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Tel: (91 22) 66303070

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JM Financial Institutional Securities Limited 1 December 20

7/21/2019 JM-BM


Building Materials – Wood Panel Sector 1 December 20

JM Financial Institutional Securities Limited Page

Table of Contents

Contents Page No.

Leaders will continue to rule the growing industry 3

Key Charts 4

Valuation comp 5

Investment summary 6Strong financials of leaders 7

India wood panel industry in exhibits 8

Companies Section

Century Plyboards, CPBI IN (HOLD, TP 200) – Structural story intact, wait for dips to BUY 19

# Debate 1- Will revenue growth slowdown 21

# Debate 2- Will it sustain industry leading profitability 27

# Debate 3- Is valuation peaking 29

Financials in exhibits 30

Company Details 34

Greenply Industries, MTLM IN (BUY, TP 1,150, upside of 24%) – MDF to be the growth engine 39

# Debate 1- Is MDF really catching up 41

# Debate 2- Will MDF EBITDA be more than plywood 46

# Debate 3- Is valuation cheap 48


Company Details 53

Greenlam Industries, GRLM IN (BUY, TP 550, upside of 27%) - Fueled for growth 57

# Debate 1- Revenue potential from the capex done 59

# Debate 2- Will company outpace peers’ profit growth 64

# Debate 3- Valuations vs. high growth 65


Company Details 70

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JM Financial Institutional Securities Limited

Leaders will continue to rule the growing industryWe initiate coverage on industry leaders in the wood panel sector –

Centuryply, Greenply and Greenlam. We believe sector revenue will continue

to witness healthy growth and industry leaders will remain biggestbeneficiaries of the structural story as they capitalize on established brands

and distribution network. GST implementation will be an additional uptick

for organized players as it would narrow pricing discount to unorganized,

forming more than 50% of the total industry of c.

250bn.

We prefer Greenply and Greenlam and are constrained by valuations on

Centuryply. Both Centuryply/Greenply would be impacted by FY16

slowdown in plywood business (expect pick-up in FY17/18) and are

incurring substantial capex on new Medium Density Fibre boards (MDF) unit,

expected to be operational by FY17/19. Greenply’s MDF business is growing

strongly, while Centuryply is not present in MDF currently. Greenply is

expected to deliver higher FY15-18E PBT CAGR of 22% vs 15% for Centuryply

and is trading at c.25-30% discount to Centuryply on FY17/18 P/E. We

initiate with a BUY on Greenply, TP 1,150, c.24% upside; and HOLD onCenturyply. Greenlam is expected deliver superior earnings growth of c.40%

over FY15-18E. Greenlam’s capex is completed and growth would be driven

by steady laminate business and revenues from new businesses. We value it

at 17x 1-yr forward EPS to arrive at a TP of 550 (Mar’17), c.27% upside.

Industry demand driven by favorable demographics and govt.’s focus: We

expect wood panel industry revenues (consisting of plywood, MDF, particle

board, laminate and veneer) to witness healthy growth. We note that demand

of mid-segment products/brands is growing at faster rate. Industry should

continue to grow with: (1) favorable Indian demographics supported by rising

middle-aged working population, and (2) increased focus of govt. on projects

like ‘Housing for All’ and ‘Smart Cities’.

Industry leaders to benefit from structural growth: We believe industry

leaders – Centuryply (plywood & laminate), Greenply (plywood & MDF) and

Greenlam (laminate) – will be the biggest beneficiaries of this structural

growth as they capitalize on established brands/distribution network.

Increasing income levels is expected to drive demand for branded/premium

products - shift in demand from huge unorganized market/up-trading. GST

implementation will be an additional uptick.

In plywood/MDF we like Greenply over Centuryply at current valuations:

For Centuryply and Greenply, we expect FY15-18 PBT CAGR of c.15%/22%.

Both are incurring substantial capex on MDF unit, expected to be operational

from FY17/19. Lower growth for Centuryply is driven by higher base of FY15

and expected slowdown in plywood business in FY16. The stock’s current

FY17/18 P/E multiple of 22.1x/19x constrains us to a HOLD rating; we value

it at 20x 1-yr forward EPS to arrive at a TP of ` 200 (Mar’17). Greenplyearnings, though impacted by FY16 plywood slowdown, are driven by revenue

growth and margin expansion of the MDF business. We value the stock at 17x1-yr forward EPS to arrive at a TP of ` 1,150 (Mar’17), 24% upside.

We like Greenlam in laminate: We expect Greenlam’s FY15-18 EPS CAGR of

c.40% driven by (1) steady growth in existing laminate business; (2)

additional revenue from new businesses; and (3) reduction in interest cost

with capex being over. The stock is trading at FY17/18 P/E of 15.6x/11.6x.We value the company at 17x 1-yr forward EPS to arrive at a TP of ` 550

(Mar’17), c.27% upside from current levels.


Tel: (91 22) 663030

Recommendations

CompanyM/Cap

(US$ mn) RecoTP ( )

Mar-17Ups

Centuryply 711 HOLD 200 4

Greenply 373 BUY 1,150 24

Greenlam 175 BUY 550 2

Growth CompanyFY15-18E ( %)

Revenue EBITDA

Centuryply 13.8% 16.5% 14

Greenply 9.2% 15.1% 15

Greenlam 18.3% 23.2% 39

Profitability and debt Company(FY18)

EBITDA % RoE%ND/E

(x)W

da

Centuryply 17.1 31 0.7 1

Greenply 14.9 21 0.5

Greenlam 12.4 22 0.5

Stock PerformanceCompany 1M 3M

Centuryply 12% 33%

Greenply 1% 5%

Greelam 10% 18%

P/ECompany FY16 FY17 F

Centuryply 24.7 21.2 1

Greenply 18.5 15.4 1

Greelam 31.3 19.8 1

Building Materials – Wood Panel Sector

1 December 2015

India | Building Materials | Initiating Coverage

JM Financial Research is also availableon: Bloomberg - JMFR <GO>,Thomson Publisher & Reuters,S&P Capital IQ and FactSet

Please see Appendix I at the end of threport for Important Disclosures andDisclaimers and Research AnalystCertification.

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Key Charts

Exhibit 1.Building Material Industry – Leaders will continue to rule the growing industry

We prefer Greenply and Greenlam and are constrained by valuations on Centuryply

MDF and laminate to grow at a higher rate than plywood Leaders revenue to grow at a higher rate than industry

Unorganized markets presents a huge opportunity Leaders with established brands

Established distribution channel of leaders Already established market shares of leaders

Higher PBT growth offered by Greenply and Greenlam Cheaper valuations of Greenply and Greenlam

Source: Company, Bloomberg, JM Financial.

1012

20

6 5 57 6

15

8 85

Total WoodPanel

Plywood MDF ParticleBoard

Laminates Veneer

Industry growth (%) FY10-15 FY15-18E

7%

14%

9%

18%

Wood panelindustry

Centuryply Greenply Greenlam

FY15-18E revenue cagr

30%

70%

40%

65% 60%

70% 60%

35% 40%30%

Plywood MDF PB Laminates Veneer

Organized Unorganized Imports

14,500

10,000

12,000

Centuryply Greenply Greelam

Approx number of end touch points

25%

11%

26%

29%

31%

Plywood MDF Laminates


16% 15%

23%

15%

22%

47%


FY15-18E cagr EBITDA PBT

21.2

15.4

19.819.0

13.6 13.7


P/EFY17 FY18

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Valuation comp

Exhibit 2. Building Materials Valuations

Company RecoM/Cap

(US$ mn)CMP ( ) TP ( ) Upside (%)

TargetP/E (x)

Revenue Gr(%) FY15-

18E

EBITDA Gr(%) FY15-

18E

EPS Gr (FY15-1

Kajaria BUY 1,251 945 1,100 16.4 25.0 15.8% 24.5% 26.

Prism HOLD 740 88 110 24.7 22.3 11.5% 37.9% N

Somany BUY 250 386 500 29.6 20.0 17.2% 30.3% 34.

Cera HOLD 424 1,957 2,450 25.2 25.0 21.9% 23.8% 25.

HSIL BUY 384 319 400 25.4 20.0 8.6% 9.3% 26.

Centuryply HOLD 711 192 200 4.1 20.0 13.8% 16.5% 14.

Greenply BUY 373 926 1,150 24.2 17.0 9.2% 15.1% 15.

Greenlam BUY 175 435 550 26.5 17.0 18.3% 23.2% 39.

Company PE (x) PBV (x) EV/EBITDA (x)

FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY1

Kajaria 32.7 25.4 20.4 8.2 6.8 6.0 17.2 13.6 11

Prism 77.7 18.6 12.1 3.8 3.2 2.6 13.2 8.4 6

Somany 25.1 16.9 13.2 4.9 4.0 3.3 12.8 9.4 7

Cera 32.4 24.0 19.0 6.1 5.0 4.1 18.5 13.9 11

HSIL 19.7 15.6 13.2 1.6 1.5 1.4 8.1 6.9 6

Centuryply 24.7 21.2 19.0 8.4 6.5 5.3 16.5 14.8 12

Greenply 18.5 15.4 13.6 3.8 3.1 2.6 10.5 9.0 8Greenlam 31.3 19.8 13.7 4.1 3.4 2.7 11.5 9.0 7

Company EBITDA % RoE (%) RoCE (%)

FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY1

Kajaria 18.3 19.4 20.1 27.7 29.2 31.0 22.7 24.9 27

Prism 8.1 10.9 11.8 5.0 18.8 23.8 7.4 12.4 15

Somany 7.3 8.8 9.6 21.2 26.2 27.3 13.7 16.6 17

Cera 14.2 14.9 15.0 20.4 22.8 23.6 17.6 20.4 21

HSIL 16.2 17.1 17.1 8.5 10.0 10.9 6.7 8.2 9

Centuryply 17.5 17.4 17.1 38.5 34.6 30.8 22.0 20.2 19

Greenply 13.1 14.4 14.9 22.5 22.1 20.8 16.6 17.4 16

Greenlam 11.9 12.2 12.4 13.8 18.6 22.1 13.8 18.6 22

Company Net-debt/Equity (x) FCFE ( bn) FY15 ( bn)

FY16E FY17E FY18E FY16E FY17E FY18E Revenue EBITDA EPS

Kajaria 0.3 0.2 0.1 0.1 2.2 2.2 21.9 3.5

Prism 1.7 1.4 1.0 0.4 1.4 3.0 56.5 3.5

Somany 0.7 0.7 0.5 -0.3 -0.4 0.5 15.4 1.1

Cera 0.0 0.0 -0.1 0.1 0.3 0.5 8.2 1.2

HSIL 0.4 0.3 0.2 2.0 1.0 1.5 19.8 3.3

Centuryply 1.1 1.0 0.7 -0.1 -0.5 1.4 15.6 2.5

Greenply 0.4 0.3 0.5 0.8 0.4 -2.0 15.6 2.0

Greenlam 1.1 0.8 0.5 -0.1 0.4 0.6 8.4 0.9


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Investment summary

Centuryply (HOLD, TP 200) – Structural story intact, wait for dips to BUY:

Centuryply is joint number one player with Greenply in plywood and third

largest in laminate. Strong at execution: (1) it delivered revenue/PAT growth

of more than 20%/25% over the last decade; (2) it was quick to capitalize on

face veneer business in FY15 leading to revenue/PAT growth of c.22%/125%;

(3) it has established strong brand/distribution channel with largely retail

sales. With sufficient capacity to grow without incurring any immediate capex,

company has decided to enter MDF business to ensure future growth. Webelieve FY15-18E revenue/EBITDA growth would be led by laminate which has

been delivering more than 20% volume growth since last year. Company is

expected to maintain RoEs of c.30% with net-debt/equity of 0.7x by FY18. We

expect company to deliver FY15-18E revenue/EBITDA/EPS CAGR of

14%/16%/14% driven by expected slowdown in FY16 in plywood segment,

albeit on a higher base of FY15 and higher interest cost on back of new

expansion of MDF unit. We value stock at 20x 1yr-forward EPS; TP of ` 200

(Mar’17). Initiate with HOLD. GST implementation and early ramp up of MDF

unit would provide additional uptick.

Greenply (BUY, TP 1,150, upside of 24%) – MDF to be the growth engine:

Greenply is the number one player in plywood and MDF market with an

established pan-India brand and distribution network. Besides growingsteadily in the established plywood business, MDF is expected to contribute

c.30% to revenues and over 50% to company’s EBITDA by end of FY16 (in 5 -6

years since the company entered MDF). FY15-18E MDF revenue CAGR is

expected at c.15% on increasing acceptability of the product. Company plans

to treble capacity to 0.54cbm by FY19 by adding a unit in Andhra Pradesh.

Plywood segment is expected to be impacted by weak near term demand (7%

FY15-18E revenue CAGR), though the mid-segment outsourced Ecotek brand

should continue to grow. We expect company to deliver FY15-18E

revenue/EBITDA/PBT CAGR of 9%/15%/22%. We value stock at 17x 1yr-

forward EPS; TP of ` 1,150 (Mar’17). Initiate with a BUY. GST implementation

and early ramp up of MDF unit would provide an additional uptick.

Greenlam (BUY, TP 550, upside of 27%) - Fueled for growth: Greenlam is

structurally well placed to deliver strong growth with extremely strong

established distribution network and brand, even internationally. Greenlam is

a largest laminate player in Asia and third largest in the world. Company is in

a sweet spot with all the growth capex completed. It has incurred a total

capex of ` 1.6bn in FY14-1HFY16 with potential to generate revenues of ` 5-

6bn (FY15 total revenue at ` 8.5bn). Expansions included capacities of 2mn

sheets laminate, 2msm melamine faced chipboard (part of laminate), 120k

units factory finishes doors (part of veneer) and 1msm engineered wood

flooring (part of veneer). We expect expansions to drive company’s growth –

laminate segment revenue/EBITDA is expected to witness 16%/22% and

veneer 36%/27% CAGR for FY15-18E. Though veneer’s revenue share would

increase by c.50% in next three years, laminate would still be c.80% of the

revenues by FY18. We expect the company to deliver revenue/EBITDA/EPSCAGR of 18/23/39% over FY15-18E. Currently the stock is trading at FY17/18

P/E of 19.8/13.7x. We value the company at 17x 1-yr forward EPS to arrive at

a TP of ` 550 (Mar’17), c.27% upside from current levels. GST implementation

would provide an additional uptick.

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Strong financials of leaders

Exhibit 3. Building Material Industry – Company financials

Greenlam to deliver higher growth

FY15 revenues10-14% revenue growth expected for Centuryply/Greenply;

over 15% for Greenlam

100-150ps margin expansions expected Greenply/Greenlam to deliver higher FY15-18E PBT cagr

Healthy return ratios Improving leverage ratios

OCF/EBITDA reflecting working capital efficiency Working capital days

Source: Company, JM Financial.

15.6 15.6

8.4


FY15 revenue (Rs bn)17.6%

9.1%

11.8%

13.8%

9.2%

18.3%


FY13-15E (% change)

FY15-18E (% change)

16.0

13.2

11.0

17.1

14.9

12.4


FY15 EBITDA (%) FY18 EBITDA (%)

16% 15%

23%

15%

22%

47%


FY15-18E cagr EBITDA PBT

44

25

13

30

21 23


FY15 RoE (%) FY18 RoE (%)1.2

0.6

1.2

0.7

0.5 0.5


FY 15 net-debt/Equity FY 18 net-debt/Equity

55.2

91.6

169.0


FY15 OCF/EBITDA123

52 56


FY 15 working capital days

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India wood panel industry in exhibits

Exhibit 4. India wood panel market – Snapshot

Growth drivers – housing, unorganized market, increasing replacement demand,

value-added products, GSTUnits Plywood MDF PB Laminates Veneer Total

Size FY15 ` mn 150 15 20 42 20 247

% of total industry 61 6 8 17 8

FY10-15 growth % 12 20 6 5 5 10Expected FY15-18E % 6 15 8 8 5 7

Organized % 30.0 70.0 40.0 65.0 60.0 41.6

Unorganized % 70.0 0.0 60.0 35.0 40.0 56.6

Imports % 0.0 30.0 0.0 0.0 0.0 1.8

Residential % 70.0 20.0 10.0 35.0 70.0 56.2

Commercial % 30.0 80.0 90.0 45.0 30.0 40.4

Export % 0.0 0.0 0.0 20.0 0.0 3.4

New Demand % 85.0 99.0 98.0 80.0 85.0 86.1

Replacement % 15.0 2.0 5.0 20.0 15.0 14.3

Source: Company, Media reports, Industry Sources, JM Financial.

Exhibit 5. India wood panel market – Industry Size and growth

c.`250bn industry to grow by c.6.5% FY15-18E cagr; MDF growth expected to be higher than plywoodbn FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E FY10-15 FY15-18

PlywoodSize 96 107 120 132 150 152 164 178 11.7 5Growth % 11.5 11.5 11.5 10.5 13.5 1.5 8.0 8.0

MDFSize 6 8 10 12 15 17 20 23 20.1 15Growth % 0.2 26.0 26.0 26.0 24.5 15.0 15.0 15.0

Particle BoardSize 16 17 18 19 20 22 23 25 5.5 8Growth % 4.5 5.3 5.3 5.3 7.4 8.0 8.0 8.0

LaminateSize 35 36 38 40 42 45 49 52 4.9 7Growth % 5.0 5.0 5.0 5.0 4.5 7.5 7.5 7.5

VeneersSize 16 17 18 19 20 21 22 23 5.0 5Growth % 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0

TotalSize 169 185 203 222 247 257 278 301 9.6 6Growth % 8.4 9.5 9.6 9.2 11.2 4.1 8.1 8.2

Source: Company, Media reports, Industry Sources, JM Financial.

Exhibit 6. India wood panel market – Product price points

With GST the pricing difference with unorganized market would narrowPricing Snapshot Plywood MDF PB Laminates

Size 19mm *8*4 19mm *8*4 19mm *8*4 1mm *8*4

Unit /sq. ft /sq. ft /sq. ft /Per sheet

Greenply 100-130 35-45 NA NA

Centuryply 100-130 NA NA 1000-1,800

Greelam NA NA NA 1000-1,800

Other branded 85-100 33-42 25-35 NA

Unorganized 65-85 NA 22-32 NA

Imported NA 32-40 22-32 NA


Note: For plywood both Greenply and Centuryply sell their mid-segment brands at 15-20% lower prices as compared to

the average premium plywood above.

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Exhibit 7. India wood panel market – Growth Drivers

Focus on housing schemes by govt. like Housing for All & Smart Cities to fuel demand

Housing Shortage Favorable Indian demographics (rising working age population)

Interest rates at peak, a decline to fuel housing demand With better than GDP growth, expect latent demand to come back


15.2017.60

23.30 22.90 23.0024.71

18.78

1961 1971 1981 1991 2001 2007 2012

Urban housing shoratge (mn)

FY01

FY12

35.4

29.1

57.7

62.6

6.9

8.3

0- 14 15 -59 60 +

2.0

3.0

4.0

5.06.0

7.0

8.0

9.0

10.0

11.0

J a n -

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J a n -

0 2

J a n -

0 3

J a n -

0 4

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0 5

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6.97.3

7.4

7.6 7.7

8.4

9.5 9.69.2

11.2

4.1

8.1 8.2

3.0

4.0

5.0

6.0

7.08.0

9.0

10.0

11.0

12.0

FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E

GDP growth % Sector growth %

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Exhibit 8. India wood panel market – Organized player to benefit more

Organized player to benefit increasing number of people aspire to have better homes/branded products

Rising disposable income, more people becoming aspirational Increasing Urbanization

Organized market share to increase Established distribution

Established brands GST would be an additional trigger

GST benefit

(1) Total tax paid now is c.26%. Any rate of GST below 26% woulbe beneficial. GST is expected to be at c.20-24%

(2) India will become one market, no octroi and other taxes. would decrease transportation days and the freight charges.

(3) Narrow the price differential with unorganized players bc.10% at 24% GST rate.


20.3

15.1

11.7 12.0 12.8 13.1

3.0

8.0

13.0

18.0

23.0

FY10 FY11 FY12 FY13 FY14 FY15

Per Capita Income growth (%)

FY01 FY11 FY20E

72.2 68.854.8

27.8 31.245.2

Rural Urban

30

70

40

65 60

70 60

35 4030

Plywood MDF PB Laminates Veneer

Organized Unorganized Imports14,500

10,000

12,000


Approx number of end touch points

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Plywood Industry

Exhibit 9. India plywood sector – Industry Size and growth

c. ` 150bn industry, expected to witness c.7.5% FY15-18E CAGR (organized market to grow at a higher rate)bn FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E FY10-15 FY15-18


Source: Company, JM Financial

Exhibit 10.India plywood sector

c.70% being unorganized; Centuryply and Greenply having c.50% of the organized market (other are regional players)

c.70% is unorganized market Duopoly organized market (revenue market share)

c.70% demand is residential Replacement mainly from new construtions

Centuryply/Greenply continue to grow faster vs. Industry Superior margin profile of Centuryply and Greenply


Organized,30%

Unorganized,70%

Centuryply,25%

Greenply,26%

Archidply,6%

Sarda, 5%

Uniply, 2%

Kitply, 1%

National, 1%

Others, 35%

Residential,70%

Commercial,30%

Newconstruction,85%

ReplacementDemand,

15%

11.7%

17.5% 17.4%

5.8%

9.9%

7.3%

Industry Growth Centuryply Greenply

Plywood revenue growthFY10-15

FY15-18E

17.6

9.17.9

3.2

10.7

-6.8

0.2

Centuryply Greenply Archidply Sarda Uniply Kitply National

EBITDA margins (%)

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Other details

Plywood is a sheet material manufactured from thin layers of wood

veneer (face veneer on top and bottom with core veneer in between) that are

glued together.

Raw-material is the major cost in plywood industry, forming about 55-60% of

revenue. Of the raw-material (1) c.80% is cost of face/core veneer - c.50% (face

veneer) is sourced from Myanmar, Africa etc. and c.30% (core veneer) is

sourced locally; (2) balance 20% is adhesives which is easily available.

In Apr’14 Myanmar govt. imposed a ban on export of raw timber, which

necessitated Indian manufacturers to establish timber processing units in

Myanmar. The Myanmar ban led to increased focus on raw-material security

by company’s like Centuryply and Greenply that have established timber

processing units in Myanmar. Centuryply would be having c.104,000cbm

peeling capacity (sells surplus raw-material to other manuafacturers) by FY16

vs. 12,600cbm for Greenply (used majorly for captive consumption).

We note that the mid-segment plywood demand for companies (like Sainik for

Centuryply and Ecotek for Greenply) is growing at a much faster rate.

Besides continued slowdown in real estate constrution activities, sector faces

risk from increased acceptance of MDF and change in regulations of countries

from where face veneer is imported.

https://en.wikipedia.org/wiki/Wood_veneer




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MDF market

Exhibit 11. India MDF sector – Industry Size and growth

c. ` 15bn industry, expected to witness c.15% FY15-18E CAGRbn FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E FY10-15 FY15-18



Exhibit 12.India MDF sector

MDF forms c.8% of the panel market in India vs. c.65% globally; Greenply is the leader in the sector

No unorganized market, c.33% imports Greenply is the largest player (sales volume share)

More driven by commercial demand Usage is increasing gradually

Globally 65% panel market is MDF, India c.10% currently Greenply’s amongst the most profitable players


Organized,70%

Imports, 30%

Mangalam,5%

Shirdi, 2%

Action, 20%

Green, 29%

RushilDécor, 11%

Imported,33%

Residential,20%

Commercial,

80% Newconstruction,

99.0%

ReplacementDemand,

2.0%

10%

65%

India Market Share Global Market Share

MDF (as % of wood panel market)

18.8

8.4

-27.8

Greenply Rushil Décor Mangalam Timber

FY15 MDF EBIT margins (%)

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Other details

MDF is engineered wood made from wood wastes fibres glued together using

heat, resin and pressure.

Only Greenply, Action Tesa and Rushil Décor have been able to establish

themselves in the market. Shirdi Industries and Managalam timber are

masking losses while Bajaj Hindustan and Nuchem have closed down. We note

that high capex acts as an entry barrier for the industry. c. ` 3bn is required to

set up a typical plant of c.400cbm/day.

We note that MDF is expected to grow faster than plywood on: (1) increased

acceptance by carpenters and architects; (2) cannibalizing demand of

unorganized plywood industry; (3) good value proposition for a consumer

considering the price and durability parameters.

c.33% of MDF volumes are imported in India. Anti-dumping duty on plain MDF

boards, which lapsed in Feb’15, has been imposed again in Oct’15.

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Laminates market

Exhibit 13. India Laminates sector – Industry Size and growth

c. ` 42bn industry, expected to grow by 6%bn FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E FY10-15 FY15-18



Exhibit 14.India Laminates sectorc.35% being unorganized; Greenlam is the largest player with c.30% market share

c.35% is unorganized market Greenlam is the largest player c.30% revenue share

Exports forming c.20% of the demand 80% demand from new projects


Other details

Laminates are a thin sheet of decorative surface material used as a surface

covering on top of a substrate like plywood, MDF or a particle board.

The export market for laminate is c.US$7bn. Greenlam has c.40% share of

India’s laminate export of c. ` 8bn.

In the laminate business raw-materials cost is the key cost forming c.50% of

the sales. Paper and chemicals form c.60% and c.40% of the total raw-material

cost. c.70% of the raw-material is either imported or is import linked. 50% of

the paper cost consists of design paper (used to give designs to the laminate)

which is imported. Remaining 50% of paper cost is towards tissue paper (used

to give a protective covering) and kraft paper (used to give thickness). Some

craft paper is also imported. All chemicals costs are linked to crude cost.

Melamine and Phenol Formaldehyde are the chemicals which are mainly used

in the laminate. Companies like Greenlam have a natural hedge on imported

raw-materials as c.50% of the laminate is exported.

Organized,65%

Unorganized,35%

Greenlam,31%

Merino, 26%

Centuryply,11%

Stylam, 8%

Royal Touch,7%

RushilDécor, 7% Others,

10%

Residential,35%

Commercial,

45%

Exports, 20%

Newconstruction,

80%

ReplacementDemand,

20%

7/21/2019 JM-BM




Manufacturing processes

Exhibit 15. Manufacturing process of plywood


STORING OF LOGS

(Logs are stored in pond)

Blocking

(Logs are cut in required size)

DEBARKING

(Barks of the Blocks are removed)

TENDERISER MACHINE

(Tenderisedto make stress free)

VENEER CLIPPING

(Veneer clipped as per required size)

PEELING

(Blocks are peeled for Veneer )

DRYING

(Dried to remove moisture)

VENEER SORTING

(Veneer sorted for grading)

GLUE MIXTURE

PRE PRESS

(Assembled packs are pressed in Cold Press

under high pressure before final pressure)

ASSEMBLING

(of Face Veneers, Glued Core, Filler again

Glued Core and then Face Veneer)

GLUE SPREADER

(Pasting glue on either side of core)

HOT PRESS

Pre-pressed pack goes to Hot Press for final

pressing under pressure and temperature

TRIMMING

(Pressed Sheets are cut into final s ize)

WIDE BELT SANDER

(Sanding of plywood sheets)

FINISHING & GRADING

(Visual checking)

DRYING CHAMBER

Drying the treated sheets with required

moisture content

PRESERVATIVE TREATMENT

(chemical treatment with high retention)

QUALITY CHECKING

(Sorting out defective sheets)

LABORATORY TESTING

(Random samples drawn for testing at lab)

GRADING & STAMPING

After grading and checking, embossing &

stamping is done (Proper checking of

stamped materials)

DESPATCH

(Plywoods are ready for market despatch)

BUNDLING & PACKING

(Stamped sheets are bundled & packed)

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Exhibit 16. Manufacturing process of MDF


Exhibit 17. Manufacturing process ofl min te


M.F.RESIN

Edge Trimming

Marking

Treating to

Required

Parameters

Cutting

Spotting

Assembly

Pressing

Sanding

Pack Making

P.F.RESIN

Treating to

Required

Parameters

Cutting

Pack Making

Packing Dispatch

Phenol

Formaldehyde

Catalyst

Kraft Paper

Melamine

Formaldehyde

Catalyst

Design Paper/

Tissue Paper

Q.C.Inspection

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Notes

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Structural story intact, wait for dips to BUYCenturyply is joint number one player with Greenply in plywood and thirdlargest in laminate. Strong at execution: (1) it delivered revenue/PAT growthof more than 20%/25% over the last decade; (2) it was quick to capitalize onface veneer business in FY15 leading to revenue/PAT growth of c.22%/125%;(3) it has established strong brand/distribution channel with largely retailsales. With sufficient capacity to grow without incurring any immediatecapex, company has decided to enter MDF business to ensure future growth.We believe FY15-18E revenue/EBITDA growth would be led by laminatewhich has been delivering more than 20% volume growth since last year.Company is expected to maintain RoEs of c.30% with net-debt/equity of 0.7xby FY18. We expect company to deliver FY15-18E revenue/EBITDA/EPS CAGRof 14%/16%/14% driven by expected slowdown in FY16 in plywood segment,albeit on a higher base of FY15 and higher interest cost on back of newexpansion of MDF unit. We value stock at 20x 1yr-forward EPS; TP of 200(Mar’17). Initiate with HOLD. GST implementation and early ramp up of MDFunit would provide additional uptick.

Intelligent capex plans; Laminates to lead FY15-18E growth: Company is a

joint number one with Greenply in plywood and third largest in laminate. Withsufficient capacity in these segments, it decided to enter MDF business andexpand face veneer capacity to ensure future growth. Laminate revenue isexpected to see 22% CAGR (c.24% volume growth in FY15) vs. company’sFY15-18E CAGR of c.14%. Plywood segment is expected to pick-up post FY16,though Sainik’s (mid-segment brand) volumes should continue to grow.

Establishment of Myanmar, Laos units noteworthy; Plywood EBITDAmargins at peak: Company’s extremely strong execution in timelyestablishment of timber processing units at Myanmar and Laos to build a longterm security of raw-material and higher profits from sale of surplus raw-material led to c.400bps EBITDA margin expansion for the plywood segmentin FY15. Plywood EBITDA grew more than 50% in FY15 – is at a high base withmargin peaking. For FY15-18E we expect EBITDA growth to be driven byLaminates segment with higher revenue growth and margin expansion.

Laminates is expected to deliver more than 40% EBITDA growth vs. company’sEBITDA CAGR of c.16% for FY15-18E. Company is expected to maintain RoEsof c.30% with net-debt/equity of 0.7x by FY18.

Initiate with HOLD: Company’s P/E has re-rated with FY15revenue/EBITDA/EPS CAGR at 22/69/125%. Currently stock is trading atFY17/18 P/E of 21.2/19x. We expect FY15-18E revenue/EBITDA/EPS CAGR of14%/16%/14% driven by slowdown in plywood, albeit on FY15 higher base andhigher interest cost on MDF expansion. We value stock at 20x 1-yr forwardEPS to arrive at TP of ` 200 (Mar’17). Initiate with a HOLD.

Exhibit 1.Centuryply – Structural story intact


Tel: (91 22) 663030

Key Data

Market cap (bn) ` 42.7 / US$ 0

Shares in issue (mn) 222

Diluted share (mn) 222

3-mon avg daily val (mn) ` 67.6/US$ 1

52-week range ` 262.0/137

Sensex/Nifty 26,146/7,9

` /US$ 66

Daily Performance

% 1M 3M 12

Absolute 9.8 25.3 12

Relative* 11.7 25.8 21

* To the BSE Sensex

Shareholding Pattern (

Sep-15 Sep-

Promoters 73.3 74

FII 10.7 5

DII 3.4 2

Public / others 12.5 17

-10-500%501015202530354045

0

50

100

150

200

250

300

Nov-12 May-13 Nov-13 May-14 Nov-14 May-15 Nov-15

Century Plyboards

Century Plyboards Relative to Sensex (RHS)

Century Plyboards| CPBI IN

1 December 2015

Price: ` 181

HOLD

12M Target: ` 200

Exhibit 1: Financial Summary ( mn)

Y/E March FY14A FY15A FY16E FY17E FY18E

Net sales 12,840 15,648 16,600 19,092 23,078

Sales growth (%) 13.5 21.9 6.1 15.0 20.9

EBITDA 1,482 2,498 2,911 3,318 3,947

EBITDA (%) 11.5 16.0 17.5 17.4 17.1

Adjusted net profit 670 1,508 1,728 2,009 2,250

EPS ( ` ) 3.0 6.8 7.8 9.0 10.1

EPS growth (%) 27.2 125.2 14.6 16.2 12.0

ROCE (%) 17.1 22.9 22.2 20.5 20.4

ROE (%) 24.8 44.4 38.5 34.6 30.8

PE (x) 63.7 28.3 24.7 21.2 19.0

Price/Book value (x) 14.6 11.0 8.4 6.5 5.3

EV/EBITDA (x) 31.7 18.8 16.4 14.7 12.2

Source: Company data, JM Financial. Note: Valuations as of 30/11/2015.




7/21/2019 JM-BM


Century Plyboards 1 December 20


Key Charts

Exhibit 2.Centuryply – Structural story intact

Initiate with HOLD, near term weakness in plywood segment

Plywood forms more than c.70% of the revenues Plywood forms more than c.70% of the EBITDA

Total revenue growth to be slower; timid FY16 growth in plywood Laminates to lead the EBITDA growth

MDF capex to ensure future growth, impact FY17 cash flows Net-debt to equity and EBITDA comfortable

Strong return ratios Stock has re-rated in FY15


73 70 69 66

19 21 23 23

4 5 44

0

20

40

60

80

100

120

FY15 FY16E FY17E FY18E

% of revenues Plywood Laminates CFS Others

8171 70 67

1118 20 20

13 12 11 10

-20

0

20

40

60

80

100

120


% of EBITDA Plywood Laminates CFS Others

17.2 17.5

23.4

13.8

9.9

21.5

0.0

5.0

10.0

15.0

20.0

25.0

Total revenue Plywood Laminates

Revenue cagr (%) FY10-15 FY15-18E

17.6 17.8 17.7 17.5

9.6

15.3 15.0 15.0

0

5

10

15

20


Segment EBITDA margin (%)

Plywood Laminates

0.7

-5.7 -5.9 -6.2

4.4

-0.5

-4.9

13.9

4.26.4 6.7

4.6 5.3

18.520.5

0.5


FCFE (Rs bn) Capex (Rs bn)

0.71.0

1.5 1.6

1.21.1 1.0

0.7

2.02.2

3.43.2

1.9 1.9 1.9

1.5


Net debt/Equity (x)

Net debt/EBITDA (x)

19% 19%

13% 16%

22% 22% 20% 20%

29%

20%19% 25%

44%39%

35%

31%


RoCE (%) RoE (%)

0

5

10

15

20

25

30

35

Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15

P/E = 22.7x Mean=18.9xMean+1SD=25.9x Mean-1SD= 11.9x

7/21/2019 JM-BM




Investment Debates

# Debate 1- Will revenue growth slowdown

Centuryply has expanded plywood capacity by 40% and almost doubled the

l min te

capacity in FY10-15. Company is a leading player in both the

segments, a joint number one with Greenply in plywood (forming c.73% of

company’s FY15 revenues) and third largest in laminate (forming c.19% of

FY15 revenues). With capacity utilization levels at 75-85%, it has sufficientcapacity to grow without incurring immediate capex in current segments

and decided to enter MDF segment to ensure future growth. We believe

FY15-18E revenue growth for the company will be led by laminate segment

which has been delivering more than 20% volume growth since last year.

Laminates segment revenue is expected to witness 22% CAGR vs. company’s

CAGR of c.14%. Plywood segment is expected to pick-up post FY16, though

Sainik’s (the mid-segment affordable outsourced brand) volumes should

continue to grow by c.15%. Structurally company is well placed to continue

to deliver strong growth with large unorganized market moving to

organized, strong distribution network, strong brand and focused capex

plans to deliver future growth.

73%/19% revenues from plywood/laminate; leader in both: Centuryply is

predominantly a plywood player with 73% of the total revenues coming from

plywood, and 19% from laminate in FY15. It is a leading player in the

organized market of both lywood and laminate segment. While it is a joint

leader with Greenply with c.25% share of the organized plywood market

revenues, it is the third largest player in the organized laminate segment with

c.10% share. c.4.5% of company’s revenues came from container freight

station business which is engaged in handling shipments near Kolkata port.

Current capacity operating at 75-85% utilizations, allowing growth

without new capex: During FY10-15 Centuryply increased plywood capacity

by c.40% to 210kcbmand; has doubled laminate capacity (50% in FY13 and

50% in FY15) to 4.8mn sheets. The capacity utilization in FY15 was c.85% in

plywood and c.75% in laminate, allowing capacity to grow further withoutimmediate new capex. The strategy in plywood is to grow by outsourcing

medium-end plywood and manufacturing higher end products at own plants.

Exhibit 3.Centuryply – Revenue break-up

More than 90% of revenues come from plywood (more than 70%) and laminate


71 73 75 73 70 69 66

16 18 18 19 21 23

23

5 5 4 4 5 4

4

0

20

40

60

80

100

120

FY12 FY13 FY14 FY15 FY16E FY17E FY18E

% of revenuesPlywood Laminates CFS Others

7/21/2019 JM-BM




Exhibit 4.Centuryply – Revenue market share and capacity

Company is a joint leader in plywood market and third largest in the laminate segment (organized market)

c.25% revenue market share of organized plywood market c.10% revenue market share of organized laminate market

209k cbm plywood capacity, operating at c.85% utilization 4.8mn sheets laminate capacity, operating at c.75% utilization

Source: Company, Industry sources, JM Financial.

Centuryply,

25%

Greenply,26%

Archidply,6%

Sarda, 5%

Uniply, 2%

Kitply, 1%

National, 1%

Others, 35% Greenlam,31%

Merino, 26%

Centuryply,11%

Stylam, 8%

Royal Touch,7%

RushilDécor, 7% Others,

10%

150 161 172

209 209 209 209 209

89 91

81

74

83 84

88

94

60

65

70

75

80

85

90

95

100

3

53

103

153

203

253


Plywood Capacity (msm) (LHS) Capacity utilisation (%)

2.40 2.40

3.60 3.60

4.80 4.80 4.80 4.80

87

99

7882

76

88

101

114

70

80

90

100

110

120

2.00

2.50

3.00

3.50

4.00

4.50

5.00


Laminates Capacity (mn sheets) (LHS) Capacity utilisation (%)

7/21/2019 JM-BM




Laminates segment to lead FY15-18E growth: We expect laminate segment

revenue to almost double to ` 5.5b in FY18, from ` 2.9bn in FY15. We gain

confidence from: (1) the doubling in laminate capacity in last five years (50%

in FY13 and 50% in FY15; (2) company’s plan to continue to increase SKUs by

100 every year, currently 700 SKUs; (3) volume growth of 23-24% in FY15 and

1QFY16, and (4) new particle board unit becoming operational in FY17. We

expect FY15-18E laminate revenue (including particle board revenues) to

witness 22% CAGR .

Exhibit 5. Centuryply – Laminates revenues and volumes

Laminates segment revenues to contribute significantly to company’s revenue growth profile

Company’s total revenue to grow by 14% cagr Laminates segment to lead the FY15-18 revenue growth

Laminates volume to grow by more than 15% Laminates revenue to grow by more than 22%


8.8

11.2 11.3 12.8

15.6 16.6

19.1

23.1

23.927.5

1.1

13.5

21.9

6.1

15.0

20.9

0

5

10

15

20

25

30

0

5

10

15

20

25


Total Revenue (Rs bn) (LHS) Growth (%)

17.2 17.5

23.4

13.8

9.9

21.5

0.0

5.0

10.0

15.0

20.0

25.0

Total revenue Plywood Laminates


15.6 16.0

10.4

8.0

23.6

17.015.0

12.5

15.4

0.8

4.5 5.3 6.3 5.8

3.5 3.5


Laminates volumes growth (%) Laminates realization growth (%)

1.4

1.8 2.0 2.4

2.9

3.5

4.4

5.338.4

26.6

13.5 16.0

24.0

20.2 26.118.4

0

5

1015

20

25

30

35

40

45

0

1

2

3

4

5

6


Laminates (Rs bn) Growth (%)

7/21/2019 JM-BM




FY16 to be weak for plywood; affordable segment to continue to grow:

For plywood we expect FY16 to be muted due to weak demand, and build in

recovery in FY17/18E. Within plywood, company’s mid-segment affordable

Sainik brand (outsourced manufacturing) volumes should continue to grow by

c.15%. We expect FY15-18E plywood revenue to see c.10%.

Exhibit 6. Centuryply – Plywood revenues and volumes

Plywood segment to gain traction post FY16

Plywood revenues to be flattish for FY16 Volumes weak in FY16

Plywood volumes to pick up in FY17/18E Sainik volumes (affordable mid-segment brand) to continue to gro


Capex on track to sustain future growth: Centuryply would be incurring (1)

` 600mn on the particle board unit (revenue to be included in Laminates

segment); (2) ` 300mn for the peeling unit in Laos & Myanmar in FY16 which

will enable company to sell increased volumes of profitable face veneers; (3)

` 2.6bn capex over FY16/17E to establish a new MDF unit (600cbm/day) and

(4) capex of c. ` 300mn on new office building in Kolkata ( ` 200-250mn already

done).

Structural drivers intact for the company

(1) Large unorganized market: 70% of the plywood market is still

unorganized vs. c.10% a decade ago, offering the organized players a huge

landscape to grow with favorable Indian demographics and increasing

preference for branded products. We note that Centuryply delivered plywood

revenue CAGR of c.24% for FY06-15 vs. industry growth of c.10%.

7.27.9 8.3

9.6

11.5 11.7

13.2

15.241.6

9.4

4.5

16.6

18.9

1.9

12.8

15.4

0

5

10

15

20

25

30

35

40

45

0

2

4

6

8

10

12

14

16


Plywood (Rs bn) Growth (%)

174197 191

221 234 241

264

294

42

40

43 44

49 4950

52

0

50

100

150

200

250

300

350

35

40

45

50

55


Plywood volumes ('000 cbm)

Plywood realization ('000 Rs/cbm)

21.9

13.6

-3.0

15.7

5.7

2.9

9.511.5

16.1

-3.7

7.7

0.8

12.5

-1.0

3.0 3.5


Plywood volumes growth (%) Plywood realization growth (%)

23.5

42.5

8.0

14.0 15.012.7

17.1 18.0 18.7 19.3

FY14 FY15 FY16E FY17E FY18E

Sainik plywood volumes growth (%) % of total volumes

7/21/2019 JM-BM




(2) Strong sales and distribution channel: Company has strong pan-India

distribution network. It has 35 marketing offices/depots, 6 regional

distribution centers and over 14,500 channel partners. Centuryply plans to

expand distribution network by deeper penetration into smaller towns.

Currently c.90% of company’s sales is through retail channels.

Exhibit 7. Centuryply – Structural drivers in place for the company

Large unorganized market, strong sales and distribution channel, strong brand and largely retail sales

Unorganized market continue be c.70% of the total plywood market Company has delivered much higher growth than industry growth

Continues to grow the dealer channel; 14,500 sales points 90% of the sales through retail channel

Centuryply have built strong brands over time Company continues spend on branding and promotion


Organized,30%

Unorganized,70%

11.7%

17.5%

5.8%

9.9%

Industry Growth Centuryply


FY15-18E

1,424 1,500

406 426

186 18633 355 6

FY14 FY15

Plyboards dealers Laminates dealers

Decorative Veneers dealers Branch Offices/ Sales Depots

Regional distribution Centers

Retail, 90%

Institutional,10%

3.4

3.74.1

2.4

3.2

3.93.5

4.9

3.2

4.9

FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15

Selling expenses (% of Net Sales)

7/21/2019 JM-BM




(3) Strong brands: Centuryply has built a strong brand over last 28 years and

continues to invest c.3-4% of revenues towards brand building. Strong brands

have been built across categories (plywood, laminate, veneers etc.) and across

segments (high to mid segment). In the past, company’s brand has been

endorsed by celebrities like Nawab Pataudi (late cricketer), Sharmila Tagore,

Sharukh Khan, Amitabh Bachan and Nana Patekar.

(4) Largely retail sales: Company sells c.90% of goods to retailers directly as

plywood and laminate are mainly used by the end-users for building furniture,

rather than builders.

7/21/2019 JM-BM




# Debate 2- Will it sustain industry leading profitability

Company deserves credit for its extremely strong execution on timely

establishing timber processing units in Myanmar (in FY15) and continuous

expansion of capacity in Myanmar and Laos to build a long term security of

raw-material and higher profits from sale of surplus raw-material. Timely

execution led to c.400bps EBITDA margin expansion for the plywood

segment in FY15. We note EBITDA margin was c.850bps more than that for

Greenply. We estimate company to have more than thrice the capacity of

raw-material by FY16 end, than required for captive consumption. Plywood

EBITDA grew by more than 50% in FY15. EBITDA margin for the segment

seems at peak. For FY15-18E we believe EBITDA growth will be driven by

Laminates segment with higher revenue growth and margin expansion in

sight. Laminates margin expanded by c.550bps in 1HFY16. We expect EBITDA

margins to be stable at c.17-17.5%. We note that, though plywood would

continue to form c.70% of the company’s EBITDA, Laminates is expected to

deliver higher EBITDA growth (c.40%). We expect company’s EBITDA to

witness c.16% FY15-18E CAGR.

Myanmar a blessing in disguise: We note that raw-material is the major cost

in plywood industry, forming about 55-60% of revenue. Of the raw-material

(1) c.80% is cost of face/core veneer - c.50% is sourced from Myanmar, Africa

etc. and c.30% is sourced locally, and (2) balance 20% is adhesives which is

easily available. The Myanmar ban led to (1) company’s increased focus on

raw-material security; (2) reduced logistic costs as processed veneer is

exported from Myanmar vs. raw timber logs earlier; (3) enabled higher

profitability from sale of surplus face veneer to domestic manufacturers.

Company creating a long term raw-material security: In Apr’14 Myanmar

govt. imposed a ban on export of raw timber, which necessitated the Indian

manufacturers to establish timber processing units in Myanmar. Centuryply

established timber processing unit in Myanmar in 1HFY15 and continues to

expand capacity in Myanmar and through new units in Laos and Indonesia,

unlike Greenply (capacity sufficient for captive consumption). Company’s

capacity was 32,000cbm in Myanmar in FY15 and is expected to be

1,04,000cbm capacity by end of FY16 (40,000 at Myanmar and 64,000cbm at

Laos). With this company would be having more than thrice the capacity of

face veneer required for captive consumption.

Not much difference in plywood EBITDA margins with Greenply till FY14;

c.850bps more than Green in FY15: We note that in FY14 Centuryply’s

plywood segment EBITDA margin was c.200bps more than that for Greenply.

FY15 was an inflexion point wherein Centuryply’s margin was c.850bps more

than Greenply led mainly by efficient sourcing of face veneer (as discussed

above) which helped the company’s top-line and bottom-line: (1) sale of

surplus scarce face veneer to domestic manufacturers at a highly profitable

price; (2) lesser raw-material cost. Also, there was forex gain vs. loss in FY14.

Expect margins to soften: Company exited FY15 with EBITDA margins at

19.4% (4QFY15). 1HFY16 margin was 17.3%. We expect margins to soften in

FY16 on back of dip in realizations of face veneer due to weakness in

plywood demand and with few local manufacturers establishing timber

processing plant in Myanmar.

7/21/2019 JM-BM




Laminates margin to trend upwards with better utilization levels: With

strong volume growth in the Laminate business, we believe margins could

expand further with higher capacity utilization. We note that the margins

expanded by c.550bps in 1HFY16 on lower raw-material cost which forms

c.55-60% of revenues. We have included particle board EBITDA in the

Laminates segment for the purpose of our calculation.

Laminates EBITDA expected to deliver higher growth: We note that though

plywood would continue to form c.70% of the company’s EBITDA, Laminates

segment is expected to deliver more than 40% EBITDA growth on back ofhigher revenue growth and EBITDA margin expansion. We expect company’s

FY15-18E EBITDA to witness c.16% CAGR.

Exhibit 8. Centuryply – EBITDA

EBITDA for the businesses at peak; sustainability is the key

EBITDA margins peaked in 1QFY16 FY15 Centuryply plywood’s EBITDA% was 850bps more than Greenply’s

Laminates margin c.260bps more than Greenlam in 1HFY16 EBITDA to grow by 13.5% FY15-18E cagr

Laminates segment EBITDA to grow faster Plywood to continue to form the bulk of EBITDA


11.112.4

10.011.5

16.0

18.016.7

17.5 17.4 17.1

13.6

17.6

10.3

9.1

FY14 FY15

Centuryply EBITDA % Greenply EBITDA%

9.4 10.1

15.0

12.4

Centuryply EBITDA % Greenlam EBITDA %

FY15 1HFY16

1.0

1.41.1

1.5

2.52.9

3.3

3.9

17.2

41.9

-18.6

31.4

68.5

16.514.0 18.9

-40.0

-20.0

0.0

20.0

40.0

60.0

80.0

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5


EBITDA (Rs bn) Growth (%)

16.5

9.7

40.8

0.0

5.0

10.0

15.0

20.0

25.0

30.035.0

40.0

45.0

Total Plywood Laminates

EBIDA FY15-18E cagr (%)

Total Plywood Laminates

8171 70 67

1118 20 20

13 12 11 10

-20

0

20

40

60

80

100

120


% of EBITDA Plywood Laminates CFS Others

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# Debate 3- Is valuation peaking

We note that company’s P/E has re-rated in past two years with FY13-15

revenue/EBITDA/EPS CAGR at 18%/49%/69% driven by (a) higher volumes from

expanded capacity; (b) price hikes taken by the company; (c) lower price of

raw-materials (procured from Mynamar). Currently the stock is trading at

FY17/18 P/E of 21.2x/19x.

We expect company to deliver revenue/EBITDA/EPS CAGR of 14%/16%/14%.

The slower growth is mainly driven by the expected slowdown in FY16 in

plywood segment and higher interest cost on back of new expansion of MDF

unit. We value stock at 20x 1-yr forward to arrive at TP of ` 200 (Mar’17).

Initiate with HOLD.

Exhibit 9.Centuryply – Valuation Charts

We value the company at 20x 1-yr forward P/E to arrive at TP of ` 200

Current 1-yr forward P/E is 22.7x Current 1-yr forward P/BV is 7.3x

Current 1-yr forward EV/E of 15.2x FY15-18 Revenue/EBITDA and PAT Cagr


Exhibit 10.Centuryply – Valuation Ratios

Trading FY17/18 P/E of 21.2/19x

Valuation Ratios FY14 FY15 FY16E FY17E FY18EPER (x) 63.7 28.3 24.7 21.2 19.0

EV/EBITDA (x) 32.0 19.0 16.5 14.8 12.3

Price to book value (x) 14.6 11.0 8.4 6.5 5.3


0

5

10

15

20

25

30

35



0.0

2.0

4.0

6.0

8.0

10.0

12.0


P/BV = 7.3x Mean=6.5xMean+1SD=8.8x Mean-1SD=4.2x

0.0

5.0

10.0

15.0

20.0

25.0


EV/EBITDA = 15.2x Mean=13.0x

Mean+1SD=17.1x Mean-1SD=8.9x

14% 16%16%

28%

14%

35%

FY15-18E FY14-18E

Revenue cagr EBITDA cagr PAT cagr

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Exhibit 12. Centuryply – Key AssumptionsFY14 FY15 FY16E FY17E FY18E

Plywood

Capacity (cbm) 209,456 209,456 209,456 209,456 209,456Capacity Utilisation (%) 74.5 83.3 83.9 88.1 94.5Sales (cbm) 176,211 196,816 199,054 213,896 234,631Growth (%) 13.9 11.7 1.1 7.5 9.7

Laminated Sheets

Capacity (mn sheets) 3.6 4.8 4.8 4.8 4.8Capacity Utilisation (%) 81.9 76.2 87.8 100.9 113.5Sales (mn sheets) 2.9 3.6 4.2 4.8 5.5

Growth (%) 8.0 23.6 17.0 15.0 12.5


Exhibit 13. Centuryply – Segmental financialsmn FY14 FY15 FY16E FY17E FY18E

Net Sales

Plywood 9,648 11,471 11,685 13,181 15,214Laminates 2,367 2,935 3,527 4,446 5,266CFS 543 703 773 850 935Others 282 539 615 615 1,663Total 12,840 15,648 16,600 19,092 23,078Net Sales growth (%)

Plywood 19 2 13 15Laminates 24 20 26 18CFS 29 10 10 10Total 22 6 15 21

EBITDA

Plywood 1,309 2,017 2,080 2,333 2,663Laminates 220 283 538 667 790CFS 232 319 336 361 398Others -279 -121 -43 -43 97Total 1,482 2,498 2,911 3,318 3,947EBITDA %

Plywood 13.6 17.6 17.8 17.7 17.5Laminates 9.3 9.6 15.3 15.0 15.0CFS 42.7 45.4 43.5 42.5 42.5Total 11.5 16.0 17.5 17.4 17.1EBITDA growth (%)

Plywood 54 3 12 14Laminates 29 90 24 18CFS 38 5 7 10Total 69 17 14 19


Exhibit 14. Centuryply – Income Statement

Income Statement FY14 FY15 FY16E FY17E FY18Emn

Net Sales 12,840 15,648 16,600 19,092 23,078Other operating income 0 0 0 0 0Total revenues 12,840 15,648 16,600 19,092 23,078Total operating costs 11,358 13,150 13,689 15,774 19,132EBITDA 1,482 2,498 2,911 3,318 3,947Depreciation 332 448 426 491 688Other income 95 181 25 29 35EBIT 1,245 2,231 2,510 2,856 3,293Interest 551 433 476 479 582PBT 693 1,798 2,033 2,377 2,711Tax 24 290 305 368 461Adjusted PAT 670 1,508 1,728 2,009 2,250E/O items 0 0 0 0 0Reported PAT 670 1,508 1,728 2,009 2,250

Adjusted EPS 3.0 6.8 7.8 9.0 10.1

Cash EPS ( `

) 4.5 8.8 9.7 11.3 13.2Shares outstanding (mn) 222 222 222 222 222

Growth rates (%)Revenue 13.5 21.9 6.1 15.0 20.9EBITDA 31.4 68.5 16.5 14.0 18.9Adjusted EPS 27.2 125.2 14.6 16.2 12.02-year forward Revenue CAGR (%) 13.7 10.5 17.92-year forward EBITDA CAGR (%) 40.1 15.2 16.42-year forward EPS CAGR (%) 60.6 15.4 14.1

Margins (%)EBITDA 11.5 16.0 17.5 17.4 17.1EBIT 9.7 14.3 15.1 15.0 14.3PAT 5.2 9.6 10.4 10.5 9.7

Effective tax rate (%) 3.4 16.1 15.0 15.5 17.0


Capacity addition’ s done in plywood and

laminate; current utilization levels give

enough space to grow

Growth to be led by Laminates

FY15-18E Revenue/EBITDA/EPS CAGR of

14%/16%/14%

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Exhibit 15. Centuryply – Balance SheetBalance Sheet FY14 FY15 FY16E FY17E FY18E

` mn

Share capital 223 223 223 223 223

Reserves & Surplus 2,692 3,653 4,876 6,297 7,889

Shareholders' funds 2,914 3,876 5,098 6,520 8,111Secured loans 1,633 1,275 1,275 1,275 1,275

Unsecured loans 3,279 3,744 4,294 5,594 4,794

Total debt 4,912 5,019 5,569 6,869 6,069Deferred Tax Liab -5 -70 -60 -60 -60

Total sources of funds 7,821 8,824 10,607 13,328 14,120

Fixed assets 2,307 2,316 3,740 5,299 4,661Gross block 3,744 4,159 5,109 5,559 8,209

Less: Acc. Depreciation 1,624 2,070 2,496 2,986 3,675

Net block 2,120 2,089 2,613 2,572 4,534CWIP 188 227 1,127 2,727 127

Investments 379 451 451 451 451

Liquid Investments 22 5 5 5 5Current assets 6,480 7,662 8,119 9,536 11,375

Stocks + WIP 2,927 3,200 3,395 3,905 4,720

Sundry debtors 2,046 2,719 2,885 3,318 4,010

Cash/bank 180 170 171 396 326Loans and advances 1,115 1,459 1,548 1,780 2,152

Other current assets 212 113 120 138 167

Current liabilities 1,345 1,605 1,703 1,958 2,367Creditors 745 652 692 796 962

Other liabilities 282 527 559 643 777

Provisions 318 426 452 519 628Total Application of funds 7,821 8,824 10,607 13,328 14,120

Gearing and profitability ratios (%) Net-debt ( ` mn) 4,710 4,843 5,392 6,468 5,737

Net-debt/Equity 1.6 1.2 1.1 1.0 0.7Net-debt/EBITDA 3.2 1.9 1.9 1.9 1.5

Interest coverage ratio 2.9 6.2 6.2 7.0 6.8

RoAE 24.8 44.4 38.5 34.6 30.8RoACE 16.0 22.5 22.0 20.2 19.9

Fixed Asset T/O (Sales/Avg. GB) 3.7 4.0 3.6 3.6 3.4

WC Cycle (days) 120 123 123 123 123Dividend Yield (%) 0.5 1.0 1.0 1.2 1.3

FCF Yield (%) -1.4 1.0 -0.1 -1.1 3.3


Exhibit 16. Centuryply – Cash flowCashflow FY14 FY15 FY16E FY17E FY18E

mn

Profits before tax 693 1,798 2,033 2,377 2,711

Depr/amort/non-cash items 278 409 401 462 654

Interest income 551 433 476 479 582Chg in working capital -1,104 -918 -358 -937 -1,500

Taxes paid -112 -344 -305 -368 -461

CF from operations 306 1,378 2,248 2,012 1,986

Fixed asset capex -460 -533 -1,850 -2,050 -50(Purchase)/Sale ofassets/investments

2 0 0 0 0

Interest/dividend received -75 -92 25 29 35CF from investments -533 -624 -1,825 -2,021 -15

Equity raised 0 0 0 0 0

Debt raised / (repaid) 224 121 550 1,300 -800

Interest paid -558 -425 -476 -479 -582Dividends paid -57 -460 -505 -588 -658

Others 0 0 0 0 0CF from financing -391 -764 -432 234 -2,040

Change in cash for year -617 -10 -9 224 -69Beginning cash 797 180 170 161 386

Closing cash 180 170 161 386 316

FCFE -786 329 -54 -488 1,389


Debt to peak out in FY17, with net-

debt/equity at 1x

FY17 FCFE negative on back of capex on M

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Quarterly Financials

Exhibit 17. Centuryply – Quarterly financials

2QFY16 revenue was grew 8.5% for the company; EBITDA margins declined 130bps QoQmn 2QFY16 2QFY15 %YoY 1QFY16 %QoQ FY15 FY14 %Yo

Net Sales(excluding excise) 4,391 4,048 8.5 3,680 19.3 15,525 12,760 21

Other Operating Income 31 22 29 123 79

Total Revenues 4,422 4,070 8.6 3,709 19.2 15,648 12,840 21

Expenditure 3,684 3,432 7.3 3,042 21.1 13,006 11,415 13

EBITDA 738 638 15.7 668 10.6 2,643 1,425 85% margin 16.7 15.7 102 bps 18.0 -130 bps 16.9 11.1 579 bp

Other income 5 15 -66.9 3 47.3 37 151 -75

Interest 135 124 8.3 123 9.8 433 551 -21

Depreciation 107 109 -1.6 101 6.6 448 332 34

PBT 501 420 19.4 448 12.0 1,798 693 159

Tax 39 62 -37.7 51 -23.7 290 24 1,125

% tax rate 7.7 14.8 11.3 16.1 3.4

PAT (Adjusted) 463 358 29.3 397 16.5 1,508 669 125

Extraordinary items 0 0 0 0 0

PAT (Reported) 463 358 29.3 397 16.5 1,508 669 125

EPS ( ` ) 2.1 1.6 29.3 1.8 16.5 6.8 3.0 125

Key Operational matrix

Sales Volume

Plywood (cbm) 54,465 52,553 3.6 43,015 26.6 196,816 176,211 11

Laminated Sheets (mn sheets) 1.1 0.9 14.9 0.9 19.3 3.6 2.9 23Average net realisation (

/cbm)

Plywood ( ` /cbm) 49,912 48,211 3.5 50,690 -1.5 50,525 46,403 8

Laminated Sheets ( ` /sheet) 723 689 5.0 702 3.0 679 639 6


Exhibit 18.Centuryply – Quarterly segmental break-up

Plywood revenue/EBITDA grew by 6.9%/25.5% YoY; Laminates revenue/EBITDA grew by over 10%/15% YoY in 2QFY16mn 2QFY16 2QFY15 %YoY 1QFY16 %QoQ FY15 FY14 %Yo

Segment Revenue

Plywood and Allied 3,206 2,997 6.9 2,581 24.2 11,523 9,662 19

Laminate and Allied 905 804 12.5 791 14.4 2,996 2,425 23

Logistic 206 196 4.9 180 14.5 714 551 29

Others 115 73 58.3 165 -30.4 416 202 105

Total 4,431 4,070 8.9 3,716 19.2 15,648 12,840 21

Segment EBITDA

Plywood and Allied 566 451 25.5 487 16.1 2,017 1,309 54

Laminate and Allied 131 111 18.2 127 3.0 283 220 28

Logistic 82 91 -9.2 79 4.7 319 232 37

Total 774 646 19.9 668 16.0 2,597 1,739 49

Segment EBITDA %

Plywood and Allied 17.6 15.0 260 bps 18.9 -124 bps 17.5 13.5 395 b

Laminate and Allied 14.4 13.8 69 bps 16.1 -160 bps 9.4 9.1 38 b

Logistic 39.9 46.1 -618 bps 43.7 -375 bps 44.8 42.2 260 b

Total 17.5 15.9 161 bps 18.0 -49 bps 16.6 13.5 305 b


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Company Details

Exhibit 19.Centuryply - Board of Directors

Name Designation Qualification Experience (years) Age (years)

Sajjan Bhajanka CMD (Promoter - Executive) B.Com 35 62

Hari Prasad Agarwal Vice Chairman & ED B.Com 42 67

Sanjay Agarwal MD B.Com 28 54

Prem Kumar Bhajanka MD

Vishnu Khemani MD B.Sc 37 63

Ajay Baldawa ED 62

Mangi Lal Jain Independent Director 67

Santanu Ray Independent Director 54

Samarendra Mitra Independent Director

Asit Pal Independent Director 63

Mamta Binani Independent Director 62


Exhibit 20. Centuryply – Key Personnel


Arun Julasaria CFO FCA, FCS 25

Ajay Baldawa ED, Technical M Tech (IIT) 30

Ashutosh Jaiswal President, CFS B Sc. 30

SugataHaldar HR PGDM HR 22

Amit Gope GM - Branding MBA (XIMB) 21

Anoop Hoon President, Marketing & ODB.A (Eco);PGDM(XLRI Jamshedpur)

34 59

Navarun SenExecutiveLOB Head-Panel

PGDM 23 47

Shankho ChowdhuryExecutiveLOB Head-Decoratives

B.A. Honours 25 53


Exhibit 21.Centuryply – Shareholding Pattern

FII holding increased substantially in last 2-3 yearsMar-13 Mar-14 Mar-15 Sep-15

Promoters 72.9 72.9 73.3 73.3

FII 1.2 1.2 8.5 10.7

DII 0.0 0.0 3.3 3.4

Others 25.9 25.9 14.8 12.5

Total 100.0 100.0 100.0 100.0

Holding of more than 1%

GMO Emerging Domestic 1.77

Patton International Ltd 1.34 1.34

Brij Bhushan Agarwal 2.85 1.17

Subham Agarwal 1.27 1.27

Eskay Business Pvt Ltd 1.32

Ponni Trexim Pvt Ltd 1.23

India Capital Markets Pvt Ltd 1.07 1.88

Sheetij Agarwal 1.25

Mittu Agarwal

East India Securities Ltd 1.43

Canara/HSBC/OBC/LIC 1.39 1.24

Govt. Pension Fund Global 2.48 2.48


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Exhibit 22.Centuyply – MilestonesYear Events

1987 Company was promoted by Mr. Sajjan Bhajanka and Mr. Sanjay Agarwal.

1997 Maiden IPO of CPIL.

1998CPIL introduced 100% termite and borer proof plywood with 7 years comprehensivewarranty.

2000 CPIL entered into Ferro business in a JV with Shyam Ferro.

2001CPIL entered into cement business through a 70% subsidiary Cement ManufacturingCompany Ltd. (CMCL).

2004 Started commercial production of cement.

2004 Entered Laminates business.

2004 Rights issue and bonus issue.

2007 Acquired Star Cement Meghalaya Ltd through CMCL.

2008 Splits face value from ` 10/- to ` 1/-.

2009 CFS business becomes operational

2010 Acquires 51% stake in Aegis business

2010 Sainik was introduced as a economy segment plywood brand.

2011 Entered CFS business.

2013 Ferro and Cement business was demerged to increase focus on the businesses seperately.

2013 Entered into readymade furniture business

2014 Laminates capacity was increased by 1.2mn sheets to 3.6mn sheets.

2014 Plywood capacity was increased by c.40% to 210k cbm during FY10-14.

2014 Demerged Aegis business

2015 Laminates capacity was increased by 1.2mn sheets to 4.8mn sheets.


Exhibit 23.Centuryply – Location of manufacturing units


Bishnupur, Joka, West Bengal

Plywood: 37,036cbm

Laminates: 4.80mn sheets

Karnal, Haryana

Plywood: 36,000cbm

Bachau, Kandla, Gujarat

Plywood: 31,000cbm

Mirza, Guwahati, Assam

Plywood: 35,000cbm

Gumudipundi, Tamil Nadu

Plywood: 39,420cbm

Rooraki, Uttarakhand

Plywood: 25,000 cbm

Container Freight Stations at:

Sonai, Kolkata - 36,000TEU

Jinjira Pole, Kolkata - 1,20,000TEU

Total capacity (FY15)

- 203,000cbm Plywood

- 4.80mn sheets Laminates

- 1,56,000 TEU’s CFS

Expansions

- Veneer capacity in Myanmar

and Laos to 104,000cbm

(32,000cbm currently)

- Particle board unit in Chennai- Evaluating MDF capex

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Company background Centuryply derives c.75-80% of revenues and EBITDA from plywood,

remaining is contributed by laminate (c.20% of revenues, c.10% EBITDA) and

container freight station business (CFS).

Company is the joint leader, along with Greenply, in the plywood industry

with c.25% market share of the organized plywood industry (c.30% is

organized). Company has six plywood manufacturing capacities with a total

capacity of c.210k cbm spread across India and a unit in Myanmar to source

face veneer (required to manufacture plywood).

It has laminate capacity of 4.8mn sheets and is the third largest player (after

Greenply and Merino) in the laminate market.

CFS is at two locations near Kolkata Port. It is spread across an area of

1,00,000 square meters with capacity to handle 156,000 TEUs (c.50% of the

CFS capacity at Kolkata airport). Company has also entered into business of

trading furniture and modular kitchen.

Key investment arguments

Intelligent capex plans; Laminates to lead FY15-18E growth: With sufficient

capacity to grow without incurring immediate capex in current segments,

company has decided to enter MDF business and expand face veneer

business to ensure future growth. Laminates revenue is expected to witness22% CAGR (delivered more than 20% volume growth since last year) vs.

company’s CAGR of c.14% for FY15-18E.

Establishment of Myanmar, Laos units noteworthy; Plywood EBITDA

margins at peak: Company’s strong execution in timely establishment of

timber processing units at Myanmar and Laos has led to c.400bps EBITDA

margin expansion for the plywood segment in FY15 (c.850bps more than

Greenply’s). Plywood EBITDA grew by more than 50% in FY15 – is at a high

base with margin peaking. Laminates is expected to deliver more than 40%

EBITDA growth vs. company’s FY15-18E EBITDA CAGR of c.16%.

Key Risks

Lower sales and profitability from face veneer business. Faster pick up in MDF market, higher replacement of plywood.

Any change in regulations of the country from which face veneer is procured.

Foreign exchange fluctuation risk as company imports raw-material.

Continued slowdown in real estate construction activities.

Valuation and View

Currently stock is trading at FY17/18 P/E of 21.2x/19x. We value stock at

20x 1-yr forward EPS to arrive at TP of ` 200 (Mar’17). HOLD.

Exhibit 24.Centuryply – Key assumptionsParticulars FY14 FY15 FY16E FY17E FY18E

Sales VolumePlywood (cbm) 176,211 196,816 199,054 213,896 234,631

YoY Growth (%) 13.9 11.7 1.1 7.5 9.7

Laminated Sheets (mn sheets) 2.9 3.6 4.2 4.8 5.5

YoY Growth (%) 8.0 23.6 17.0 15.0 12.5

Average net realisation ( /cbm)Plywood ( ` /cbm) 46,403 50,501 50,355 52,151 54,248

YoY Growth (%) 1.1 8.8 -0.3 3.6 4.0

Laminated Sheets ( ` / sheet) 639 679 718 744 770

YoY Growth (%) 5.3 6.3 5.8 3.5 3.5

EBITDA %Plywood 13.6 17.6 17.8 17.7 17.5

Laminated Sheets 9.3 9.6 15.3 15.0 15.0


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Financial Tables (Standalone)

Profit & Loss ( mn)


Net sales (Net of excise) 12,840 15,648 16,600 19,092 23,078

Growth (%) 13.5 21.9 6.1 15.0 20.9

Other operational income 0 0 0 0 0

Raw material (or COGS) 8,143 9,129 9,424 10,868 13,202

Personnel cost 1,514 1,933 2,051 2,359 2,851

Other expenses (or SG&A) 1,701 2,088 2,215 2,547 3,079

EBITDA 1,482 2,498 2,911 3,318 3,947

EBITDA (%) 11.5 16.0 17.5 17.4 17.1

Growth (%) 31.4 68.5 16.5 14.0 18.9

Other non-op. income 95 181 25 29 35

Depreciation and amort. 332 448 426 491 688

EBIT 1,245 2,231 2,510 2,856 3,293

Add: Net interest income -551 -433 -476 -479 -582

Pre tax profit 693 1,798 2,033 2,377 2,711

Taxes 24 290 305 368 461

Add: Extraordinary items 0 0 0 0 0

Less: Minority interest 0 0 0 0 0

Reported net profit 670 1,508 1,728 2,009 2,250


Margin (%) 5.2 9.6 10.4 10.5 9.7

Diluted share cap. (mn) 222 222 222 222 222

Diluted EPS ( .) 3.0 6.8 7.8 9.0 10.1

Growth (%) 27.2 125.2 14.6 16.2 12.0

Total Dividend + Tax 260 534 505 588 658

Source: Company, JM F inancial

Balance Sheet ( mn)

Y/E March FY14A FY15A FY16E FY17E FY1

Share capital 223 223 223 223 2

Other capital 0 0 0 0

Reserves and surplus 2,692 3,653 4,876 6,297 7,8

Networth 2,914 3,876 5,098 6,520 8,1

Total loans 4,912 5,019 5,569 6,869 6,0

Minority interest 0 0 0 0

Sources of funds 7,826 8,895 10,667 13,388 14,1

Intangible assets 0 0 0 0

Fixed assets 3,744 4,159 5,109 5,559 8,2

Less: Depn. and amort. 1,624 2,070 2,496 2,986 3,6

Net block 2,120 2,089 2,613 2,572 4,5

Capital WIP 188 227 1,127 2,727 1

Investments 379 451 451 451 4

Def tax assets/- liability 5 70 60 60

Current assets 6,480 7,662 8,119 9,536 11,3

Inventories 2,927 3,200 3,395 3,905 4,7

Sundry debtors 2,046 2,719 2,885 3,318 4,0

Cash & bank balances 180 170 171 396 3

Other current assets 212 113 120 138 1

Loans & advances 1,115 1,459 1,548 1,780 2,1

Current liabilities & prov. 1,345 1,605 1,703 1,958 2,3

Current liabilities 1,027 1,179 1,251 1,439 1,7

Provisions and others 318 426 452 519 6

Net current assets 5,134 6,057 6,416 7,578 9,0

Others (net) 0 0 0 0

Application of funds 7,826 8,895 10,667 13,389 14,1


Cash flow statement ( mn)




-Inc/dec in working cap. -1,048 -1,039 -320 -839 -1,342

Others 0 0 0 0 0

Cash from operations (a) -96 914 1,834 1,661 1,596

-Inc/dec in investments -223 -72 0 0 0

Capex -372 -454 -1,850 -2,050 -50

Others 96 107 -38 -99 -158

Cash flow from inv. (b) -499 -419 -1,888 -2,149 -208

Inc/-dec in capital 7 -12 0 0 0

Dividend+Tax thereon -260 -534 -505 -588 -658

Inc/-dec in loans 234 107 550 1,300 -800

Others -4 -65 10 0 0

Financial cash flow ( c ) -22 -505 55 712 -1,458

Inc/-dec in cash (a+b+c) -617 -10 1 224 -69

Opening cash balance 797 180 170 171 396

Closing cash balance 180 170 171 396 326


Key Ratios


BV/Share ( ` ) 13.1 17.4 22.9 29.3 36

ROCE (%) 17.1 22.9 22.2 20.5 20

ROE (%) 24.8 44.4 38.5 34.6 30

Net Debt/equity ratio (x) 1.5 1.1 1.0 0.9 0

Valuation ratios (x)

PER 63.7 28.3 24.7 21.2 19

PBV 14.6 11.0 8.4 6.5 5

EV/EBITDA 31.7 18.8 16.4 14.7 12

EV/Sales 3.7 3.0 2.9 2.6 2

Turnover ratios (no.)

Debtor days 58 63 63 63

Inventory days 83 75 75 75

Creditor days 33 26 27 27


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Notes

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MDF to be the growth engineGreenply is the number one player in plywood and MDF market with an

established pan-India brand and distribution network. Besides growing

steadily in the established plywood business, MDF is expected to contributec.30% to revenues and over 50% to company’s EBITDA by end of FY16 (in 5 -6

years since the company entered MDF). FY15-18E MDF revenue CAGR is

expected at c.15% on increasing acceptability of the product. Company plans

to treble capacity to 0.54cbm by FY19 by adding a unit in Andhra Pradesh.

Plywood segment is expected to be impacted by weak near term demand

(7% FY15-18E revenue CAGR), though the mid-segment outsourced Ecotek

brand should continue to grow. We expect company to deliver FY15-18E

revenue/EBITDA/PBT CAGR of 9%/15%/22%. We value stock at 17x 1yr-

forward EPS; TP of 1,150 (Mar’17). Initiate with a BUY. GST implementation

and early ramp up of MDF unit would provide an additional uptick.

MDF capacity to treble by FY19, plywood to grow by outsourcing:

Greenply is number one player in plywood and MDF. In FY15 MDF contributedc.26% to company’s revenues (balance was plywood). We expect MDF to

deliver FY15-18E revenue CAGR of c.15% on (1) increasing acceptability of the

product; (2) demand from cannibalization of low-end plywood and (3)

company’s expansion in value-added products. Company plans to treble

capacity to 0.54cbm by FY19, by adding a unit in Andhra Pradesh. Plywood

segment is expected to be impacted by weak near term demand (12% FY16-

18E revenue CAGR), though the mid-segment outsourced Ecotek brand

should continue to grow for the company.

MDF to contribute more than 50% to EBITDA: The MDF business built in last

5-6 years would be contributing over 50% of EBITDA by FY16. MDF EBITDA is

expected to witness FY15-18E CAGR of more than 20% led by higher revenue

growth and margin expansion vs. plywood EBITDA by 11%. Company is

expected to maintain RoEs of over 20% with peak net-debt/equity at 0.5x and

net-debt/EBITDA at 1.4x in FY18 (majority of MDF capex is incurred).

Initiate with a BUY: Company’s P/E has re-rated in the past 4-5years led by

FY10-15 revenue/EBITDA/PBT CAGR of 25%/29%/26%. Currently stock is

trading at FY17/18 P/E of 15.4x/13.6x. We expect FY15-18E

revenue/EBITDA/PBT CAGR of 9%/15%/22%. We value stock at 17x 1-yr

forward EPS to arrive at TP of ` 1,150 (Mar’17). Initiate with a BUY.

Exhibit 1.Greenply – MDF to be the growth engine

Vicky


Tel: (91 22) 663030

Key Data





52-week range ` 1135.0/699


` /US$ 66

Daily Performance

% 1M 3M 12

Absolute -0.2 2.2 8

Relative* 1.8 2.7 17

* To the BSE Sensex


Sep-15 Sep-

Promoters 55.0 55

FII 11.4 15

DII 11.9 7

Public / others 21.7 21

-50

0%

50

10

15

20

0

200

400

600

800

1000

1200

1400

Nov-12 May-13 Nov-13 May-14 Nov-14 May-15 Nov-15

Greenply Industries

Greenply Industries Relative to Sensex (RHS)

Greenply Industries| MTLM IN

1 December 2015

Price: ` 926

BUY

12M Target: ` 1,150

Exhibit 1: Financial Summary ( mn)


Net sales 13,900 15,606 16,310 18,253 20,393

Sales growth (%) 5.8 12.3 4.5 11.9 11.7

EBITDA 1,833 2,043 2,355 2,727 3,118

EBITDA (%) 13.2 13.1 14.4 14.9 15.3


EPS ( ` ) 31.8 43.9 50.2 60.1 68.3

EPS growth (%) -6.9 38.1 14.1 19.8 13.7

ROCE (%) 15.7 17.7 17.6 18.3 16.9

ROE (%) 22.2 24.5 22.5 22.1 20.8

PE (x) 29.1 21.1 18.5 15.4 13.6

Price/Book value (x) 5.9 4.6 3.8 3.1 2.6

EV/EBITDA (x) 14.1 12.3 10.4 8.9 8.5





7/21/2019 JM-BM


Greenply Industries 1 December 20


Key Charts

Exhibit 2.Greenply – MDF to be the growth engine

Initiate with BUY, near term weakness in plywood segment

MDF to contribute to c.30% of the revenues in FY16 MDF to contribute over 50% of the EBITDA in FY16

Margins to expand MDF to drive EBITDA growth

MDF capex to ensure future growth, impact near term cash flows Net-debt to equity and EBITDA comfortable

Healthy return ratios Current 1-yr forward P/E is 16.5x


74 70 69 70

26 30 31 30

0

20

40

60

80

100

120


% of revenues Plywood MDF

5243 43 46

47 57 57 54

0

20

40

60

80

100

120


% of EBITDA Plywood MDF

9.1 9.0 9.4 10.2

23.3

27.1 27.1 27.1

0

5

10

15

20

25

30



Plywood MDF

9.3

7.3

14.615.1

11.2

20.5

Total Plywood MDF

Revenue EBITDA

0.7 0.5 0.40.8

0.4

-2.0

-0.7 -0.6-0.9 -0.8

-1.3

-3.8FY13 FY14 FY15 FY16E FY17E FY18E


1.2

1.0

0.6

0.40.3

0.5

2.12.0

1.5

1.0

0.8

1.4

FY13 FY14 FY15 FY16E FY17E FY18E

Net debt/Equity (x)

Net debt/EBITDA (x)

17% 17% 17% 16%

25%23%

22%

21%


RoCE (%) RoE (%)

14

16

18

20

22

Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15


7/21/2019 JM-BM




Investment Debates

# Debate 1- Is MDF really catching up

Greenply is a number one player in plywood and MDF with a market share of

25-30% of the domestic market revenues in both the businesses. In FY15

MDF contributed c.26% to company’s revenues (balance was plywood).

Company has patiently spent 5-6 years in MDF market to reach c.90%

utilization levels in FY15 and now plans to treble the capacity to 0.54cbm byFY19, by adding 0.36cbm unit in Andhra Pradesh. Besides being an inferior

quality product as compared to plywood which was compensated by MDF’s

lower price, the challenge faced initially by the MDF companies was low

acceptance by carpenters and architects. MDF revenues has grown by c.16%

in FY15 and we expect the company to deliver FY15-18E revenue CAGR of

c.15% on back of increasing acceptability of the product, demand from

cannibalization of low-end plywood demand and company’s expansion in

value-added products. We note that in FY18, MDF segment’s growth would

be constrained by capacity. Plywood segment is expected to be impacted by

weak near term demand (7% FY15-18E revenue CAGR, 12% for FY16-18E),

though the mid-segment outsourced Ecotek brand should continue to grow

for the company. Structurally company is well placed to continue to deliver

strong growth with large unorganized market moving to organized inplywood, increasing demand for MDF, strong distribution network, strong

brand and focused capex plans to deliver future growth.

74%/26% revenues from plywood/MDF; number one player in both: c.74%

of Greenply’s FY15 revenues came from the plywood business where

company is joint leader with Centuryply with c.25% share of the organized

market revenue; organized market being c.30% of the total market.

Remaining 26% revenues was contributed by MDF business where company is

the number one domestic player with c.30% share of the total market volume

(of which c.33% is imports). Company has the highest MDF capacity in India of

1,80,000cbm at Pantnagar, Uttarakhand.

Exhibit 3.Greenply – Revenue break-up74% revenues from plywood and 26% from MDF in FY15


77 72 75 74 70 69 70

23 28 25 26 30 31 30

0

20

40

60

80

100

120


% of revenuesPlywood MDF

7/21/2019 JM-BM




Exhibit 4.Greenply – Revenue market share and capacity

Company is a joint leader in plywood market and largest player in MDF (organized market)

c.25% revenue market share of organized plywood market c.30% volume market share of organized MDF market

32.4msm plywood capacity, operating at c.102% utilization 0.18cbm MDF capacity, operating at c.90% utilization

Source: Industry Sources, Company, JM Financial.

Capacities reaching peak utilizations; New MDF plant to come in FY19: We

note that FY15 capacity utilization levels for plywood and MDF plants stood at

c.102% and c.90% respectively. With peaking of the capacity in plywood,company has adopted the strategy to grow by outsourcing the lower end

products. Company is already outsourcing c.30% of the volumes and 20% by

value, and is targeting to increase it upto 30% by value over coming 2-3 years.

In MDF there is no outsourcing done as it is a fully organized market and

company is already in the process of laying a new 0.36cbm (double the

present capacity) MDF unit in AP (including 20-25MW power plant for captive

purpose) which should be operational in FY19. Company has already

purchased 106 acres of land. South is an important market for the company

which contributed c.30% to FY15 MDF revenues. We note that FY18 revenue

growth may be impacted by capacity constraint in MDF.

Centuryply,25%

Greenply,26%

Archidply,6%

Sarda, 5%

Uniply, 2%

Kitply, 1%

National, 1%

Others, 35%

Mangalam,5%

Shirdi, 2%

Action, 20%

Green, 29%

RushilDécor, 11%

Imported,33%

24.9

28.4

32.4 32.4 32.4 32.4 32.4 32.4119

113

121

107 10299

103 108

60

70

80

90

100

110

120

130

3.0

8.0

13.0

18.0

23.0

28.0

33.0

38.0


Plywood Capacity (msm) (LHS) Capacity utilisation (%)

0.18 0.18 0.18 0.18 0.18 0.18 0.18 0.18

15

6588

76

90103

116 121

0

20

40

60

80

100

120

140

0.00

0.05

0.10

0.15

0.20


MDF Capacity (mn cbm) (LHS) Capacity utilisation (%)

7/21/2019 JM-BM




MDF is fastest growing segment; plywood a bit slow: MDF plant was

started by Greenply in FY11 and it took around five years for the company to

reach c.90% utilization levels (in FY15). Besides being an inferior quality

product as compared to plywood which was compensated by its lower price,

the challenges faced by MDF companies were (1) low acceptance by

carpenters as it required different skill sets to make MDF furniture as

compared to plywood; (2) low acceptance by architects as it reduces the

billing amount and hence the commission earned on the billing amount. We

believe, MDF is the fastest growing segment in the panel boards industry and

there is a long way for MDF to grow in India. For FY15-18E, we expect

company’s MDF revenues to witness 15% CAGR vs. 7% CAGR for plywood.

MDF demand is led by increased acceptability of the product itself and

replacement of low end plywood varieties. Company is increasingly expanding

into value added products like pre-laminated MDF, UV coated MDF and

laminate/veneer flooring. Plywood segment is expected to be impacted by

weak near term demand, though the mid-segment outsourced Ecotek brand

should continue to grow for the company.

Exhibit 5.Greenply – MDF revenue and volumes

MDF segment revenues to contribute significantly to company’s revenue growth profile

Company’s total revenue to grow by 9% FY15-18E cagr MDF segment to lead the FY15-18 revenue growth

MDF volume to grow by c.10% cagr MDF revenue to grow by c.15% cagr


7.2

10.6

13.1 13.9

15.6 16.318.3

20.439.3

47.1

24.1

5.8

12.3

4.5 11.9

11.7

0

10

20

30

40

50

0

5

10

15

20

25


Revenue (Rs bn) (LHS) Growth (%)

24.7

17.4

9.37.3

14.6

0.0

5.0

10.0

15.0

20.0

25.0

30.0

Total revenue Plywood MDF


-10.1

17.014.5

12.5

4.54.9

-1.0

5.03.0 3.5


MDF volumes growth (%) MDF realization growth (%)

0.5

2.4

3.7 3.54.1

4.9

5.76.2

-5.7

15.820.2

15.9

8.2

-10

-5

0

5

10

15

20

25

0

1

2

3

4

5

6

7


MDF (Rs bn) Growth (%)

7/21/2019 JM-BM




Exhibit 6. Greenply – Plywood revenues and volumes

Plywood segment to gain traction post FY16

Plywood revenues to be flattish for FY16 Volumes weak in FY16

Plywood volumes to pick up in FY17/18E Ecotek volumes (affordable brand) to continue to faster


Structural drivers intact for the company

Large unorganized market: 70% of the plywood market is still unorganized

vs. c.10% a decade ago, offering the organized players a huge landscape to

grow with favorable Indian demographics and increasing preference for

branded products. We note that Greenply has delivered plywood revenue

CAGR of c.29% for FY06-15 vs. industry growth of c.10%.

Strong sales and distribution channel: Greenply has a strong pan-India

distribution network with c.6,000 and 4,000 retailers for plywood and MDF

respectively. Company has c.1,170/450 distributors and 33/15 branch offices

for plywood/MDF.

Strong brands: Greenply has built strong brands over last 31 years in

different categories (plywood and MDF) and in various segments (high,

medium-end). Company has built “Green Panelmax” brand in MDF. Company

continues to spend 2-3% of the revenues towards building of brand. In past

company’s brand has been endorsed by celebrities like Arjun Rampal.

Largely retail: Company sells c.90% of the goods to retailers directly, rather

than builders, as plywood and laminates are mainly used by the end-users for

building furniture.

6.7

8.29.4 10.4

11.5 11.412.6

14.230.5

20.9

15.3

10.3

11.1

-1.1

10.2

13.3

-5

0

5

10

15

20

25

30

35

0

2

4

6

8

10

12

14

16


Plywood (Rs bn) Growth (%)

34.6 38.0

41.544.5 46.1 47.5

51.154.9

195 215

226 233250 252

261 270

0.0

10.0

20.0

30.0

40.0

50.0

60.0

35

85

135

185

235

285


Plywood volumes (msm)

Plywood realization (Rs/sqm)

20.6

9.9 9.27.2

3.62.0

7.0

9.58.2

10.0

5.5

2.9

7.2

-3.0

3.0 3.5


Plywood volumes growth (%) Plywood realization growth (%) 45.5

34.3

14.5 13.4

18.322.0

28.6 32.1

34.036.7


Ecotek plywood volumes growth (%) % of total volumes

7/21/2019 JM-BM




Exhibit 7. Greenply – Structural drivers in place for the company

Large unorganized market, strong sales and distribution channel, strong brand and largely retail sales

Unorganized market continue be c.70% of the total plywood market Company has delivered much higher growth than industry growth

Strong Distribution network 90% of the sales through retail channel

Plywood FY15

Distributors/Stockists 1,100

Retailers 6,000

Branches 33

MDF

Distributors/Stockists 450

Retailers 4,000

Branches 12

Presence

States 21

City 300

Greenply have built strong brands over time Company continues spend on branding


Organized,

30%

Unorganized,70%

11.7%

17.4%

5.8%7.3%

Industry Growth Greenply


FY15-18E

Retail, 90%

Institutional,10%

1.8

2.3 2.2 2.2 2.2

FY11 FY12 FY13 FY14 FY15

Selling expenses (% of Net Sales)

7/21/2019 JM-BM




# Debate 2- Will MDF EBITDA be more than plywood

With strong execution Greenply has built the MDF business in last 5-6years

to contribute c.47% to company’s EBITDA in FY15. With higher revenue

growth than the plywood business and margin expansion on the back of

better utilization, we expect MDF to contribute over 50% to company’s

EBITDA in FY16. We note that more than 60% of the increase in company’s

EBITDA over FY15-18E would be driven by MDF business. For FY15-18E, we

expect MDF EBITDA to witness over 20% CAGR vs. plywood EBITDA of 11%.

MDF to contribute more than 50% to company’s EBITDA: MDF formed

c.26% of Company’s FY15 revenues. We expect MDF revenues to continue to

grow at a higher rate with expansion of margins led by better utilization

levels and price hikes. We estimate FY15-18 MDF EBITDA to witness more

than 20% CAGR (EBITDA margins to expand by more than 350bps) vs. 11% for

plywood. MDF is expected to contribute more than 50% to company’s EBITDA

from FY16 itself. We note that more than 60% of the increase in company’s

EBITDA would be driven by MDF business over FY15-18E.

Exhibit 8. Greenply – EBITDA

MDF is the key for EBITDA growth

Company EBITDA to grow by 15% FY15-18 cagr MDF margins to expand

Growth to be led by MDF segment MDF EBITDA to form more than 50% of EBITDA in FY16


0.7

1.2

1.8 1.82.0

2.4

2.7

3.1

70.3

53.1

1.8

11.5

15.3 15.814.3

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5



9.1 9.0 9.4 10.2

23.3

27.1 27.1 27.1

0

5

10

15

20

25

30



Plywood MDF

15.1

11.2

20.5

0.0

5.0

10.0

15.0

20.0

25.0

Total Plywood MDF


Total Plywood MDF

5243 43 46

47 57 57 54

0

20

40

60

80

100

120


% of EBITDA Plywood MDF

7/21/2019 JM-BM




Plywood EBITDA to grow steadily: During FY15 Greenply’s plywood EBITDA

remained flat as increase in revenues by c.11% was offset by decline in

EBITDA margins by 100bps to c.9%. We note that the plywood margins were

c.850bps lower that Centuryply mainly led by efficient sourcing of raw-

material by Centuryply post ban on export of raw timber in Myanmar

(discussed in detail in the Centuryply section). The difference was driven by

as (1) Greenply established the Myanmar sourcing unit in 2HFY15 vs. 1HFY15

by Century; (2) Greenply has established the Myanmar unit mainly for captive

consumption under 50% JV vs. Centuryply which has established Myanmar

unit under a 100% subsidiary and has been able to sell surplus raw-material at

highly profitable prices (including inventory from last year). We expect

Greenply’s FY15-18E plywood EBITDA to see 11% CAGR driven by 7% revenue

CAGR and c.100bps margin expansion.

7/21/2019 JM-BM




# Debate 3- Is valuation cheap

We note that company’s P/E has re-rated in the past 4-5years led by FY10-15

revenue/EBITDA/PBT CAGR of 25%/29%/26%. The growth has been led by

growth in both plywood and MDF segment. Currently the stock is trading at

FY17/18 P/E of 15.4x/13.6x. Greenply is expected to deliver higher FY15-18E

PBT CAGR of 22% vs 15% for Centuryply and is trading at c.25-30% discount to

Centuryply on FY17/18 P/E.

We expect company to deliver revenue/EBITDA/PBT CAGR of 9%/15%/22%.

Profit growth would mainly be driven by MDF EBITDA. We value stock at 17x

1-yr forward EPS to arrive at TP of ` 1,150 (Mar’17). Initiate with BUY.

Exhibit 9.Greenply – Valuation Charts

We value the company at 17x 1-yr forward P/E to arrive at TP of ` 1,150

Current 1-yr forward P/E is 16.5x Current 1-yr forward P/BV is 3.4x

Current 1-yr forward EV/E is 9.8x FY15-18E Revenue/EBITDA/PBT and PAT Cagr


Exhibit 10.Greenply – Valuation Ratios

Trading FY17/18 P/E of 15.2/13.2x

Valuation Ratios FY14 FY15 FY16E FY17E FY18EPER (x) 29.1 18.4 18.5 15.4 13.6

EV/EBITDA (x) 14.2 12.4 10.5 9.0 8.5

Price to book value (x) 5.9 4.6 3.8 3.1 2.6


14

16

18

20

22



3.0

3.5

4.0

4.5


P/BV = 3.4x Mean=3.6xMean+1SD=3.9x Mean-1SD=3.3x

8.0

9.0

10.0

11.0

12.0

13.0


EV/EBITDA = 9.8x Mean=10.3x


9%

15%

22%

16%

Revenue EBITDA PBT PAT

FY15-18E cagr

7/21/2019 JM-BM




Financials in exhibits

Exhibit 11.Greenply – Financials

Healthy financials, MDF is the key

MDF revenue to growth at higher rate MDF EBITDA to grow at a higher rate

PAT growth impacted by higher tax rate, PBT to grow over 20% Comfortable of net-debt/equity and net-debt/EBITDA

Major capex would be on MDF in FY18, FCF negative in FY18 Better working capital management than Centuryply

Healthy return on capital Stable dividend policy


7.2

10.6

13.1 13.9

15.6 16.318.3

20.439.3

47.1

24.1

5.8

12.3

4.5 11.9

11.7

0

10

20

30

40

50

0

5

10

15

20

25


Revenue (Rs bn) (LHS) Growth (%)

15.1

11.2

20.5

0.0

5.0

10.0

15.0

20.0

25.0

Total Plywood MDF


Total Plywood MDF

9%

15%

22%

16%

Revenue EBITDA PBT PAT

FY15-18E cagr

1.2

1.0

0.6

0.40.3

0.5

2.12.0

1.5

1.00.8

1.4

FY13 FY14 FY15 FY16E FY17E FY18E

Net debt/Equity (x)

Net debt/EBITDA (x)

0.7 0.5 0.40.8

0.4

-2.0

-0.7 -0.6-0.9 -0.8

-1.3

-3.8FY13 FY14 FY15 FY16E FY17E FY18E


19

30 30 30 30


Working Capital Cycle (days)

17% 17% 17% 16%

25%23%

22%

21%


RoCE (%) RoE (%)

9

7

10 10 10


Dividend payout (%)

7/21/2019 JM-BM




Exhibit 12.Greenply– Key AssumptionsFY14 FY15 FY16E FY17E FY18E

Plywood (msm)

Capacity 32.40 32.40 32.40 32.40 32.40Capacity Utilisation (%) 107.0 102.1 98.6 102.6 107.7Despatches 34.71 32.94 31.95 33.23 34.89Outsourced volumes 9.80 13.16 15.07 17.09 20.21Total Volume 44.51 46.11 47.03 50.32 55.10Growth (%) 7.2 3.6 2.0 7.0 9.5

MDF (mn cum)Capacity 0.18 0.18 0.18 0.18 0.18Capacity Utilisation (%) 76.0 89.6 102.7 115.5 120.7Sales 0.14 0.16 0.18 0.21 0.22Growth (%) -10.1 17.0 14.5 12.5 4.5


Exhibit 13. Greenply– Segmental financialsmn FY14 FY15 FY16E FY17E FY18E

Net SalesPlywood 10,373 11,521 11,399 12,562 14,237

MDF 3,527 4,085 4,911 5,691 6,155

Total 13,900 15,643 16,310 18,253 20,393Net Sales growth (%)

Plywood 10 11 -1 10 13

MDF -6 16 20 16 8

Total 6 13 4 12 12

EBITDAPlywood 1,070 1,053 1,022 1,183 1,447MDF 764 954 1,333 1,544 1,670

Total 1,833 2,043 2,355 2,727 3,118

EBITDA %Plywood 10.3 9.1 9.0 9.4 10.2

MDF 21.6 23.3 27.1 27.1 27.1

Total 13.2 13.1 14.4 14.9 15.3EBITDA growth (%)

Plywood 8 -2 -3 16 22

MDF -6 25 40 16 8

Total 2 11 15 16 14


Exhibit 14. Greenply– Income StatementIncome Statement FY14 FY15 FY16E FY17E FY18E

mnNet Sales 13,900 15,606 16,310 18,253 20,393

Other operating income 0 37 0 0 0Total revenues 13,900 15,643 16,310 18,253 20,393

Total operating costs 12,067 13,599 13,955 15,526 17,275

EBITDA 1,833 2,043 2,355 2,727 3,118Depreciation 359 471 473 489 505

Other income 39 11 4 5 5

EBIT 1,513 1,583 1,886 2,243 2,618Interest 481 353 303 256 358

PBT 1,032 1,230 1,583 1,987 2,259

Tax 264 170 372 536 610Adjusted PAT 768 1,061 1,211 1,450 1,649

E/O items 0 158 0 0 0

Reported PAT 768 1,218 1,211 1,450 1,649

Adjusted EPS 31.8 43.9 50.2 60.1 68.3

Cash EPS ( ` ) 46.7 63.4 69.7 80.3 89.2

Shares outstanding (mn) 24 24 24 24 24Growth rates (%)Revenue 5.8 12.3 4.5 11.9 11.7

EBITDA 1.8 11.5 15.3 15.8 14.3

Adjusted EPS -6.9 38.1 14.1 19.8 13.72-year forward Revenue CAGR (%) 8.3 8.2 11.8

2-year forward EBITDA CAGR (%) 13.3 15.5 15.1

2-year forward EPS CAGR (%) 25.5 16.9 16.7

Margins (%)EBITDA 13.2 13.1 14.4 14.9 15.3

EBIT 10.9 10.1 11.6 12.3 12.8

PAT 5.5 6.8 7.4 7.9 8.1

Effective tax rate (%) 25.6 13.8 23.5 27.0 27.0


New MDF expansion to come in FY19

MDF revenue and EBITDA to grow at a

higher rate than plywood

FY15-18E Revenue/EBITDA/PBT/EPS

cagr of 9%/15%/23%/16%

7/21/2019 JM-BM




Exhibit 15. Greenply– Balance SheetBalance Sheet FY14 FY15 FY16E FY17E FY18E

` mn

Share capital 121 121 121 121 121

Reserves & Surplus 3,685 4,719 5,788 7,069 8,525

Shareholders' funds 3,806 4,840 5,909 7,189 8,646Secured loans 2,325 1,922 1,222 1,022 3,172

Unsecured loans 1,376 1,317 1,317 1,317 1,317

Total debt 3,701 3,239 2,539 2,339 4,489Deferred Tax Liab 431 403 403 403 403

Total sources of funds 7,938 8,482 8,851 9,932 13,538

Fixed assets 5,273 5,469 5,747 6,508 9,753Gross block 6,533 7,263 7,513 7,763 8,013

Less: Acc. Depreciation 1,525 1,933 2,406 2,894 3,399

Net block 5,007 5,330 5,108 4,869 4,614CWIP 266 139 639 1,639 5,139

Investments 138 329 329 329 329

Liquid Investments 0 182 182 182 182Current assets 5,190 5,667 5,894 6,585 7,355

Stocks + WIP 1,960 1,903 1,989 2,226 2,487

Sundry debtors 2,200 2,572 2,688 3,009 3,361

Cash/bank 72 72 46 40 44Loans and advances 3 8 8 9 11

Other current assets 955 1,112 1,162 1,300 1,453

Current liabilities 2,663 2,983 3,118 3,489 3,898Creditors 2,006 2,249 2,351 2,631 2,939

Other liabilities 423 444 464 519 580

Provisions 235 290 303 339 379Total Application of funds 7,938 8,482 8,851 9,932 13,538

Gearing and profitability ratios (%) Net-debt ( ` mn) 3,629 2,986 2,311 2,117 4,264Net-debt/Equity 1.0 0.6 0.4 0.3 0.5

Net-debt/EBITDA 2.0 1.5 1.0 0.8 1.4

Interest coverage ratio 3.9 5.8 7.8 10.7 8.7RoAE 22.2 24.5 22.5 22.1 20.8

RoACE 14.7 16.6 16.6 17.4 16.3

Fixed Asset T/O (Sales/Avg. GB) 2.2 2.3 2.2 2.4 2.6WC Cycle (days) 57 52 52 52 52

Dividend Yield (%) 0.3 0.3 0.5 0.6 0.7

FCF Yield (%) 2.4 1.9 3.6 1.6 -8.7


Exhibit 16. Greenply– Cash flowCashflow FY14 FY15 FY16E FY17E FY18E

mn

Profits before tax 1,032 1,388 1,583 1,987 2,259

Depr/amort/non-cash items 383 490 469 484 500Interest income 377 359 303 256 358

Chg in working capital -141 -89 -118 -325 -358

Taxes paid -187 -277 -372 -536 -610CF from operations 1,463 1,871 1,865 1,865 2,150

Fixed asset capex -553 -858 -750 -1,250 -3,750(Purchase)/Sale ofassets/investments

-137 -191 0 0 0

Interest/dividend received 30 7 37 5 5

CF from investments -659 -1,042 -713 -1,245 -3,745

Equity raised 0 0 0 0 0

Debt raised / (repaid) -444 -465 -700 -200 2,150Interest paid -397 -604 -303 -256 -358

Dividends paid -85 -85 -142 -170 -193Others 60 331 0 0 0

CF from financing -866 -823 -1,145 -626 1,599

Change in cash for year -62 6 7 -6 3

Beginning cash 92 23 29 36 30

Closing cash 30 29 36 30 34

FCF 544 416 849 364 -1,954


Debt to peak out in FY18

Net-debt/equity at 0.5x in FY18

FY18 FCFE negative on back of capex on M

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Exhibit 17. Greenply– Quarterly financials

2QFY16 revenue declined by 2.5% YoY and EBITDA was up 7% YoYmn 2QFY16 2QFY15 %YoY 1QFY16 %QoQ

Total Revenues 4,008 4,108 -2.4 3,808 5.2

Expenditure 3,443 3,580 -3.8 3,249 6.0

EBITDA 565 528 7.1 559 1.1

% margin 14.1 12.9 125 bps 14.7 -57 bps

Other income 1 2 -66.0 0 5.3Interest 78 92 -14.7 77 1.6

Depreciation 123 115 7.2 120 2.3

PBT 364 322 12.9 362 0.6

Tax 91 54 69.2 95 -3.7

% tax rate 25.1 16.8 26.2

PAT (Adjusted) 273 268 1.6 267 2.2

Extraordinary items 0 0 0

PAT (Reported) 273 268 1.6 267 2.2

EPS ( ` ) 11.3 11.1 1.6 11.1 2.2


Sales Volume

Plywood (msm) 12.03 12.29 -2.1 11.01 9.3

MDF (cbm) 0.04 0.04 11.7 0.04 6.5

Average net realisation ( /cbm)

Plywood ( ` /sqm) 235 241 -2.5 241 -2.5MDF ( ` /cbm) 26,818 26,158 2.5 27,166 -1.3


Exhibit 18.Greenply – Quarterly segmental break-up

MDF revenue/EBITDA grew strongly by over 14.5%/38% YoY in 2QFY16mn 2QFY16 2QFY15 %YoY 1QFY16 %QoQ

Segment Revenue

Plywood and Allied 2,877 3,120 -7.8 2,735 5.2

MDFs 1,131 987 14.5 1,074 5.3

Total 4,008 4,107 -2.4 3,808 5.2

Segment EBITDA

Plywood and Allied 259 296 -12.6 235 10.1

MDFs 315 229 37.7 323 -2.4

Total 574 525 9.3 558 2.9

Segment EBITDA %

Plywood and Allied 9.0 9.5 -50 bps 8.6 40 bps

MDFs 27.9 23.2 470 bps 30.1 -220 bps

Total 14.3 12.8 154 bps 14.7 -33 bps


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Company Details

Exhibit 19. Greenply - Board of DirectorsName Designation Qualification Experience (years) Age (years

Shiv Prakash Mittal Executive Chairman - Promoter Director B Sc 42 66

Rajesh Mittal MD - Promoter Director B Com 31 52

Shobhan Mittal JMD & CEO - Promoter Director BBA 10 35

Moina Yometh Konyak Non-Executive – Independent B Com 58

Susil Kumar Pal Non-Executive – Independent BSc, Mtech 72

Vinod Kumar Kothari Non-Executive – Independent Bcom, CA, CS 54

Anupam Kumar Mukerji Non-Executive – Independent M Sc 79

Sonali Bhagwati Dalal Non-Executive – Independent B Arch 54

Upendra Nath Challu Non-Executive – Independent BA 65


Exhibit 20. Greenply – Key PersonnelName Designation Qualification Experience (years) Age (years

Vishwanathan Venkatraman CFO Bcom, CA 51 28

Yogesh Arora Country Head - Sales & Marketing (EPD) B Sc 29 59

Vinit Kumar Tiwari Country Head - Sales & Marketing (PBD) MBA 23 46

Naveen Malhotra Country Head-Flooring (EPD) 19 19 43

Dr. Sushil Kumar Nath Technical Head Ph.D 31 60

Mr Sanjeeb Choudhury AVP HR BA (Hons), PGDHRM 23 46

Mr Kamala Kant Mishra AVP Branding PGDM 13 36


Exhibit 21. Greenply – Shareholding Pattern

Institutional holding has increased c.10pps in last 2-3 yearsMar-13 Mar-14 Mar-15 Sep-15

Promoters 55.0 55.0 55.0 55.0

FII 7.7 15.3 12.2 11.4

DII 5.8 6.5 7.9 11.9

Others 31.5 23.3 24.9 21.7

Total 100.0 100.0 100.0 100.0

Holding of more than 1%Emerging Markets Management LLC A/C TheEmmumbrella Funds Emerging Markets SouthAsianstars Fund 1.3

Volrado Venture Partners 1.9

Jai-Vijay Resources Pvt Ltd 2.3

Morgan Stanley Mauritius Company Ltd 2.9 1.8 1.1

Kotak Mahindra UK Ltd A/c Kotak IndiaFocusfund II 3.1

IDFC Trustee Company Ltd A/c HDFC balanceFund 1.9

HDFC Trustee Company 3.9 4.6 7.9 9.0

HDFC Trustee Company 1.9

Citigroup Global Markets Mauritius Pvt Ltd 3.0HSBC Bank (Maurities) Limited A/c Jawalamukhi Investment Holdings 9.9 9.9 9.9

Westbridge 3.0 3.0Mangal bhansali 1.1 1.0 1.0

Ashish Kacholia

Ashish Dhawan 11.9 9.8 9.8 4.2

Lata Bhanshali 1.8 2.1

Vallabh Roopchand Bhanshali 1.3

Gagandeep Credit Capital Pvt Ltd

HDFC Life 1.3

IDFC Sterling Equity Fund 1.5

Akhil Dhavan 1.1


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Exhibit 22.Greenply – MilestonesYear Events

1984Mr. Shiv Prakash Mittal and Mr.Rajesh Mittal ventured into the industry by setting up asaw-mill.

1988 Set up a plant at Nagaland for the manufacture of plywood.

1994

Amalgamation of the erstwhile Greenply Industries Limited with Mittal Laminates Limitedwith effect from April 1, 1994. Pursuant to this amalgamation the plywood manufacturingunit at Tizit, Nagaland was transferred and its name was changed to ‘Greenply' industriesLimited’.

1995 The equity shares of our Company were listed pursuant to an offer for sale.

2005Amalgamation of Worthy Plywoods Limited, pursuant to which the plywood manufacturingunit at Kriparampur, West Bengal was amalgamated.

2006 Established a manufacturing unit in Pantnagar, Uttarakhand for plywood.

2007Acquisition of Galaxy Décor Private Limited and Platinum Veneers Private Limited aswholly-owned subsidiaries, which owned the plywood manufacturing facility atBamanbore, Gujarat.

2008Launched Green Defender (Fire Retardant Plywood) certified by the Central BuildingResearch Institute (CBRI).

2009Ranked first for the largest plywood company, by construction world. Amalgamation ofGalaxy Décor Private Limited and Platinum Veneers Private Limited with Greenply.

2010 Chosen as ‘Power Brand’ by Indian consumers.

2011 Introduced value- added products.

2012Recognised as the leading Indian Company in the Plywood sector at the Dun & BradstreetCorporate Awards 2012.

2013Created a lasting impression with Greenply Always Hoyenga, India’s largest graffiti wall(960 x 5.25ft) that figured in the Limca Book of Records (national record).

2014The Brand Trust Report Award to Greenply Industries Limited for the most trusted PlywoodBrand.

2015Greenply Industries Limited was honoured with the Dun & Bradstreet Manappuram FinanceLimited Corporate Award in the Plywood Sector.


Exhibit 23.Greenply –Location of manufacturing units


Bamanbore, Gujarat

Plywood - 11.40msm

Pantnagar, Uttarakhand

Plywood -10.50msm

MDF - 0.18mn cbm

Kriparampur , Kolkata

Plywood - 6.00msm

Tizit, Nagaland

Plywood - 4.50msm

Chittoor, Andhra Pradesh

MDF - 0.36msm (FY19E)


- 32.40msm Plywood

- 0.18mn cbm MDF

Expansions

- 0.36msm MDF (FY19E)

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Company background Greenply derived c.74% of the FY15 revenues from plywood and balance

c.26% from MDF (commenced in FY11). MDF contributed c.46% to the

company’s EBITDA in FY15.

Company is the joint leader, along with Century, in the plywood industry with

c.25% market share of the organized plywood industry (c.30% is organized).

Company has four plywood manufacturing capacities with a total capacity of

c.32.4msm spread across India and a 50% joint venture in Myanmar (capacityof 42msm) to source face veneer (required to manufacture plywood).

With MDF capacity of 0.18mn cbm (at Pantnanagar, Uttarakhand) it is the

largest player in the MDF market.

Company demerged the decorative business of laminates and veneers into a

separate listed entity as “Greenlam”.


MDF capacity to treble by FY19: We expect MDF to deliver FY15-18E revenue

CAGR of c.15% on back of increasing acceptability of the product, demand

from cannibalization of low-end plywood demand and company's expansion

in value-added products. Company plans to treble the capacity to 0.54cbm by

FY19. Plywood segment is expected to be impacted by weak near term

demand (7% FY15-18E revenue CAGR), though the mid-segment outsourced

Ecotek brand should continue to grow for the company.

MDF to contribute more than 50% to EBITDA: Greenply's FY15-18E MDF

EBITDA is expected to witness CAGR of more than 20% led by higher revenue

growth and margin expansion vs. plywood EBITDA by 11%.

Key Risks

Company is incurring substantial capex on MDF expansion; any slump in MDF

demand would be detrimental to company’s growth and financials.



Valuation and View

Currently stock is trading at FY17/18 P/E of 15.4x/13.6x. We expect FY15-

18E revenue/EBITDA/PBT CAGR of 9%/15%/22%. We value stock at 17x 1-yr

forward EPS to arrive at TP of ` 1,150 (Mar’17). BUY.

Exhibit 24.Greenply – Key assumptionsParticulars FY14 FY15 FY16E FY17E FY18E

Sales VolumePlywood (msm) 44.5 46.1 47.0 50.3 55.1

YoY Growth (%) 7.2 3.6 2.0 7.0 9.5

MDF (mn cbm) 0.14 0.16 0.18 0.21 0.22

YoY Growth (%) -10.1 17.0 14.5 12.5 4.5

Average net realisation ( /cbm)Plywood ( ` /cbm) 233 250 242 250 258

YoY Growth (%) 2.9 7.2 -3.0 3.0 3.5MDF ( ` /cbm) 25,572 25,307 26,572 27,369 28,327

YoY Growth (%) 4.9 -1.0 5.0 3.0 3.5

EBITDA %Plywood 10.3 9.1 9.0 9.4 10.2

MDF 21.6 23.3 27.1 27.1 27.1


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Profit & Loss ( mn)


Net sales (Net of excise) 13,900 15,606 16,310 18,253 20,393

Growth (%) 5.8 12.3 4.5 11.9 11.7

Other operational income 0 37 0 0 0

Raw material (or COGS) 9,490 10,489 10,768 11,968 13,290

Personnel cost 1,199 1,457 1,478 1,644 1,847

Other expenses (or SG&A) 1,378 1,654 1,710 1,914 2,138

EBITDA 1,833 2,043 2,355 2,727 3,118

EBITDA (%) 13.2 13.1 14.4 14.9 15.3

Growth (%) 1.8 11.5 15.3 15.8 14.3

Other non-op. income 39 11 4 5 5


EBIT 1,513 1,583 1,886 2,243 2,618

Add: Net interest income -481 -353 -303 -256 -358

Pre tax profit 1,032 1,230 1,583 1,987 2,259

Taxes 264 170 372 536 610

Add: Extraordinary items 0 158 0 0 0

Less: Minority interest 0 0 0 0 0



Margin (%) 5.5 6.8 7.4 7.9 8.1

Diluted share cap. (mn) 24 24 24 24 24

Diluted EPS ( .) 31.8 43.9 50.2 60.1 68.3

Growth (%) -6.9 38.1 14.1 19.8 13.7

Total Dividend + Tax 85 87 142 170 193


Balance Sheet ( mn)


Share capital 121 121 121 121 1

Other capital 0 0 0 0

Reserves and surplus 3,685 4,719 5,788 7,069 8,5

Networth 3,806 4,840 5,909 7,189 8,6

Total loans 3,701 3,239 2,539 2,339 4,4

Minority interest 0 0 0 0

Sources of funds 7,507 8,079 8,448 9,529 13,1

Intangible assets 0 0 0 0

Fixed assets 6,533 7,263 7,513 7,763 8,0

Less: Depn. and amort. 1,525 1,933 2,406 2,894 3,3

Net block 5,007 5,330 5,108 4,869 4,6

Capital WIP 266 139 639 1,639 5,1

Investments 138 329 329 329 3

Def tax assets/- liability -431 -403 -403 -403 -4

Current assets 5,190 5,667 5,894 6,585 7,3

Inventories 1,960 1,903 1,989 2,226 2,4

Sundry debtors 2,200 2,572 2,688 3,009 3,3

Cash & bank balances 72 72 46 40

Other current assets 955 1,112 1,162 1,300 1,4

Loans & advances 3 8 8 9

Current liabilities & prov. 2,663 2,983 3,118 3,489 3,8

Current liabilities 2,428 2,693 2,814 3,150 3,5

Provisions and others 235 290 303 339 3

Net current assets 2,527 2,684 2,776 3,095 3,4

Others (net) 0 0 0 0

Application of funds 7,507 8,079 8,448 9,529 13,1






-Inc/dec in working cap. -130 -72 -100 -277 -305

Others 0 0 0 0 0

Cash from operations (a) 944 1,554 1,583 1,662 1,849

-Inc/dec in investments -137 -191 0 0 0

Capex -615 -604 -750 -1,250 -3,750

Others -43 -85 -17 -48 -53

Cash flow from inv. (b) -795 -880 -767 -1,298 -3,803

Inc/-dec in capital 5 -97 0 0 0

Dividend+Tax thereon -85 -87 -142 -170 -193

Inc/-dec in loans -239 -462 -700 -200 2,150

Others 91 -28 0 0 0

Financial cash flow ( c ) -229 -674 -842 -370 1,957

Inc/-dec in cash (a+b+c) -80 0 -26 -6 3

Opening cash balance 152 72 72 46 40

Closing cash balance 73 72 46 40 44


Key Ratios


BV/Share ( ` ) 157.7 200.5 244.8 297.9 358

ROCE (%) 15.7 17.7 17.6 18.3 16

ROE (%) 22.2 24.5 22.5 22.1 20

Net Debt/equity ratio (x) 0.9 0.6 0.4 0.3 0


PER 29.1 21.1 18.5 15.4 13

PBV 5.9 4.6 3.8 3.1 2

EV/EBITDA 14.1 12.3 10.4 8.9 8

EV/Sales 1.9 1.6 1.5 1.3 1


Debtor days 58 60 60 60

Inventory days 51 45 45 45



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Fueled for growthGreenlam is structurally well placed to deliver strong growth with extremelystrong established distribution network and brand, even internationally.

Greenlam is a largest laminate player in Asia and third largest in the world.Company is in a sweet spot with all the growth capex completed. It hasincurred a total capex of 1.6bn in FY14-1HFY16 with potential to generaterevenues of 5-6bn (FY15 total revenue at 8.5bn). Expansions includedcapacities of 2mn sheets laminate, 2msm melamine faced chipboard (part oflaminate), 120k units factory finishes doors (part of veneer) and 1msmengineered wood flooring (part of veneer). We expect expansions to drivecompany’s growth – laminate segment revenue/EBITDA is expected towitness 16%/22% and veneer 36%/27% CAGR for FY15-18E. Though veneer’srevenue share would increase by c.50% in next three years, laminate wouldstill be c.80% of the revenues by FY18. We expect the company to deliverrevenue/EBITDA/EPS CAGR of 18/23/39% over FY15-18E. Currently the stockis trading at FY17/18 P/E of 19.8/13.7x. We value the company at 17x 1-yrforward EPS to arrive at a TP of 550 (Mar’17), c.27% upside from current

levels. GST implementation would provide an additional uptick. Expansions completed; staged to grow: Greenlam has incurred total capex

of ` 1.5bn in FY14-1HFY16 (excluding c.Rs0.8bn improvement capex on

existing facilities) with potential to generate revenues of ` 5-6bn. Expansions

added following capacities - 2mn sheets laminate, 2msm melamine faced

chipboards (part of laminate), 120k units factory finishes doors (part of

veneer) and 1msm engineered wood flooring (part of veneer). For FY15-18E,

laminate segment revenue is expected to witness 16% CAGR and veneer 36%.

Though veneer’s revenue share would increase by c.50% in next three years,

laminate would still be c.80% of revenues by FY18 (88% in FY15).

To outpace peers’ profit growth: We expect Greenlam’s EBITDA to witness

c.23% CAGR during FY15-18E driven by 22%/27% EBITDA CAGR for the

laminate/veneer business vs. 15-17% growth for peers. EBITDA growth isexpected to be driven by (1) margin expansion in laminate business on better

utilizations and (2) EBITDA contribution by new businesses in the veneer

segment. Laminate segment would continue to contribute c.80% to EBITDA.

Initiate with BUY: We expect the company to deliver Revenue/EBITDA/EPS

CAGR of 18/23/39% over FY15-18E. Currently the stock is trading at FY17/18

P/E of 19.8/13.7x. We value the company at 17x 1-yr forward EPS to arrive at

a TP of ` 550 (Mar’17), c.27% upside from current levels. E1.Vicky


Tel: (91 22) 663030

Key Data





52-week range ` 582.0/299


` /US$ 66

Daily Performance

% 1M 3M 12

Absolute 7.2 16.0

Relative* 9.2 16.5

* To the BSE Sensex


Sep-15 Sep-

Promoters 55.1

FII 6.9

DII 7.6

Public / others 30.4

0%10203040506070809010

0

100

200

300

400

500

600

Mar-15 May-15 Ju l-15 Se p-15 No v-15

Greenlam Industries

Greenlam Industries Relative to Sensex (RHS)

Greenlam Industries | GRLM IN

1 December 2015

Price: ` 435

BUY

12M Target: ` 550

Exhibit 1: Financial Summary (

mn)

Y/E March FY15A FY16E FY17E FY18E

Net sales 8,446 9,632 11,768 13,986

Sales growth (%) 11.4 14.0 22.2 18.8

EBITDA 929 1,146 1,431 1,739

EBITDA (%) 11.0 11.9 12.2 12.4

Adjusted net profit 284 335 529 765

EPS ( ` ) 11.8 13.9 21.9 31.7

EPS growth (%) -17.7 18.1 57.8 44.6

ROCE (%) 9.9 10.3 13.3 16.6

ROE (%) 13.2 13.8 18.6 22.1

PE (x) 37.0 31.3 19.8 13.7

Price/Book value (x) 4.6 4.1 3.4 2.7

EV/EBITDA (x) 14.0 11.4 8.9 6.9


JM Financial Research is also availableon: Bloomberg - JMFR <GO>,Thomson Publisher & Reuters,S&P Capital IQ and FactSet.

Please see Appendix I at the end of thireport for Important Disclosures andDisclaimers and Research AnalystCertification.


7/21/2019 JM-BM


Greenlam Industries 1 December 20


Key Charts

Exhibit 2. Greenlam – Fuelled for growth

Initiate with BUY, to outpace peers profit growth

Capex completed in FY14-1HFY16 Staged for a strong growth, veneer to grow faster

Product CapacityCapex( mn)

RevenuePotential ( mn)

Laminate Sheets 2mn sheets 200 1,000-1,200

MFC 2msm 150 350-500

Factory Finished Doorsand frames

1,20,000units 270 800-900

Engineered WoodFlooring

1msm 1,050 3,000-3,500

Total 1,620 5,150 - 6,100

Laminate to contribute to c.80% of the revenues by FY18 Laminate to continue to contribute to c.80% of the EBITDA

Capex over, FCFE to kick in from FY17 Net-debt equity and EBITDA to improve

Return ratios to improve Outpace peers growth


18%16%

36%

23% 22%27%

40%

Total business Laminates Veneer business

FY15-18E cagr Revenue EBITDA PAT

88 87 84 82

12 13 16 18

0

20

40

60

80

100

120


% of revenues Laminates Veneer

81 91 86

79

19 9 14

21

0

20

40

60

80

100

120


% of EBITDA Laminates Veneer

0.3

-0.1

0.4

0.6

-1.0

-0.5

-0.1 -0.1



1.21.1

0.8

0.5

2.8

2.4

1.6

1.0


Net debt/Equity (x)

Net debt/EBITDA (x)

10% 10%

13%

16%

13% 14%

19% 22%


RoCE (%) RoE (%)

14%

9%

18%16% 15%

23%

14% 16%

39%


FY15-18E cagr

Revenue EBITDA PAT

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Investment Debates

# Debate 1- Revenue potential from the capex done

Company is largest laminate producer in Asia and third largest in the world

by volumes. c.88% of the FY15 8.4bn revenues of Greenlam came from the

laminate business, balance c.12% from veneer segment. It has incurred total

capex of 1.6bn in FY14-1HFY16 (excluding c.Rs0.8bn improvement capex on

existing facilities of Nalagarh and Behror) to drive the growth momentum inthe business. These expansions have the capacity to generate revenues of

5-6bn. Expansions added the following capacities - 2mn sheets laminate,

2msm melamine faced chipboards (part of laminate), 120k units factory

finishes doors (part of veneer) and 1msm engineered wood flooring (part of

veneer). We expect expansions to drive company’s revenues – for FY15-18E,

laminate segment revenue is expected to witness 16% CAGR and veneer

36%. Though veneer’s revenue share would increase by c.50% in next three

years, laminate would continue to form c.80% of the total revenue in FY18.

Structurally company is well placed to deliver strong growth with extremely

strong distribution network and brand established, even internationally.

Asia’s largest player in laminate: c.88% of FY15 ` 8.4bn revenues for

Greenlam came from the laminate business, balance c.12% from veneersegment. Company has c.30% market share of the total organized laminate

market in India (c.45% of the India’s laminate exports market and c.30% of the

domestic organized market). Greenlam is largest laminate producer in Asia

and third largest in the world by volumes. c.50% of the company’s laminate

revenue comes from exports. APAC/US/Europe account for c.47%/16%/13% of

exports. In the veneer market, company is present in the natural veneer

business with market share of c.20% of the organized market. In

1QFY16/2QFY16 it entered the teak veneer/engineered veneer business.

Exhibit 3.Greenlam – Revenue break-up

88% revenues from laminate and 12% from veneer’s in FY15


82 87 88 88 87 84 82

18 13 12 12 13 16 18

0

20

40

60

80

100

120


% of revenuesLaminates Veneer

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Exhibit 4.Greenlam – Revenue market share and capacity

Company is the Asia’s largest player in the laminate market and leading player in natural veneer business

c.30% revenue market share of India’s organized laminate market c.20% revenue share of India’s organized natural veneer market

10.02mn sheets laminate capacity, c.114% utilization (FY15) Sufficient veneer capacity, expanding into teak/engineered venee


Laminate capacity is optimally utilized; veneer has surplus capacity: We

note that company ended FY15 with a capacity utilization of c.114% in

laminate. A new 2mn sheet laminate expansion (taking total capacity to 14mn

sheets) became operational in Sep’15. Veneer’s capacity utilization was c.25%in FY15. Veneer’s optimal capacity utilization is generally low (around 50%) as it

is a niche product involving a labor intensive process.

Capex incurred has ability to generate more than 5bn revenues: Greenlam

has done total capex of ` 1.6bn in FY14-1HFY16 (excluding c.Rs0.8bn

improvement capex on existing facilities of Nalagarh and Behror) to drive the

growth momentum in the business. With new products company would be

present across the spectrum of surface decorative materials. These expansions

have the capacity to generate revenues of ` 5-6bn as shown below:

Exhibit 5. Greenlam – Capex

` 1.6bn capex done, capable of generating ` 5-6bn of revenues

Product Segment Capacity CommercialOperations

Capex(

mn)RevenuePotential

(

mn)Comments

Laminate Sheets Laminate 2mn sheets 2QFY16 2001,000-1,200

Brownfield expansion. Already a marketleader.

MFC Laminate 2msm 3QFY15 150 350-500Used in the organized manufacture ofmodular furniture and kitchens. It is aderivative of laminates business itself.

Factory Finished Doors and frames Veneer 1,20,000units 2QFY16 270 800-900 Market growing by 20-25%.

Engineered Wood Flooring Veneer 1msm 3QFY15 1,0503,000-3,500

Market size of ` 6bn (75% is timber basedproducts). Market growing by 20-25%.

Total 1,6205,150 -6,100


Greenlam,31%

Merino, 26%

Centuryply,11%

Stylam, 8%

Royal Touch,

7%

Rushil

Décor, 7% Others,

10% Greenlam,

20%

Others

organised

players, 80%

10.0 10.0 10.0 10.0 10.0

12.0

14.0 14 .0

9499

103107

114

105

101

114

60

70

80

90

100

110

120

3.0

5.0

7.0

9.0

11.0

13.0

15.0


Laminates (mn sheeets) (LHS) Capacity utilisation (%)

4.20 4.20 4.20 4.20 4.20 4.20 4.20 4.20

33

33

3026 25

34

37 39

0

5

10

15

20

25

30

35

40

45

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50


Veneer (msm) (LHS) Capacity uti lisation (%)

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We note that, if required, company may go for further two phases of brownfield

expansions (2mn sheets each phase) in laminate by incurring incremental capex

of ` 200mn per 2mn sheets.

About the new products

Melamine Faced Chipboards (MFC): MFC is an engineered particle wood

product. Greenlam offers laminated MFC which is primarily used in organized

carpentry by OEMs like modular furniture manufacturers and kitchen

manufactures.

Engineered Wood Flooring: Company sells the wood flooring material, under

the brand “Mikasa”. It is the first Indian brand in the category and has the

highest range of offerings with 111 SKUs. The product comes with a maximum

warranty of 30 years and is unique with a glueless mechanism for installation.

Engineered Door: Greenlam is the first organized company to launch

engineered, factory finished, door solutions in the country.

Exhibit 6. Greenlam - New products

Melamine Faced Chipboards Engineered Wood Flooring Engineered Door


Veneer share to double in next three years; laminate to continue to form

more than 80% revenue: Veneer business is expected to deliver c.35% revenue

cagr driven by (1) new wood flooring business; (2) new engineered doors

business; (3) expansion into teak and engineered veneer business. We note

that we have assumed wood flooring and engineered door business to deliver

c. ` 700mn and ` 500mn revenues by FY18E, though they have the potential to

deliver double the revenues. For FY15-18E, we expect Laminate business to

witness c.16% revenue CAGR driven mainly by volume growth from newly

expanded capacity.

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Exhibit 7.Greenlam – Veneer revenues

Veneer’s revenue share to increase by c.50% in next three years, FY15-18E revenue cagr of 36%

Company’s total revenue to grow by 18% FY15-18E cagr Veneer segment revenue to grow faster at c.36% cagr

Revenue assumed from wooden flooring and engineered doors Veneer revenue growth ex- flooring and doors business


Exhibit 8. Greenlam – Laminate revenues

Laminate continue to form more than 80% revenue in FY18Laminate revenues to continue to grow Volumes gain traction with expansions done


8.4 9.6 11.8 14.0

11.314.2

22.2

18.8

0

5

10

15

20

25

0

2

4

6

8

10

12

14

16



1.0 1.3 1.9 2.5

10.2

26.4

54.3

29.3

0

10

20

30

40

50

60

0

1

1

2

2

3

3


Veneer (Rs bn) Growth (%)

182

0

511

250

703

500

Wooden flooring Engineered Doors

Revenue (Rs mn) FY16E FY17E FY18E

26.4

8.1

54.3

9.7

29.3

10.7

Total Veneer business Veneer business (ex-floor and doors)

Revenue Growth (%) FY16E FY17E FY18E

7.4 8.4 9.8 11.5

11.4

12.5

17.4

16.8

0

5

10

15

20

0

2

4

6

8

10

12

14


Laminates (Rs bn) Growth (%)

7.3

9.0

12.5 12.5

3.93.0 3.5 3.5


Laminates volumes growth (%) Laminates realization growth (%)

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# Debate 2- Will company outpace peers’ profit growth

We believe Greenlam will outpace peers like Centuryply and Greenply in

terms of EBITDA growth. For FY15-18E, we expect company’s EBITDA to

witness c.23% CAGR driven by 22%/27% CAGR of the laminate/veneer

business (vs. 15-17% growth of Centuryply and Greenply). EBITDA growth in

both segments is expected to be driven by (1) higher utilization in laminate

business and (2) contribution to EBITDA by the new businesses in the

veneer segment. We note that laminate segment would continue to

contribute c.80% to company’s EBITDA.

Laminate to account for c.80% of EBITDA in FY18: Laminate business

accounted for 81% of EBITDA in FY15. We expect laminate share to remain

flattish over FY15-18E (higher in FY16 due to initial loss in new business

ventures of veneer segment), delivering 22% EBITDA CAGR on c.16% revenue

CAGR and c.250bps margin expansion (to 12.4%, from 10% in FY15).

Company’s 1HFY16 laminate EBITDA margin was 12.4%.

New businesses to drive veneer segment’s EBITDA: We expect the new

businesses of wooden flooring/engineered door to be EBITDA

breakeven/positive from FY17 and contribute to more than 40% of EBITDA of

the total veneer business by FY18. EBITDA of the veneer business is expected

witness 27% CAGR to more than ` 350mn by FY18.

Exhibit 11. Greenlam – EBITDA

Company FY15-18 EBITDA to witness 23% cagr; higher than peers

Company EBITDA to grow by 23% FY15-18 cagr, higher than peers Laminate margins to expand

Higher growth in Veneer business EBITDA Laminate to continue to form 80% of EBITDA


0.9 1.1 1.4 1.7

13.6

23.3

24.9

21.5

0.0

5.0

10.0

15.0

20.0

25.0

30.0

0.0

0.5

1.0

1.5

2.0



10.1

11.7 12.4 12.5 12.0

17.9

9.78.6

10.4

14.4

0

5

10

15

20

FY15 1QFY16 FY16E FY17E FY18E


Laminates Veneer

23.2

22.4

26.8

20.0

21.0

22.0

23.0

24.0

25.0

26.0

27.0

28.0

Total Laminates Veneer


Total Laminates Veneer

81 91 86 79

19 9 14 21

0

20

40

60

80

100

120



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# Debate 3- Valuations vs. high growth

Greenlam was formed by demerging the decorative surface laminate and veneer

business of Greenply.

We expect the company to deliver Revenue/EBITDA/EPS CAGR of 18/23/40%

over FY15-18E. Currently the stock is trading at FY17/18 P/E of 19.8/13.7x. We

value the company at 17x 1-yr forward EPS to arrive at a TP of ` 550 (Mar’17),

c.27% upside from current levels.

Exhibit 12.Greenlam – Valuation Charts

We value the company at 17x 1-yr forward P/E to arrive at TP of ` 550

Current 1yr forward P/E is 22.5x Current 1yr forward P/BV is 3.7x

Current 1yr forward EV/E is 10x FY15-18E Revenue/EBITDA and PAT Cagr


Exhibit 13.Greenlam – Valuation Ratios

Trading FY17/18 P/E of 19.7/13.6xValuation Ratios FY15 FY16E FY17E FY18E

PER (x) 39.4 31.3 19.8 13.7

EV/EBITDA (x) 14.1 11.5 9.0 7.0

Price to book value (x) 4.6 4.1 3.4 2.7


14

19

24

29

34



2.5

3.0

3.5

4.0

4.5


P/BV=3.7x Mean=3.5xMean+1SD=3.8x Mean-1SD=3.2x

8.0

9.0

10.0

11.0

12.0

13.0


EV/EBITDA = 10x Mean=9.8x


18%

23%

40%

Revenue EBITDA PAT

FY15-18E cagr

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Financials in exhibitsExhibit 14.Greenlam – Financials

Strong growth in offing

Revenues to grow by c.18% cagr over FY15-18E Veneer to grow faster

Laminate to continue to form c.80% EBITDA FCFE to kick in with capex being over

Net-debt/equity and net-debt/EBITDA to trend down Efficient working capital management

Return ratios set to improve To maintain c.4% dividend payout


8.4 9.6 11.8 14.0

11.314.2

22.2

18.8

0

5

10

15

20

25

0

2

4

6

8

10

12

14

16



18%16%

36%

23% 22%27%

40%

Total business Laminates Veneer business

FY15-18E cagr Revenue EBITDA PAT

81 91 86 79

19 9 14 21

0

20

40

60

80

100

120



0.3

-0.1

0.4

0.6

-1.0

-0.5

-0.1 -0.1



1.21.1

0.8

0.5

2.8

2.4

1.6

1.0


Net debt/Equity (x)

Net debt/EBITDA (x) 41 41 41 41


Working Capital Cycle (days)

10% 10%

13%

16%

13% 14%

19% 22%


RoCE (%) RoE (%)

4 4 4 4


Dividend payout (%)

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Exhibit 15. Greenlam– Key AssumptionsFY15 FY16E FY17E FY18E

Laminate (mn sheets)Capacity 10.02 12.02 14.02 14.02Capacity Utilisation (%) 114 105 101 114Sales 11.59 12.63 14.21 15.99Growth (%) 7.3 9.0 12.5 12.5

Veneer (msm)Capacity 4.20 4.20 4.20 4.20Capacity Utilisation (%) 25 34 37 39Sales 1.06 1.45 1.55 1.65

Growth (%) -5.0 36.0 7.0 7.0

Other CapacitiesMFC (msm) 2.00 2.00 2.00 2.00Engeneered Wood (msm) 1.00 1.00 1.00 1.00Engineered Doors (mn units) 0.12 0.12 0.12


Exhibit 16.Greenlam – Segmental financialsmn FY15 FY16E FY17E FY18E

Net SalesLaminate and Allied Products 7,442 8,375 9,828 11,477Veneer and Allied Products 994 1,257 1,940 2,509Total 8,436 9,632 11,768 13,986Net Sales growth (%)Laminate and Allied Products 11.4 12.5 17.4 16.8Veneer and Allied Products 10.2 26.4 54.3 29.3

Total 11.3 14.2 22.2 18.8EBITDALaminate and Allied Products 752 1,038 1,228 1,377Veneer and Allied Products 178 108 202 362Total 929 1,146 1,431 1,739EBITDA %Laminate and Allied Products 10.1 12.4 12.5 12.0Veneer and Allied Products 17.9 8.6 10.4 14.4Total 11.0 11.9 12.2 12.4EBITDA growth (%)Laminate and Allied Products 10.9 38.2 18.3 12.1Veneer and Allied Products 26.9 -39.4 88.3 78.7Total 13.6 23.3 24.9 21.5


Exhibit 17.Greenlam – Income StatementIncome Statement FY15 FY16E FY17E FY18E

mnNet Sales 8,446 9,632 11,768 13,986Other operating income 0 0 0 0Total revenues 8,446 9,632 11,768 13,986Total operating costs 7,517 8,486 10,337 12,247EBITDA 929 1,146 1,431 1,739Depreciation 302 335 354 358Other income 14 16 20 24EBIT 642 827 1,097 1,405Interest 268 299 283 228PBT 373 528 814 1,177Tax 89 193 285 412Adjusted PAT 284 335 529 765E/O items -18 0 0 0Reported PAT 266 335 529 765

Adjusted EPS 11.8 13.9 21.9 31.7Cash EPS ( ` ) 24.3 27.8 36.6 46.5Shares outstanding (mn) 24 24 24 24

Growth rates (%)Revenue 11.4 14.0 22.2 18.8EBITDA 13.6 23.3 24.9 21.5Adjusted EPS -17.7 18.1 57.8 44.62-year forward Revenue CAGR (%) 18.0 20.52-year forward EBITDA CAGR (%) 24.1 23.22-year forward EPS CAGR (%) 36.5 51.1

Margins (%)EBITDA 11.0 11.9 12.2 12.4EBIT 7.6 8.6 9.3 10.0PAT 3.4 3.5 4.5 5.5

Effective tax rate (%) 23.9 36.5 35.0 35.0


All expansions completed

Veneer business to grow faster, laminate

continue to form c.80% of EBITDA

FY15-18E Revenue/EBITDA/PBT/EPS

cagr of c.%/18%/23%/39%

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Exhibit 18. Greenlam – Balance SheetBalance Sheet FY15 FY16E FY17E FY18E

` mn

Share capital 121 121 121 121

Reserves & Surplus 2,150 2,468 2,971 3,698

Shareholders' funds 2,271 2,589 3,092 3,819Secured loans 1,742 1,842 1,442 842

Unsecured loans 930 930 930 930

Total debt 2,672 2,772 2,372 1,772Deferred Tax Liab 145 145 145 145

Total sources of funds 5,087 5,506 5,608 5,735

Fixed assets 3,206 3,371 3,067 2,759Gross block 4,534 5,034 5,084 5,134

Less: Acc. Depreciation 1,420 1,755 2,109 2,466

Net block 3,114 3,279 2,975 2,667CWIP 92 92 92 92

Investments 175 175 175 175

Liquid Investments 0 0 0 0Current assets 3,757 4,298 5,223 6,197

Stocks + WIP 1,881 2,145 2,621 3,115

Sundry debtors 1,181 1,347 1,645 1,955

Cash/bank 29 46 29 23Loans and advances 662 754 922 1,095

Other current assets 5 6 7 8

Current liabilities 2,051 2,339 2,857 3,396Creditors 1,765 2,012 2,459 2,922

Other liabilities 194 221 270 320

Provisions 93 106 129 153Total Application of funds 5,087 5,505 5,608 5,735

Gearing and profitabilityratios (%) Net-debt ( ` mn) 2,643 2,726 2,343 1,749

Net-debt/Equity 1.2 1.1 0.8 0.5Net-debt/EBITDA 2.8 2.4 1.6 1.0

Interest coverage ratio 3.5 3.9 5.1 7.7

RoAE 13.2 13.8 18.6 22.1RoACE 9.6 9.9 12.8 16.1

Fixed Asset T/O (Sales/Avg. GB) 2.0 2.0 2.3 2.7

WC Cycle (days) 56 56 56 56Dividend Yield (%) 0.1 0.1 0.2 0.3

FCF Yield (%) 3.2 -0.6 3.9 6.0


Exhibit 19. Greenlam – Cash flowCashflow FY15 FY16E FY17E FY18E

mn

Profits before tax 355 528 814 1,177Depr/amort/non-cash items 319 319 334 334

Interest income 268 299 283 228Chg in working capital 737 -236 -424 -441

Taxes paid -109 -193 -285 -412

CF from operations 1,571 718 722 886

Fixed asset capex -973 -500 -50 -50(Purchase)/Sale ofassets/investments

9 -1 0 0

Interest/dividend received 11 16 20 24

CF from investments -953 -485 -30 -26

Equity raised 0 0 0 0Debt raised / (repaid) -325 100 -400 -600Interest paid -269 -299 -283 -228

Dividends paid 0 -17 -26 -38

Others -1 0 0 0CF from financing -596 -216 -709 -866

Change in cash for year 22 17 -18 -6Beginning cash 7 29 46 28

Closing cash 29 46 28 22

FCF 340 -65 409 632


Debt at peak in FY16

Net-debt/equity to reduce to 0.4x by FY18

To generate strong FCF from FY17

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Exhibit 20. Greenlam – Quarterly financials

Laminate volume grew by c.5% YoY in 2QFY16 led by decline in exportsmn 2QFY16 1QFY16 %QoQ,bps

Net Sales (excluding excise) 2,216 2,082 6.5

Other operating Income 85 88

Total Revenues 2,301 2,170 6.0

Expenditure 2,005 1,918 4.5

EBITDA 296 252 17.6% margin 12.9 11.6 127 bps

Other income 3 2 16.4

Interest 75 77 -3.6

Depreciation 75 76 -1.5

PBT 149 100 48.5

% margin 6.5 4.6 185 bps

Tax 56 36 55.3

% tax rate 38.0 36.3

PAT (Adjusted) 92 64

% margin 4.0 2.9 107 bps

Extraordinary items 0 0

PAT (Reported) 92 64 44.6

EPS ( ` ) 3.8 2.6 44.6


Sales VolumeLaminate 3.0 2.8 4.9

Veneer 0.4 0.4 5.4


Laminate 638 627 1.8

Veneer 740 735 0.7


Exhibit 21.Greenlam – Quarterly segmental break-up

Veneer EBITDA being impacted by loss of new business of wood flooringmn 2QFY16 1QFY16 %QoQ,bps

Segment Revenue

Laminate1,997 1,887 5.8

Veneer 304 283 7.4

Total 2,301 2,170 6.0

Segment EBITDA

Laminate 260 221 17.6

Veneer 33 27 20.6

Total 293 248 17.9

Segment EBITDA %

Laminate 13.0 11.7 130 bps

Veneer 10.9 9.7 120 bps

Total 12.7 11.4 128 bps


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Company Details

Exhibit 22. Greenlam - Board of Directors

Name Designation Qualification Experience Age

Shiv Prakash Mittal Chairman B.Sc 42 66

Saurabh Mittal MD & CEO B.Com 18 40

Parul Mittal Director Marketing & Design B.Com 13 37

Vijay Kumar Chopra Independent Director CA 35 69

Urvashi Saxena Independent Director LLB 40 70

Sonali Bhagwati Dalal Independent Director B.Arch 30 54


Exhibit 23. Greenlam – Key Personnel


Ashok Sharma CFO CA 22 46

B L Sharma President - Plant Operations

Deepak Aadhar VP - HR, CSR, IT & Admin MSc, EMP 29 51

Alex Joseph VP - Marketing MBA 12 39

Anuj Sangal Country Head Sales – Laminate & Allied Vertical MBA 22 48

Anil Tyagi Country Head Sales – Flooring Vertical B.Sc 28 59

Shivaji Mohinta Country Head Sales – Decorative Veneer Strategic Mgt Diploma 25 47

Lokesh Dutt VP - International Exports B.Tech 25 49

Banwari Lal Sharma Head - Manufacturing B.Sc, LLB, MBA 34 59

Sandeep Mathur President-Doors PGDM 34 57

Alok M Tibrewala Country Head - Laminate and Allied B.Tech 31 52


Exhibit 24. Greenlam – Shareholding Pattern

Listed in Mar’15

Mar-15 Jun-15 Sep-15Promoters 55.0 55.1 55.1

FII 12.3 12.4 6.9

DII 7.6 7.6 7.6

Others 25.1 25.0 30.4

Total 100.0 100.0 100.0

Holding of more than 1%

HSBC (Jwalamukhi) 9.9 9.9 5.0

HDFC 7.6 7.6 7.6

MS 1.4 1.4 1.4

Westbridge 3.0 3.0 7.9

Akash Bhansali 1.4 1.4 2.6

Ashish Dhawan 9.8 10.2 10.5

Vallabh Bhansali 1.3 1.3 1.3

Mangal Bhansali 1.1 1.1 1.1


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Exhibit 25. Greenlam – MilestonesYear Events

1992 Foundation stone of First laminate Unit at Behror, Rajasthan.

1993 Commercial Production and Exports of Laminate started.

2002 Started Commercial Production of Decorative Veneer.

2005 1st Overseas Subsidiary in Singapore.

2008 2nd Overseas Subsidiary in US.

2009 2nd Laminate unit at Nalagarh starts commercial production.

2010-11 Highest exporter of Laminate.

India’s Largest Laminate Company.

Worlds 3rd Largest Laminate Brand.

2013 Decorative Division demerger approved by Board of Directors.2014

Commercial Production of Engineered Wooden flooring and Melamine Faced Chipboardsstarted at Behror.

Demerger with Greenply was appproved by Hon’ble High Court of Gauhati and filingdone with RoC.

2015 Listed on NSE & BSE.


Exhibit 26. Greenlam – Location of manufacturing units


Behror, Rajasthan

Laminates - 5.34mn sheets

Veneer - 4.20msm Engineered Wood Flooring - 1msm

Engineered doors – 1,20,000 units

Nalagarh, Himachal Pradesh

Laminates - 6.68mn sheetsMelamine Faced Chipboards - 2msm


- 10.02mn sheets Laminates

- 4.20msm veneer

- 1msm engineered wood flooring

- 2msm melamine faced chipboards

Expansions

- 2mn sheet Laminates (2QFY16)

- 1,20,000units engineered doors (2QFY16)

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Company background Greenlam demerged the decorative surface business of laminate and veneer

business into a separate entity w.e.f. from Nov’14.

c.88% of FY15 ` 8.4bn revenues came from the laminate business, balance

c.12% from veneer segment.

Company is the largest producer of laminate in Asia and third largest in the

world. In has a market share of c.12.5% in the natural veneer business.

Company has a capacity of 12.02mn sheets of laminate and 4.20msm of

veneer’s capacity.


Expansions completed; staged to grow: Greenlam has incurred total capex

of ` 1.6bn in FY15 and 1HFY16 (excluding c.Rs0.8bn improvement capex on

existing facilities of Nalagarh and Behror) with potential to generate revenues

of ` 5-6bn. Expansions added capacities of - 2mn sheets laminate, 2msm

melamine faced chipboards, 120k units factory finishes doors (part of veneer)

and 1msm engineered wood flooring (part of veneer). For FY15-18E, laminate

segment revenue is expected to witness 16% CAGR and veneer 36%.

Higher profit growth than peers: EBITDA growth in both segments is

expected to be driven by margin expansion in laminate business and

contribution to EBITDA by the new businesses in the veneer segment.

Greenlam will outpace EBITDA growth of Centuryply and Greenply. For FY15-

18E, we expect company's EBITDA to witness c.23% CAGR vs. 13-15% growth

of Centuryply and Greenply.

Key Risks

Slower than expected pick-up in new businesses of MFC, wooden flooring and

engineered door.

Increase in competitive intensity in laminate market in India and globally.



Valuation and View

Currently the stock is trading at FY17/18 P/E of 19.8/13.7x. We value the

company at 17x 1-yr forward EPS to arrive at a TP of ` 550, BUY.

Exhibit 27. Greenlam – Key assumptionsParticulars FY15 FY16E FY17E FY18E

Sales Volume

Laminate 11.59 12.63 14.21 15.99

YoY Growth (%) 7.3 9.0 12.5 12.5Veneer 1.06 1.45 1.55 1.65

YoY Growth (%) -5.0 36.0 7.0 7.0


Laminate 642 661 684 708

YoY Growth (%) 3.9 3.0 3.5 3.5

Veneer 936 737 763 789

YoY Growth (%) 16.0 -21.3 3.5 3.5

EBITDA %

Laminate 10.1 12.4 12.5 12.0

Veneer 17.9 8.6 10.4 14.4


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Profit & Loss ( mn)


Net sales (Net of excise) 8,446 9,632 11,768 13,986

Growth (%) 11.4 14.0 22.2 18.8

Other operational income 0 0 0 0

Raw material (or COGS) 5,466 6,147 7,480 8,852

Personnel cost 788 899 1,099 1,306

Other expenses (or SG&A) 1,262 1,439 1,758 2,090

EBITDA 929 1,146 1,431 1,739

EBITDA (%) 11.0 11.9 12.2 12.4

Growth (%) 13.6 23.3 24.9 21.5

Other non-op. income 14 16 20 24

Depreciation and amort. 302 335 354 358

EBIT 642 827 1,097 1,405

Add: Net interest income -268 -299 -283 -228

Pre tax profit 373 528 814 1,177

Taxes 89 193 285 412

Add: Extraordinary items -18 0 0 0

Less: Minority interest 0 0 0 0

Reported net profit 266 335 529 765

Adjusted net profit 284 335 529 765

Margin (%) 3.4 3.5 4.5 5.5

Diluted share cap. (mn) 24 24 24 24

Diluted EPS ( .) 11.8 13.9 21.9 31.7

Growth (%) -17.7 18.1 57.8 44.6

Total Dividend + Tax 15 17 26 38


Balance Sheet ( mn

Y/E March FY15A FY16E FY17E FY1

Share capital 121 121 121 1

Other capital 0 0 0

Reserves and surplus 2,150 2,468 2,971 3,6

Networth 2,271 2,589 3,092 3,8

Total loans 2,672 2,772 2,372 1,7

Minority interest 0 0 0

Sources of funds 4,943 5,361 5,464 5,5

Intangible assets 0 0 0

Fixed assets 4,534 5,034 5,084 5,1

Less: Depn. and amort. 1,420 1,755 2,109 2,4

Net block 3,114 3,279 2,975 2,6

Capital WIP 92 92 92

Investments 175 175 175 1

Def tax assets/- liability -145 -145 -145 -1

Current assets 3,757 4,298 5,223 6,1

Inventories 1,881 2,145 2,621 3,1

Sundry debtors 1,181 1,347 1,645 1,9

Cash & bank balances 29 46 29

Other current assets 5 6 7

Loans & advances 662 754 922 1,0

Current liabilities & prov. 2,051 2,339 2,857 3,3

Current liabilities 1,958 2,233 2,728 3,2

Provisions and others 93 106 129 1

Net current assets 1,707 1,960 2,366 2,8

Others (net) 0 0 0

Application of funds 4,943 5,361 5,463 5,5




Reported net profit 266 335 529 765

Depreciation and amort. 103 335 354 358

-Inc/dec in working cap. 563 -182 -328 -341

Others 0 0 0 0

Cash from operations (a) 933 488 555 782

-Inc/dec in investments 1 0 0 0

Capex -780 -500 -50 -50

Others 78 -53 -96 -100

Cash flow from inv. (b) -702 -553 -146 -150

Inc/-dec in capital -6 0 0 0

Dividend+Tax thereon -15 -17 -26 -38

Inc/-dec in loans -307 100 -400 -600

Others 89 0 0 0

Financial cash flow ( c ) -238 83 -426 -638

Inc/-dec in cash (a+b+c) -7 18 -18 -6

Opening cash balance 36 29 46 29

Closing cash balance 29 47 29 23


Key Ratios

Y/E March FY15A FY16E FY17E FY1

BV/Share ( ` ) 94.1 107.3 128.1 158

ROCE (%) 9.9 10.3 13.3 16

ROE (%) 13.2 13.8 18.6 22

Net Debt/equity ratio (x) 1.1 1.0 0.7 0


PER 37.0 31.3 19.8 13

PBV 4.6 4.1 3.4 2

EV/EBITDA 14.0 11.4 8.9 6

EV/Sales 1.5 1.4 1.1 0


Debtor days 51 51 51

Inventory days 81 81 81



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Notes

7/21/2019 JM-BM




APPENDIX I

JM Financial Institutional Securit ies Limited(Formerly known as JM Financial Institutional Securities Private Limited)

Corporate Identity Number: U65192MH1995PLC092522Member of BSE Ltd. and National Stock Exchange of India Ltd. and MCX Stock Exchange Ltd.

SEBI Registration Nos.: BSE - INZ010012532, NSE - INZ230012536 and MCX-SX - INZ260012539Registered Office: 7th Floor, Cnergy, Appasaheb Marathe Marg, Prabhadevi, Mumbai 400 025, India.

Board: +9122 6630 3030 | Fax: +91 22 6630 3488 | Email: [email protected] | www.jmfl.comCompliance Officer: Mr. Sunny Shah | Tel: +91 22 6630 3383 | Email: [email protected]

Definition of ratingsRating Meaning

Buy Total expected returns of more than 15%. Total expected return includes dividend yields. Hold Price expected to move in the range of 10% downside to 15% upside from the current market price. Sell Price expected to move downwards by more than 10%

Research Analyst(s) Certification

The Research Analyst(s), with respect to each issuer and its securities covered by them in this research report, certify that:

All of the views expressed in this research report accurately reflect his or her or their personal views about all of the issuers and tsecurities; and

No part of his or her or their compensation was, is, or will be directly or indirectly related to the specific recommendations or views exprein this research report.

Important Disclosures

This research report has been prepared by JM Financial Institutional Securities Limited (JM Financial Institutional Securities) to proinformation about the company(ies) and sector(s), if any, covered in the report and may be distributed by it and/or its associates solely fopurpose of information of the select recipient of this report. This report and/or any part thereof, may not be duplicated in any form andreproduced or redistributed without the prior written consent of JM Financial Institutional Securities. This report has been prepindependent of the companies covered herein.

JM Financial Institutional Securities is registered with the Securities and Exchange Board of India (SEBI) as a Merchant Banker and a SBroker having trading memberships of the BSE Ltd. (BSE), National Stock Exchange of India Ltd. (NSE) and MCX Stock Exchange Ltd. (MCXNo material disciplinary action has been taken by SEBI against JM Financial Institutional Securities in the past two financial years which

impact the investment decision making of the investor.

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JM Financial Institutional Securities and/or its associates, their directors and employees may; (a) from time to time, have a long or sposition in, and buy or sell the securities of the company(ies) mentioned herein or (b) be engaged in any other transaction involving ssecurities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) covered uthis report or (c) act as an advisor or lender/borrower to, or may have any financial interest in, such company(ies) or (d) considering nature of business/activities that JM Financial Institutional Securities is engaged in, it may have potential conflict of interest at the tim

publication of this report on the subject company(ies).

Neither JM Financial Institutional Securities nor its associates or the Research Analyst(s) named in this report or his/her relatives individuown one per cent or more securities of the company(ies) covered under this report, at the relevant date as specified in the SEBI (ReseaAnalysts) Regulations, 2014.

Research Analysts or their relatives; (a) do not have any financial interest in the company(ies) covered under this report or (b) did not receany compensation from the company(ies) covered under this report, or from any third party, in connection with this report or (c) do not any other material conflict of interest at the time of publication of this report. Research Analyst(s) are not serving as an officer, directoemployee of the company(ies) covered under this report.

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While reasonable care has been taken in the preparation of this report, it does not purport to be a complete description of the securimarkets or developments referred to herein, and JM Financial Institutional Securities does not warrant its accuracy or completeness.Financial Institutional Securities may not be in any way responsible for any loss or damage that may arise to any person from any inadvererror in the information contained in this report. This report is provided for information only and is not an investment advice and must alone be taken as the basis for an investment decision. The investment discussed or views expressed or recommendations/opinions gherein may not be suitable for all investors. The user assumes the entire risk of any use made of this information. The information contaherein may be changed without notice and JM Financial Institutional Securities reserves the right to make modifications and alterations tostatement as they may deem fit from time to time.

This report is neither an offer nor solicitation of an offer to buy and/or sell any securities mentioned herein and/or not an offconfirmation of any transaction.

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Persons who receive this report from JM Financial Singapore Pte Ltd may contact Mr. Ruchir Jhunjhunwala ([email protected]+65 6422 1888 in respect of any matters arising from, or in connection with, this report.

Additional disclosure only for U.S. persons: JM Financial Institutional Securities has entered into an agreement with Enclave Capital ("Enclave Capital"), a U.S. registered broker-dealer and member of the Financial Industry Regulatory Authority ("FINRA") in order to condcertain business in the United States in reliance on the exemption from U.S. broker-dealer registration provided by Rule 15a-6, promulgaunder the U.S. Securities Exchange Act of 1934 (the "Exchange Act"), as amended, and as interpreted by the staff of the U.S. Securities Exchange Commission ("SEC") (together "Rule 15a-6").

This research report is distributed in the United States by Enclave Capital in compliance with Rule 15a-6, and as a "third party research repfor purposes of FINRA Rule 2711. In compliance with Rule 15a-6(a)(3) this research report is distributed only to "major U.S. institutiinvestors" as defined in Rule 15a-6 and is not intended for use by any person or entity that is not a major U.S. institutional investor. If have received a copy of this research report and are not a major U.S. institutional investor, you are instructed not to read, rely onreproduce the contents hereof, and to destroy this research or return it to JM Financial Institutional Securities or to Enclave Capital.

This research report is a product of JM Financial Institutional Securities, which is the employer of the research analyst(s) solely responsiblits content. The research analyst(s) preparing this research report is/are resident outside the United States and are not associated personemployees of any U.S. registered broker-dealer. Therefore, the analyst(s) are not subject to supervision by a U.S. broker-dealer, or otherrequired to satisfy the regulatory licensing requirements of FINRA and may not be subject to the Rule 2711 restrictions on communicatwith a subject company, public appearances and trading securities held by a research analyst account.

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Additional disclosure only for U.K. persons: Neither JM Financial Institutional Securities nor any of its affiliates is authorised in the UnKingdom (U.K.) by the Financial Conduct Authority. As a result, this report is for distribution only to persons who (i) have professiexperience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial PromotOrder 2005 (as amended, the "Financial Promotion Order"), (ii) are persons falling within Article 49(2)(a) to (d) ("high net worth companunincorporated associations etc.") of the Financial Promotion Order, (iii) are outside the United Kingdom, or (iv) are persons to whominvitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 200connection with the matters to which this report relates may otherwise lawfully be communicated or caused to be communicated (all spersons together being referred to as "relevant persons"). This report is directed only at relevant persons and must not be acted on or reon by persons who are not relevant persons. Any investment or investment activity to which this report relates is available only to relevpersons and will be engaged in only with relevant persons.

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