Ashish Dhawan of ChrysCapital is one of the foremost believers of the prospects of Greenply Industries, a small cap stock with a market cap of only Rs. 1900 crore. He is the single largest (corporate & individual) shareholder of GreenPly with a massive chunk of 23.69 lakh (down from 28.69 lakh) shares worth a fabulous Rs. 189 crore.
Ashish Dhawan has a 3-Bagger in GreenPly in just the last two years. His gains from his initial holding will be much more.
The other major shareholder of GreenPly is Jwalamukhi Holdings a.k.a Westbridge Capital. Westbridge’s portfolio is also studded with several multi-bagger stocks.
Prashant Jain’s HDFC Mutual Fund has a small holding of 15.51 Lakh shares of GreenPly. He has now (24th June) bought a further 4,83,389 shares at Rs. 660 per share. HDFC MF’s holding in GreenPly is now at 7.38%.
Prashant Jain’s buy has proved to be a good-luck charm for Greenply because in just the few days since then, the stock has rocketed 28% to an all-time high of Rs. 800.
Now, the question is what is it about GreenPly that has attracted savvy investors like Ashish Dhawan, Prashant Jain and Westbridge?
To find the answer, we need to turn to the latest research report (pdf) by FirstCall Research. FirstCall points out that GreenPly is India’s largest interior infrastructure company with consolidated net sales of Rs. 2215 crores. It is engaged in the manufacture of decorative laminate, plywood, decorative veneers and MDF (medium density fiberboard). It has more than 40 branches across the country and a strong channel network of over 14000 dealers, etc. Its’ flagship product “Greenlam” (laminate) is available in more than 70 countries. The furniture industry market size is expected to touch Rs. 1,12,000 crore by 2015.
The best part is that GreenPly’s valuations are quite reasonable. FirstCall points out that the stock is trading at a FY15E P/E of 11.66x & a FY16E PE of 10.51x. You should also note that as against GreenPly’s FY 2014A P/E of 13x, its peers Century Ply boards & Rushil Décor are quoting at a P/E of 24x and 33x respectively. GreenPly has a ROE of about 20% and a debt:equity ratio of 0.91.
The reason for the sudden euphoria (which sent the stock price surging 28% after Prashant Jain’s purchase) is the news that the shareholders had approved the proposal to demerge the Laminates Division. It is believed that this will unlock value for the shareholders.
If you think about it, GreenPly is another proxy for playing NAMO’s “100 Cities” theme. The rapid urbanization, housing complexes and real estate boom means that GreenPly’s products will be in great demand. Also, because its valuations are not challenging, there is a chance for good upside.
In my portfolio, I already have a chunk of Cera Sanitaryware, Kajaria Ceramics and HSIL, which are expected to benefit from NAMOnomics. If you don’t have any of these stocks, then you need to consider the situation carefully and redress it before the 100-Cities plan takes concrete shape.