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Fresh concerns over rising Covid cases in the country can create an opportunity for a smallcap firm Greenpanel Industries which has already rallied 718% from its 52-week low of Rs 23.80, scaled on May 20 last year. The scrip traded at around Rs 185.20 on April 12.
Greenpanel is India’s largest producer of medium density fiberboards (MDF). According to market watchers, the demand scenario of the domestic MDF industry continues to be robust on the back of rapid displacement of low-end plywood by MDF, drying up of imports and aggressive product penetration strategies by larger players.
Further, the pick-up of online sales in the furniture segment combined with the expansion phase of organised players like IKEA provides long term growth visibility for the domestic MDF industry. There are hopes that Greenpanel being the market leader of the MDF segment in India would turn out to be the biggest beneficiary of the buoyant demand scenario.
Brokerage ICICI Securities see over 50% upside in the counter, citing strong earnings growth in near-to-medium term driven by increasing demand for modular furniture particularly post Covid and possible import substitution with likely imposition of anti-dumping duty on thin MDF and CVD on all MDF imports into India.
Of late, the company posted 34.53% YoY growth in net sales at Rs 316.93 for the quarter ended December 31. The consolidated net profit of the company jumped to Rs 30.45 crore in Q3FY21 over Rs 0.46 crore in Q3FY20.
“Despite fresh worries of Covid cases increasing in the country, we believe this could be a potential blessing in disguise for Greenpanel with the likelihood of people incrementally opting for modular furniture over customised home-made furniture. We also expect margin tailwind to persist led by firm pricing, sustained cost rationalisation, improving market mix and operating leverage,” the brokerage said while setting a price target of Rs 300 for Greenpanel Industries.
On the other hand, YES Securities also upgraded Greenpanel Industries on the back of better than expected demand and pricing scenario. “We upgrade our EPS estimates for Greenpanel by 39% and 14% for FY22E and FY23E respectively,” the brokerage said. It has fixed a price target of Rs 268 for Greenpanel Industries.