This Small Cap Stock Is Crashing After Q1, But Analysts Still See Up To 50% Upside

Shares of Greenpanel Industries were crashing in early trade on Monday after the company reported a 50% slump in net profits during the June quarter. However, analysts at ICICI and HDFC Securities said that the company’s long-term prospects look healthy despite the thought quarter.

The Greenpanel Analysts: Arun Baid-led analyst team at ICICI Securities maintained the ‘buy’ rating on the stock with a price target of ₹509, indicating an around 49% upside from the stock’s last closing price of ₹341.10.

The analysts at HDFC Securities led by Keshav Lahoti also maintained the ‘buy’ rating for the stock with a target price of ₹420.

The Greenpanel Thesis: ICICI Securities noted that the company had a rough quarter as revenue declined 16.8% year-over-year in the June quarter. While revenue at the MDF (Medium-density fibreboard) segment fell 13.2% YoY, the plywood segment’s revenue fell 36.5% YoY.

Analysts at HDFC Securities highlighted that the volume in the MDF segment was down 7% YoY in line with estimates, mainly due to the 19-day shutdown in the north plant and a decrease in export. The brokerage firm added that rising timber prices, higher advertisement and logistics costs drove down the MDF segment’s margins.

ICICI Securities also said that while the company’s volumes have been in line with estimates, but, margins have been lower. However, the brokerage added that it continues to like the company for its leadership in the MDF segment, which has strong growth prospects. The firm said that despite near-term headwinds it remains bullish on the stock as it expects the company to be a major beneficiary of increased MDF adoption.

HDFC Securities reiterates the point of the company’s strong growth prospects in the MDF segment adding that the company expects a rebound in ply revenue and margin in FY24E, amid its increased segmental focus.

Price Action: Greenpanel’s share price was down 2.79% to trade at ₹331.60 shortly after market open on Monday.

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Posted In: Analyst ColorPrice TargetReiterationAnalyst RatingsGreenpanel IndustriesHDFC SecuritiesICICI Securities