Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Greenply Industries Ltd (BOM:526797, Financial) achieved a consolidated revenue of INR584 crores during Q1 FY25, marking a 35.7% Y-o-Y growth.
- The company's consolidated EBITDA grew by 101.6% Y-o-Y to INR58 crores, with margins improving to 10% from 6.7% in Q1 FY24.
- Profit after tax for the quarter was INR33.2 crores, benefiting from an income tax refund pertaining to earlier years.
- The MDF business saw an improvement in EBITDA margins to 16.6% from 14.1% in the previous quarter, driven by better product mix and operational efficiencies.
- Net debt levels were reduced to INR431 crores from INR502 crores in the previous quarter, thanks to reduced working capital and strong profitability.
Negative Points
- The plywood business experienced a decline in adjusted core EBITDA margin to 7.9% from 8.7% in Q1 FY24 due to increased raw material prices.
- Despite the revenue growth, the volume growth in the plywood business was only 8.6% Y-o-Y, indicating potential market saturation or competition.
- The company faced delays in the Samet project due to late machinery deliveries and challenges in hiring key sales positions, impacting potential sales.
- There is pressure on raw material costs, particularly timber, which has seen a slight increase, affecting margins.
- The company remains cautious about committing to higher margin guidance due to ongoing competitive price cuts in the MDF market.
Q & A Highlights
Q: When I look at your MDF profitability, especially comparing Q1 with Q4, volumes are lower, revenues are flattish, but margins have expanded significantly. How should we reconcile this in the absence of operating leverage?
A: We've sold a better product mix in the market. Even though the absolute number in CBM remains similar compared to Q4, the product mix sold is much better, leading to better realization and hence, better profitability. (Sanidhya Mittal, Joint Managing Director)
Q: Has there been an increase in timber costs sequentially in the MDF segment?
A: Yes, there has been a slight increase in timber costs. However, compared to peers, we are in a more comfortable situation in Gujarat. (Sanidhya Mittal, Joint Managing Director)
Q: What is your guidance for this year for MDF volume and ply and margin side?
A: For MDF, we expect to grow at 50% plus over the previous year with margins around 16%. For plywood, we anticipate volume growth of 8% to 10%, with margins potentially flattish or varying by 50 basis points. (Manoj Tulsian, Joint Managing Director and CEO)
Q: Is Greenply planning any price hikes in the plywood segment to pass on the timber cost?
A: Yes, we have already taken one price increase during this quarter, and we might plan another price increase in the coming quarters. The previous hike was around 1.5% to 2% in plywood. (Manoj Tulsian, Joint Managing Director and CEO)
Q: Given the current performance, why not increase the margin guidance for MDF?
A: We are cautious because the industry has been cutting prices. We are confident of maintaining 16% plus margins but prefer to deliver first before revising guidance. (Sanidhya Mittal, Joint Managing Director)
Q: What is the status of the Samet project ramp-up and its execution for FY25?
A: We faced delays in receiving key machinery and hiring sales team members. We expect to start selling from September and ramp up in Q3. The plant is ready, but some key machines are still pending. (Manoj Tulsian, Joint Managing Director and CEO)
Q: Can you provide details on the CapEx for the in-house resin production capability?
A: We received environmental clearance in Q1 and are building our resin production capability for the MDF plant. The total CapEx for the company this year is estimated around INR70 crores. (Sanidhya Mittal, Joint Managing Director)
Q: What is the current in-house capacity for plywood, and are there plans for expansion?
A: The existing capacity is around 48.4 million square meters. We are planning a new facility, which should be finalized within three to six months and operational in about 15 months. (Manoj Tulsian, Joint Managing Director and CEO)
Q: What are the plans for MDF capacity expansion by FY25?
A: We have an extension provision to increase our existing line from 800 to 1,000 cubic meters per day. However, we need to build some buffer inventory before we can shut down the plant for this expansion. (Sanidhya Mittal, Joint Managing Director)
Q: What is the current split between premium and value segments in plywood volumes and values?
A: In Q1, premium accounted for 44% of volumes and 57% of value, while the value segment was 56% of volumes and 43% of value. (Manoj Tulsian, Joint Managing Director and CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
