Continuing their bearish trend, shares of Greenpanel Industries dropped 3.62% to hit a new 52-week low of ₹276.25 apiece in Friday's trade. The company's shares, which were trading at ₹515 apiece a year ago, have plummeted by 44.32% in 12 months to today's closing price of ₹286.75.
The stock performed well between mid-2019 and April 2022, providing remarkable gains of 2,400%, rising from an all-time low of ₹25 apiece to a record high of ₹625. Since then, the stock has been on a downward trend and has lost nearly 53% of its value.
Greenpanel Industries is a small-cap stock with a market cap of ₹3,516 crore. The company is a manufacturer of medium-density fiberboard (MDF), plywood, decorative veneers, flooring, and doors. According to the company's website, it is the largest MDF manufacturer in India as well as the largest MDF manufacturer in Asia. The company's manufacturing plants have a combined annual capacity of more than 5,88,000 cubic meters of MDF.
On January 30, Greenpanel Industries announced its Q3 results for the financial year 2023. The company's consolidated net profit declined by 40.57% to ₹37.5 crore compared to a net profit of ₹63.1 crore in the same period last year. Sequentially, the net profit was down by 48%.
The fall in net profit was due to sluggish demand in the US and Europe and growing MDF imports into India. Management stated that demand for MDF remains strong, but higher imports have impacted domestic demand for the company. The landed cost of imports is 20–25% cheaper compared to domestic prices. Management expects imports to remain at elevated levels in the near term.
Demand for furniture in the USA and Europe has slowed, due to which exports from South-Asian countries (Thailand, Vietnam) have been diverted to other markets (including India). According to the company, this resulted in increased imports into India.
The revenue from operations in Q3FY23 fell marginally by 2.36% YoY to ₹416.1 crore, while the operating profit came in at ₹92 crore, a drop of 17.11%. The EBITDA margin fell to 21.90%, a drop of 428 bps YoY.
Despite such weak performance in the quarter, ICICI Securities maintained its "buy" call on the stock with a revised target price of ₹532 apiece from ₹668 earlier, representing a significant upside potential of 85.53% from the stock's previous closing price.
The brokerage reduced the target multiple due to near-term headwinds in demand. Also, it cut the PAT estimates by 7%–9% over FY23–25E.
ICICI Securities stated that the company has near-term demand headwinds led by high imports and lower prices of MDF in the export market. However, the company plans to negate it over the long term by increasing distribution and higher branding.
"We continue to like the company for its strong net cash balance sheet, leadership in the MDF segment, which has strong growth prospects, and attractive valuations," said the brokerage.
Similarly, HDFC Securities also maintained its "buy" call on the stock with a target price of ₹430 apiece.
HDFC said that it liked Greenpanel for its leadership positioning in the high-growth MDF segment, superior margin, and working capital profile (the most efficient among peers).
According to Trendlyne, the average brokerage target price for the stock was ₹563.5 apiece, an upside of 95.51%.
11 analysts polled by MintGenie on average have a 'strong buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.