Share to Buy: Building Materials Stocks Reduce Net Debt, MDF Accomplishments Rise 28%, Buy Stocks for a 56% Rise

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Stock to buy: target price

The current market price (CMP) of Greenpanel Industries Ltd. is around Rs. 381.40. BoB Capital has estimated a target price for the stock at Rs. 595. This stock has the potential to generate a return of 56.16% over the next 12 months. It is a small cap stock with a market capitalization of Rs. 4,686 crores.

Stock market outlook
Current market price (CMP) Rs.381.40
Target price Rs.595
Potential Benefits 56.16%
52-week high share price Rs.625.70
52 week low price Rs.350.35
Inventory valuation

Inventory valuation

According to BoB Capital, “The stock is trading at ~15x FY24E EPS, which is attractive given Greenpanel’s strong growth prospects, leading position in MDF and improving balance sheet and yield ratios. We continue to value the stock at 23x FY24E EPS (a 34% discount to CPBI) and maintain our price target of Rs. 595 with a Buy rating.”

Strong Q2 earnings

Strong Q2 earnings

Greenpanel’s consolidated revenue in Q2FY23 increased by 8% year-on-year to Rs. 4.6 billion. MDF revenues were up 13.5% year-on-year, while plywood fell 17%. Consolidated EBITDA margin decreased to 25.5% from 26.8% in Q2FY22 (28.3% in Q1FY23) due to lower plywood volumes and higher costs. Management guided revenue of Rs. 1.9 billion to 1.95 billion in FY23. Export achievement increased by 21% YoY to Rs. 22,906/cbm and domestic achievement increased increased by 24% to Rs. 33,554/m3.

MDF realizations

MDF realizations

The company’s blended MDF realizations increased by 28% YoY (fixed rate) to Rs. 31,299/m3 in Q2FY23. Export achievements increased by 21% YoY (-4% QoQ) to Rs. 22,906/cbm, while domestic achievements increased by 24% YoY (fixed QoQ) to Rs. 33,554/m3. Exports scored lower than domestic activity due to the insignificant contribution of value-added products. MDF export sales totaled 26,737 m3 in Q2FY23, down 41% YoY (fixed QoQ). Domestic volumes increased by 4% year-on-year (-10% quarter-on-quarter) to reach 95,980 m3.

Disclaimer

Disclaimer

The stock above was taken from BoB Capital’s brokerage report. Investing in stocks presents a risk of financial loss. Investors should therefore exercise caution. Greynium Information Technologies, the author, and the brokerage are not responsible for any losses caused as a result of decisions based on the article.

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