GREENPLYNSEQ2 FY2024November 6, 2023

Greenply Industries Limited

9,291words

130turns

12analyst exchanges

0executives

Key numbers — 40 extracted

Rs.600 Crore

performance for Q2 and Hl FY2024. First of all, I am happy to share with you that we have crossed Rs.600 Crores in consolidated revenue in this quarter, which is the highest ever for Greenply in a single qu

22%

this our consolidated sales for this financial year will approximately grow at a CAGR of around 22% over FY2022 and a CAGR of around 13% over FY2020 if we are to compare the performance against the

13%

financial year will approximately grow at a CAGR of around 22% over FY2022 and a CAGR of around 13% over FY2020 if we are to compare the performance against the pre-COVID era. Now I will share so

9.7%

are some highlights of the business wise performances. In our plywood business revenue growth was 9.7% on a Y-o-Y basis majorly driven by 11% sales volume growth. On a half yearly basis, we have achie

11%

performances. In our plywood business revenue growth was 9.7% on a Y-o-Y basis majorly driven by 11% sales volume growth. On a half yearly basis, we have achieved approximately 7% volume growth. Wit

majorly driven by 11% sales volume growth. On a half yearly basis, we have achieved approximately 7% volume growth. With this we are fairly confident of achieving our annual volume growth of 8% to 1

tely 7% volume growth. With this we are fairly confident of achieving our annual volume growth of 8% to 10% as guided earlier. On the margin front our adjusted core EBITDA was at 7.9%, which include

10%

% volume growth. With this we are fairly confident of achieving our annual volume growth of 8% to 10% as guided earlier. On the margin front our adjusted core EBITDA was at 7.9%, which includes a one

7.9%

volume growth of 8% to 10% as guided earlier. On the margin front our adjusted core EBITDA was at 7.9%, which includes a one- time expense related to entry tax amounting to Rs.3.2 Crores which is non-

Rs.3.2 Crore

ted core EBITDA was at 7.9%, which includes a one- time expense related to entry tax amounting to Rs.3.2 Crores which is non-recurring in nature. In addition to that, we have booked major expenses related t

15.5%

ance in the first full quarter of operation itself. Durning this quarter our EBITDA margin was at 15.5%. We are also confident that we will meet our indicated 1 lakh CBM sales volume for FY2024. More d

1 lakh

s quarter our EBITDA margin was at 15.5%. We are also confident that we will meet our indicated 1 lakh CBM sales volume for FY2024. More details on the MDF business will be shared by Sanidhya later on

Guidance — 20 items

Manoj Tulsian

opening

“will be updating you on Greenply’s operating and financial performance for Q2 and Hl FY2024.”

Manoj Tulsian

opening

“| am very confident that this trend will continue in the upcoming quarters and with this our consolidated sales for this financial year will approximately grow at a CAGR of around 22% over FY2022 and a CAGR of around 13% over FY2020 if we are to compare the performance against the pre-COVID era.”

Manoj Tulsian

opening

“Considering the above we expect margin improvements in H2 FY2024.”

Manoj Tulsian

opening

“More details on the MDF business will be shared by Sanidhya later on.”

Sanidhya Mittal

opening

“Being a premium player we will introduce other innovative products and value engineered products to serve all categories of consumer segments going forward.”

Manoj Tulsian

“What we are now feeling 1s that timber prices will possibly stabilize because it is already very high and we do not see because to some extent the popular prices are slightly corrected, which will slightly ease out the pressure on the eucalyptus also going forward.”

Sneha Talreja

“You have already specified you would be doing 1 lakh CBM in this particular year given that you have already 15% EBITDA margin now where do you see the EBITDA margin strength given that your overall guidance if | am not wrong was around 22%, it is full operation so where do we see the EBITDA margin pending now given that the 15% positive?”

Sneha Talreja

“I am saying that you have already achieved 15% EBITDA margin, which is phenomenal in the first quarter of full operation just wanted to understand given that now utilization should be further increasing where do you see this trend going forward, do you maintain the earlier guidance, or do you want to inch it up from here?”

Sanidhya Mittal

“I think just to add to this 22% we would have said when we are doing a full-fledged operations you may expect that type of a margin maybe next full year of operations or around that number.”

Sanidhya Mittal

“Do not hold us again next year first quarter itself that we said 22%, but 1 think a full year of operations where maybe once we are targeting around 700 odd Crores of sales that type of a margin assuming that similar margin trend continues as the market is today will be possible and in H2 definitely our margins profile will be better than Q2 also.”

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Risks & concerns — 14 flagged

The full impact of the same would be visible in H2.

— Manoj Tulsian

Our Gabon business continued to be under pressure due to severe political unrest in the imtial part of the quarter and also supply-side challenges.

— Manoj Tulsian

What we are now feeling 1s that timber prices will possibly stabilize because it is already very high and we do not see because to some extent the popular prices are slightly corrected, which will slightly ease out the pressure on the eucalyptus also going forward.

— Manoj Tulsian

No, the premium end side demand we have not been able to see there has been a drag on the premium end, maximum the total growth, but what has happened is in the value segment only.

— Manoj Tulsian

Of course, we are also doing a higher strength on marketing side which I think I mentioned around a couple of quarters back that we would be investing more on the marketing side, but yes there is some impact of the product mix change already reflected on the margins.

— Manoj Tulsian

So, for them it becomes slightly more challenge to serve the same material directly from the farmer compared to us, well we in MDF can use material with bark and also as far as species are available in the market, I think paper industry has a limitation in the number of species.

— Sanidhya Mittal

So, we are almost at the end of the cycle, maybe last 12 to 15 months we might have to face this challenge of higher timber price and then possibly it will come down.

— Manoj Tulsian

At this moment it 1s very difficult, but if you still want to know for the last quarter and I am sure Gautam and Nitin Ji can give you the number as to how much the gross margin ‘was.

— Sanidhya Mittal

So what Sanidhya is trying to say that maybe one or two more quarters we will also get a lot of clarity in terms of the mix what we are able to sell, how the market is panning out, lot many questions will get answered to us also internally, but your concern is right, and we are also hoping the same thing that Q3 margin will be better than Q2 and Q4 should be better than Q3.

— Manoj Tulsian

The actual reason that [ am asking is | am wondering why that when there is a raw material price hike, timber price hike, why is it that you are not able to take price hike in the end products considering that the region where you are present does not have any import threat, at least in the southern region there is threat of imports, etc., but being in West and North there is very minimal import, so there is a raw material pressure you can take the price increase?

— Balaji Vaidyanath

Number two, there are many people who already added capacity or are in the process of adding capacity, so I think everybody is wanting to secure their own market share, secure their own customers, secure their own volumes and at this given point I do not think it is possible to further increase prices, in fact to hold on to prices will be a challenge.

— Sanidhya Mittal

I was just asking in terms of the Bureau of Indian Standards coming up with a new notification for import of wood products wanted your views on that in terms of how difficult it would make the life for importers?

— Balaji Vaidyanath

I think 1t will definitely make the importers life slightly difficult.

— Sanidhya Mittal

Sir, how should we look at this 11% volume growth in this year, is it that finally demand is coming back in plywood, of course you did mention that the third quarter because of seasonality would be weak, but would it be that fourth quarter would be better than second quarter and then FY2025 will be better than FY2024 so do you think that things are improving from your own or too early for that?

— Akshay Chheda

Q&A — 12 exchanges

Hi Sir, good evening and thanks a lot for the opportunity. Just couple of questions from my end in your opening remarks you said that timber costs have already started cooling off could you highlight this further and where do we see now our margins going ahead and have, we taken it has been a substantial price hike to offset now any further timber cost from here?

Manoj Tulsian

First thing I am not saying that the timber prices will start coming down. What we are now feeling 1s that timber prices will possibly stabilize because it is already very high and we do not see because to some extent the popular prices are slightly corrected, which will slightly ease out the pressure on the eucalyptus also going forward. So, keeping that in mind, I am assuming that possibly the timber prices have peaked, just an assumption our internal discussions we may go wrong also on the same. In terms of price increase as I said in the speech, we have taken price increase on some of the

Hi, Sir. Congratulations on a great set of numbers. Firstly, on the plywood we have grown could you let us know what is the demand scenario, 1s the demand more in the premium end or it 1s in which of the brands have we seen the major growth coming in?

Manoj Tulsian

Thank you first of all. No, the premium end side demand we have not been able to see there has been a drag on the premium end, maximum the total growth, but what has happened is in the value segment only. So, do you see when this mix also improving would it yield to our plywood margins as well that the change in product mix? Well to some extent slightly it is also reflecting in this quarter itself. Of course, we had some one-off expenses. Of course, we are also doing a higher strength on marketing side which I think I mentioned around a couple of quarters back that we would be investing more o

The sale has been increased by 23% from the last year so breakdown into supplies and the volume growth?

Manoj Tulsian

Sale has been increased by 23% on a consolidated basis. So, [ think that is not the nght you are looking at it because one last year base we did not have the MDF business, MDF business only started in first quarter of this year and in Q2 we have done close to around 89 Crores, which 1s straightaway addition to the overall number which is reflected in the growth and in the plywood business the total growth which we have done is close to around 7% and the Gabon business has actually not shown any growth so that number to some extent maybe it is slightly lower only compared to last year HI. ‘What

1 just want to ask that do you compete with the paper industry for your raw material that it is wood that comes from tree plantations and if yes then how do you see that competition playing out in the future like will it lead to higher prices for all or will it lead to more area under plantation, which will lead to lower prices in the future?

Sanidhya Mittal

So yes, we do compete with paper mills to buy raw material, but however with the given knowledge I have about paper industry they can use only debark material. So, for them it becomes slightly more challenge to serve the same material directly from the farmer compared to us, well we in MDF can use material with bark and also as far as species are available in the market, I think paper industry has a limitation in the number of species. We are slightly more open towards other species as well. So, I think our pricing will always be slightly lower than paper industries, but yes, we are competing

Hi, Sir. Thanks for the opportunity first, congratulations for commendable performance on the MDF side. Just wanted to have some more details on the distribution basically region wise sales if you can help with something you did indicate on our pricing strategy to start with, but how we are making this successful just wanted to understand that that is the first question?

Sanidhya Mittal

On MDF? Yes, Sir. I think our focus obviously is primarily West because our plant is there; however, looking at North India as well because NCR is one of the largest markets of MDF and it is also not very far from the Gujarat facility. So yes, the second focus area becomes North and the upper north and NCR and obviously since the brand has its own network in East and South as well and all set of their own loyal dealers, so yes certain percentage of sales is coming to South and East also, but our focus in South and East is much lower compared to West and North, our main markets is West and Nort

Sir, just carrying on the MDF front we already have one quarter of revenue. Sir, ballpark what is our gross margin in this business for now because in Q2 we will mainly have the non-pre-lam business just to understand how the gross margins were there?

Sanidhya Mittal

I think it is too early, I believe this is too early to comment. I think going forward with the pre-lam added etc., and once we are on full scale, I think then things will really change for us. At this moment it 1s very difficult, but if you still want to know for the last quarter and I am sure Gautam and Nitin Ji can give you the number as to how much the gross margin ‘was. Because the idea to ask that question [ hope Gautam will get back to you the data, but the idea of the question was because when pre-lam comes in our margin should be way, way better because the relation there are massive

Thanks a lot, for the opportunity. I had a couple of questions. So firstly a clarification on the MDF segment you mentioned about the value added products could you quantify during second quarter what was the share of value added products in the 31000 volume that you did and where would you like to take it [ understand it will take a few quarters for you to realize that, but where would you ideally want to take it on a steady state basis and by when do you think you will be able to achieve it the share of value added in MDF?

Sanidhya Mittal

I think at this point it will not be fair to share, we would want it to be 100% ideally speaking, but that is not practical. So, totally depends on what the sales team can achieve, how much the brand can attract and how much we can focus on our value-added sales. I think time is going to say and our hard work is going to speak that how much we will be able to achieve. For the last quarter what we achieve, the team can share the data. You can get in touch with Mr. Nitin Kalani. He will share the data with the share of value added for Q2, but going forward I think it will be unfair to decide how

Good evening. Just wanted to understand there is a metric that you track in terms of the pricing differential between the value ply versus top end MDF and if so, how that pricing differential has moved because you mentioned that the value ply is doing much better in your overall five segment, so at what point does it becomes, the customer becomes indifferent between a, top end MDF versus value ply?

Sanidhya Mittal

I think value ply is growing because if you see the pyramid of the plywood industry the value segment 1s much larger and the premium segment is very small, and we are already having a significant share in the premium segment. Hence the value is growing much faster than the premium that is the plywood story because of the market and I think MDF, and plywood are clearly different needs of the consumers and depending on different need and the consumer chooses or the fumiture manufacturer chooses, or the converter chooses depending on the need. I think they are very different needs when he is comi

Thank you for the opportunity. Sir, as we highlighted in call the timber charges are on par with North prices, but North price is currently 30% higher than South prices, so how will you be able to compete with import in Western market when you have a higher timber prices and what is your timber price per kg in Q2?

Manoj Tulsian

See the prices of timber in North and West are almost similar, in South also the prices have gone up and today if you really see they are only cheaper by around Re.1 a kilo type which would be in terms of percentage maybe around 14%-15% if you take that, but between North and West there 1s no difference in the landed price. We are not trying to compete with the import. We are selling at a much higher realization than import. Import average realization in Rs. 19000-Rs.20000 pwe CBM, while as our average realization for interior grade in the trade is about Rs.25000 per CBM and as you keep going

Hi. Thanks for the opportunity. Just two questions one given that you are already on 52% utilization levels in MDF segment where do you see your cost per CBM settling in for your interior grade MDF if you can give some color over there, that will be helpful, so we have seen a comparison, | would say we have seen some of the larger players report or sort of clocking around Rs.17000 to Rs. 18000 per CBM I am just trying to get a sense of where will you settle in once your utilization level ramp up?

Sanidhya Mittal

I think 1t will be too early to say, think at the end of the year we will be in a better position to reply on this because if you look at the number of months from May 5, 2023, we started so hardly being five months of operation till Q2 end. So, it is still too new to comment on this. Lot of our costs might be slightly higher today because the volumes are comparatively lower. We are slightly newer players compared to others. Would not be comparable by the year end or next year Ql we will be in the position to give you a real picture. Yes, at this point of time the overall margin which we are a

Thank you for the opportunity. Just one question. Sir, how should we look at this 11% volume growth in this year, is it that finally demand is coming back in plywood, of course you did mention that the third quarter because of seasonality would be weak, but would it be that fourth quarter would be better than second quarter and then FY2025 will be better than FY2024 so do you think that things are improving from your own or too early for that?

Manoj Tulsian

Well for this year first, yes, Q3 as like any other year because of a lot of festivity is always the subdued quarter. So, the Q3 numbers possibly will be, and I mean should be lower than the Q2 numbers, but Q4 again the number improves because that is a good season. So, for the full year as I said we are at 7% right now in Hl. We are hoping that if you are able to clock around 9% in H2 then for sure we are at 8% volume growth and as I have always maintained in plywood business if we do the things in the right perspective and if we do not have any supply side challenges then we always will try

Thank you all for taking time to participate in this call. In case of any further clarifications or queries, please feel free to reach Mr. Nitin Kalani. Thanks again and goodbye.

Management

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Speaking time

Manoj Tulsian

Sanidhya Mittal

Moderator

Arun Baid

Ritesh Shah

Udit Gajiwala

Balaji Vaidyanath

Mohit Agarwal

Kushagra

Sneha Talreja

Opening remarks

Karan Bhatelia

Thanks Seema. Hi, everyone, good evening. On behalf of Asian Markets Securities, we thank you for joining us on the Greenply Industries Q2 & First Half FY2024 Conference Call. In the panel today we have Mr. Manoj Tulsian, Joint Managing Director & CEO; Mr. Sanidhya Mittal, Joint Managing Director, Mr. Nitin Kalani, CFO; and Mr. Gautam Jain, AVP - Strategy & IR. May I now invite Manoj Sir to begin the proceedings of the call. Thank you and over to you!

Manoj Tulsian

Thank you Karan and good evening, everyone. It is a pleasure to have you all on this call. will be updating you on Greenply’s operating and financial performance for Q2 and Hl FY2024. First of all, I am happy to share with you that we have crossed Rs.600 Crores in consolidated revenue in this quarter, which is the highest ever for Greenply in a single quarter. | am very confident that this trend will continue in the upcoming quarters and with this our consolidated sales for this financial year will approximately grow at a CAGR of around 22% over FY2022 and a CAGR of around 13% over FY2020 if we are to compare the performance against the pre-COVID era. Now I will share some highlights of the business wise performances. In our plywood business revenue growth was 9.7% on a Y-o-Y basis majorly driven by 11% sales volume growth. On a half yearly basis, we have achieved approximately 7% volume growth. With this we are fairly confident of achieving our annual volume growth of 8% to 10% as gui

Sanidhya Mittal

Thank you ManojJi and good evening to everyone on the call. In our MDF business we are progressing well. I am happy to share that we are at positive cash flow from operations in last quarter much ahead of our original plans. Its results are meticulous planning and team effort, brand strength and commercial discipline. During the quarter we have installed a few short cycle presses as well for production of pre-lam MDF boards. In addition, we have launched other value-added product categories like CARB and Boil Pro. Being a premium player we will introduce other innovative products and value engineered products to serve all categories of consumer segments going forward. In the last quarter we almost sold 31000 CBM with a blended realization of 28500 per CBM. As our share of sales of value- added product increases the realization should also increase consequently. For the full year perspective, we are well on course of achieving sales volume of 1 lakh plus CBM as guided earlier. With this

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