Greenply Industries Q1FY18 Concall Summary

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 Financial Highlights 

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  • Top line was lower by 6% compared to the y-o-y quarter due to extensive de-stocking by dealers
  • Currency losses of Rs. 8.58 crores on long-term borrowings for the new MDF plant in Andhra Pradesh impacted the MDF margins as well as the overall margins
  • Gross margins expanded owing to better capacity utilizations and improvement in domestic MDF realization by 4%
  • Gross margins improved by 230 basis points year-on-year to 47.9%
  • Ad expenditure of 3.7% compared to 3.3% in the corresponding quarter
  • Operating margins down by about 100 basis points at 14.5%
  • Capacity utilizations of 101% for plywood and 117% for the MDF segment compared to 111% and 106%, respectively, in the corresponding year quarter
  • Profit after tax down by 10% primarily due to the currency losses
  • Working capital days improved by 2 days to 45 days compared to y-o-y quarter
  • Debt equity ratio at 0.55 as on June 30th owing to incremental debt for CAPEX
  • Expected 5 to 7% growth in top line for FY18 and real growth from FY19
  • In Q1FY18 price increase only for the amount of GST
  • Company is underperforming as compared to Century, however, industry growth would benefit the company
  • Restricting the credit terms due to CAPEX
  • About €32 million and USD 4 million borrowings for the new plant in AP
  • Increase in raw material prices in March quarter, but prices have stabilized in the first quarter
  • Unorganized players have taken price increases in the range of 5% to 7%
  • Rs. 6 crores out of Rs. 8 crores in Other Income is refund of excise duty relating to our Nagaland unit
  • The overall tax rate will be stable for the current year and from next year tax outflows will be in MAT
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  • Degrowth of 13.6% due to destocking as dealers hold inventories of 30 to 45 days
  • Volume growth of about 6% in the outsourced segment
  • Average realizations lower by about 4% partly due to end of excise exemption at Pantnagar unit
  • Unorganized sector was impacted more than organized
  • 2% increase in plywood prices from August 1st
  • 5% expected growth in plywood


  • MDF top line grew by 9%
  • Blended margin of about 23% to 24% for the MDF business in future
  • No destocking as dealers normally carry inventory of about 10 to 12 days
  • Steep 73% volume increase in MDF exports to 6,009 cu. Mt. at Rs. 15,095 / cu. Mt. which 12% of overall volume
  • Last year, exports were 3472 cubic meters, roughly 7% of overall volumes
  • Export prices at a discount of 40% to 45% compared to the domestic MDF
  • 5% increase in prices in MDF and discount to dealers so domestic realization higher by 4.19%
  • 8 to 10% expected growth in MDF
  • Market could grow at rates between 15% to 20% during the next two years
  • Domestic realizations for plain MDF are Rs. 26,000 /cu. Mt. and imports are 14-15% cheaper

Future Prospects and Strategy

  • Gabon plant for veneer production commenced operations of three peeling units, and three units would commission in Nov-Dec, 2018
  • 13.5 Mn sq. meter plywood manufacturing unit in UP to commence production in second half of FY19
  • Decorative veneer unit in Gujarat is expected to start operations in the second quarter of FY19
  • Domestic margin is about 27%, and there will be 13% to 14% margin on exports
  • Timber inventories available till October or November, so if Myanmar shuts down, then timber will be procured from Gabon and Indonesia
  • Will invest US $4 or $5 million apart from investments in land which will be spread over three year.For UP CAPEX of Rs. 115 crores: Rs. 55 crore this year and Rs. 60 crore the next year.
  • Rs. 40 crores CAPEX for Gujarat to be spread 50-50 in next two years
  • MDF could threaten low-end plywood in next 4-5 years
  • Expected 6-7% premium on MDF compared to imported MDF because of
    • superior quality,
    • after-sales service and
    • currency issues
  • Debt of Rs. 650 to 700 crore possibly closer to about Rs. 670 crore in FY19

Andhra Pradesh Plant

  • Annual depreciation should be in the range of about Rs. 32 crore
  • CAPEX of Rs. 450 crores and remaining Rs. 200 to 225 crore in the current year and about Rs. 75 to 100 crore in the next financial year
  • 12-13% of freight cost saving with the new plant in AP
  • New MDF plant will be starting commercial production in September-October 2018
  • The company will be exporting about 30% to 40% of production from the new plant till demand improves in the domestic markets
  • Import for MDF would decrease once AP plant starts operation
  • Blended borrowing cost for the new plant should be about 7.5%
  • Exports would be completely shifted to this plant