Greenpanel Industries rises after ICRA upgrades credit ratings

Greenpanel Industries gained 1.80% to Rs 458.75 after ICRA upgraded the long term and short term ratings on the bank facilities of the company.

The credit rating agency has upgraded Greenpanel Industries' long-term rating to '[ICRA] A+ (Stable)' from '[ICRA] A'. It has also upgraded the company's short-term rating to '[ICRA] A1+' from '[ICRA] A1'.

ICRA said that the ratings upgrade factors in the improvement in Greenpanel Industries' (GIL) financial risk profile as reflected by healthy growth in revenues and operating margins, which along with reduction in debt resulted in strong debt protection metrics in FY2022.

The debt protection metrics are expected to remain healthy going forward, despite its debt-funded capex plans during FY2023-FY2025 towards medium density fibreboard (MDF) capacity, which is likely to be funded with a debt to equity mix of 60:40.

GIL's operating income grew by 59% year on year (YoY) to Rs 1,625 crore in FY2022 on the back of improved domestic demand for MDF, driven by growth in ready-made furniture, increased spend on interior works in residential dwelling units, and import substitution. The company is expected to witness an increase in revenues by 8% to 9% in FY2023.

The operating margins increased to 26.7% in FY2022 and 28.3% in Q1 FY2023 from 20.3% in FY2021, supported by higher net sales realisation and better absorption of overheads. With reduction in total debt to Rs 315.6 crore as of March 2022, there has been improvement in leverage and debt coverage metrics.

Despite the debt-funded capex plans, the debt protection metrics are expected to remain strong in FY2023 backed by the likely healthy operating margins and limited debt repayment obligations.

The rating favourably factors in GIL's strong operational profile, characterised by its dominant position in the domestic MDF industry with an established brand along with a wide distribution network and extensive experience of the promoters in the wood-based interior infrastructure and decorative segment.

The stable outlook on the long-term rating reflects ICRA's opinion that GIL's credit profile will be supported by its strong brand presence, distribution network, healthy leverage and strong liquidity position.

Greenpanel Industries is India's largest manufacturer of wood panels. Its manufacturing plants in Uttarakhand and Andhra Pradesh make medium-density fibreboard (MDF), plywood, veneers, flooring, and doors.

The company's consolidated net profit zoomed 160.9% to Rs 77.60 crore on 50.5% surge in net sales to Rs 464 crore in Q1 FY23 over Q1 FY22.

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