Release Date: January 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Rushil Decor Ltd (BOM:533470, Financial) saw a noteworthy upswing in demand in Q3 FY 2024 compared to Q2, attributed to festivities, stable raw material prices, and better operating leverage.
- The Chikkamagaluru plant in Karnataka achieved its highest-ever sales volume in December 2023, surpassing 120% in capacity utilization.
- The company has set an ambitious target of planting 8 million saplings by FY 2024 to ensure a quality supply of raw materials and mitigate future price fluctuations.
- Rushil Decor Ltd (BOM:533470) achieved a significant expansion in market reach by onboarding 500+ dealers and distributors for both laminate and MDF segments.
- The company is progressing with its Greenfield capex of INR90 crores for a premium laminate project aimed at export markets like Europe, USA, Australia, and New Zealand.
Negative Points
- The laminate segment experienced a year-on-year volume decline of 5%, although utilization stood at a robust 80% in Q3 FY 2024.
- The net revenue from operations for the nine months ended December 31, 2023, stood at INR611 crores, down from INR624 crores last year.
- EBITDA for the first nine months of FY 2024 stood at INR91 crores, down from INR121 crores in the previous year.
- The company anticipates a marginal increase in timber prices, which could impact future costs.
- The implementation of a market expansion strategy resulted in a modest reduction in realization, which the company believes will help gain a competitive edge.
Q & A Highlights
Q: Sir, I want to get a more sense on the BIS on MDF side, which is getting implemented in next week. What sort of initial color are you seeing and what are your expectations?
A: Good evening. We are seeing this as a very positive sign. Number one, Indian consumers will be benefited out of it, they will get better quality of panel products and as everyone will have to make product as per BIS standards so there will be a healthy competition and definitely there will be some. We are not sure when import will start or what will be the condition for imports we are not very clear about it, so we see that it is going to be a good opportunity.
Q: So, ocean trades have seen a very sharp spike from January start onwards, so what sort of impact will it have on our MDF export and also on laminate export?
A: Currently, the export market has taken this on the positive note and the customers who we are selling have given us a price hike because of the freight going upwards, so we do not see any kind of hesitance in achieving the export targets as we have.
Q: In continuation with the freight cost there is a conflict going on in Red Sea, so are we facing any challenges in terms of both supply of raw material as well as on demand front?
A: As of now we do not see any kind of a problem in this.
Q: The other thing wanted to know that the paper that we use which all country do we imported from?
A: So, we import it from the countries Europe, China, Japan, and a few of the other countries. But as we are in forward planning for our paper currently, we are not seeing the spike in our raw material price.
Q: Sir, in terms of this capex that you have announced so if you could throw some detail, I might have missed it, so what sort of expansion is it, what would be the size we would cater to and what is the cost as well?
A: Last time if you have seen our earnings call and presentation also, we mentioned that we are targeting INR2,500 crores turnover in the span of next five years. Now, for that purpose, there are couple of plans it is under consideration and discussion with management. But as of now, the plan which is already declared is the laminate project, which was earlier decided for INR60 crores. But after deciding this fundraising, we had increased the size of project from INR60 crores to INR90 crores and the capacity wise from 3.4 million, additional 2.8 million is planned and the whole production is targeted for export, mainly where the present EBITDA margin of laminate will be increased from 8% to 9% to almost 12% to 13% overall margin and for this particular export the EBITDA margins, which we are expecting is in the range of 14% to 15%.
Q: I just wanted to understand the question is more of an industry specific, so if I want to know the realization per CBM, so the interior grade per se if it is 25,000 so to what extent that per CBM realization can go?
A: The realization is always a combination of interior grade, as well as value additions and interior grid realization is purely a price linked subject, but we see that as and when we increase our value additions then definitely realization will go up.
Q: But any range for the higher grade MDF?
A: At present, if we talk about the plain MDF realization is around I would say INR20,000 to INR22,000. And for value addition it is around INR30,000 to INR32000 per CBM and average comes out around INR25,000 to INR27,000 CBM.
Q: I could see, historically, we have achieved near about INR28,800 per CBM in Q2 FY 2023 so any idea like when can we reach to that realization any internal target to increase the realization for us?
A: Yes, very soon maybe, because that was a COVID time also one reason and second thing is now at that time contribution from Chikkamagaluru plant was more than the AP plant at that time. Now, we are very positive about that, at present AP plant value addition has reached almost 30% now so we want to take this value addition business to 50%.
Q: I could see there is a huge capacity coming in the southern part and overall, the capacities of India in MDF is increasing, so are you confident in order to increase your realization in your product and also the new companies are also entered in the MDF space so how do you see that the competition going forward?
A: Number one we can see at present these imports is around 75,000 to 100,000 CBM per quarter. We have a good opportunity to tap this market if there is a restriction on implementation of BIS standard and all number one. Number two, industry itself is having a compounded annual growth of 15% to 20%. When being in south consumption is quite good and this BIS implementation the first part will be benefited that will be the South India because at present maximum import is coming to southern region as well as western region.
Q: So, we are quite confident, and you can see that this quarter we reached almost 65,000 CBM sales compared to last quarter it was 60,000. I just wanted to understand like why not increase the domestic share where the realization is high and like why you are going for the export market just that question?
A: So, first of all, we have some duty implications that has to be fulfilled; because of which, we are focusing on exports as well as when the demand we are very flexible with the operation point of view. But we have always dedicated our 15% to 20% capacity for exports and this is going to be a strategy for long as well and also now once we have achieved the total duty part which we have to pay off then we will be focusing more on selling the value added products to other countries than normal interior grade and achieving the big volumes in the export as well.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
