Buy Greenpanel Industries, Sharekhan says
|Current market price||Rs 399|
|Target price||Rs 510|
The brokerage is bullish on the stock of Greenpanel Industries and sees an upside to Rs 510, as against the current market price of Rs 399. Greenpanel is India’s largest manufacturer of wood panels.
Greenpanel reported stupendous performance for Q2FY2022 outperforming on the revenue and OPM front by a wide margin.
“Consolidated revenues grew by 88% y-o-y to Rs. 422 crore led by 103% y-o-y jump in MDF revenues (volume/realizations growth of 67%/22% y-o-y) at Rs. 349 crore. Plywood revenues were up 38% y-o-y led by volume/realizations growth of 22%/13% y-o-y to Rs. 73 crore. Consolidated OPM at 26.8% (+619bps y-o-y) was led by operating leverage, higher value added product share and higher realizations (both domestic and exports). The company expects growth momentum to continue with 1.2 lakh cubic metres capacity coming on stream in Q3FY2022 and expects blended capacity utilization to be at 90-95% for FY2022. The OPM too are expected to remain elevated,” the brokerage has said.
Valuation of Greenpanel and view by Sharekhan
The company’s limited capex requirement towards brownfield expansions, strong operating cash flow generation, tight working capital management and reducing leverage would propel its return ratios over FY2021-FY2024E.
“The company is currently trading at a P/E of 16x its FY2024E earnings, which we believe is quite attractive considering over 60% CAGR in net earnings expected over FY2021-FY2024E. Hence, we retain our Buy rating with a revised price target of Rs. 510 led by upward revision in estimates,” the brokerage has said.
Buy Hitech Pipes For 18% to 20% returns
The broking firm has also set a target price of 18 to 20% higher against the current market price of Rs 624 on the stock of Hitech Pipes.
“The company reported better than expected performance for Q2FY2022 on account of higher than anticipated realizations while volumes disappointed. The consolidated net revenues grew 21% y-o-y to Rs. 461 crore led by 60.5% y-o-y rise in realizations at Rs. 71,149/tone while volumes dipped 24.7% y-o-y at 64,765 tons.
The volumes were affected by the postponement of orders from contractors due to high steel prices and monsoons domestically while export order were affected by logistics issues. However, EBITDA/tone stood strong at Rs. 3742/tone (up 68% y-o-y) led by higher realizations, higher share of value added products and inventory gains. The consolidated operating profit/net profit grew by 26.6%/54.6% y-o-y,” the brokerage has said.
Valuation and view on Hitech Pipes
According to Sharekhan, the company’s debt-free capacity expansion plans over the medium to long term are expected to capture the huge growth potential for the domestic steel pipe industry.
“At the current market price, the stock is currently trading at a P/E of 8x its FY2024E EPS, at a discount to its peers. We expect valuation multiple gap vis-à-vis peers to narrow down as Hitech ramps ups net earnings driven by healthy topline growth and strong operational profitability. Hence, we retain our positive view on the stock and expect an upside of 18-20%,” the brokerage has said.
Investors are advised caution as investing in equities is risky. The report is for informational purposes and Greynium Information Technologies, the author and the brokerage would not be responsible for any losses incurred by investors based on the report above.
Original news source Credit: www.goodreturns.in