Thread by @ValueEducator

#GreenpanelIndustries Q3 FY22 concall highlights:

@NeilBahal

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1. Net sales were up 34% YoY. Gross margins were up 220 bps at 57%.
2. Price hikes were taken to compensate for increase in raw material costs.

3. EBITDA margins were up 510 bps at 27.2% due to price increases, superior product mix and cost optimization.
4. MDF sales grew by 40.2% ₹356.4 Cr and contributed 84% of the topline.

5. MDF volumes fell by 2.4%. MDF domestic revenues were ₹307.35 Cr whereas exports contributed ₹43.05 Cr. Domestic realizations are up by 42.6% and export realizations are up by 49%.

6. The Uttarakhand MDF plant remained inoperative for nearly half the

quarter - initially due to debottlenecking and afterwards due to the breakdown of a refiner component.

7. The Uttarakhand plant operated at 56% capacity whereas Andhra Pradesh plant operated at 101% capacity

8. Plywood sales grew by 8.1% at ₹67.04 Cr. Plywood volumes were down by 2%. The unit operated at 89% capacity utilization. Plywood sales realizations were up by 11.5%.

9. Gross Debt to Equity stands at 0.28 as of 31st Dec 2021 compared to 0.70 as of 31st Dec 2020.

10. The third wave of COVID had an impact on volume in the first few days of January but volumes have started to pick up thereafter. But they are back on track and margins are expected to sustain for Q4 and the next financial year.

11. The South plant catered to the North market to make up for the shortfall from the Noth plant. So capacity utilization for the South plant looks high.

12. They are not looking to take any price hikes immediately. Still monitoring the RM situation and will take a call as and when needed.
13. Mix between Retail and OEM this quarter was 95% Retail and 5% OEM.

It will become irrelevant in the future because the company has removed the price difference between Retail and OEM. So now they are billed at the same price.

14. OEM used to get billed at a 6% discount compared to retail. Now that difference has been removed. So the price increase for OEMs is much higher than retail.

15. Plan was to add about 800 dealers in a 2 year period(FY22 and FY23).

They have added 316 dealers in MDF against a target of 400.

16. Normally, the festive months of October and November see a drop in plywood volumes every year. They also took a 4% price increase this quarter which may have had an impact on the decrease in plywood volumes.

They plan to take another 3% increase in Q4.
17. When RM prices go down, they will be passing on most of the benefits to the market with a time lag of about 15 to 20 days

18. There is an acute worldwide shortage of MDF around the world, so the global markets are booming. So imports into the country are unlikely.

19. Also, a lot of domestic importers have switched their business model to working with domestic producers.

20. MDF acceptance has moved to value added products. Almost 50% of their sales today is for value added products which are not being imported. They don't foresee any imports coming into the country in the near future.

Vietnam - which is an exporter of MDF is seeing increased domestic demand.

21. Majority of their sales are routed through dealers. So they do not get data on the segregation between furniture and non-furniture sales.

They don’t have the IT infrastructure installed at their partners facilities in order to obtain that data.
22. The challenge of procuring raw materials for a new plant is not with availability but with lead times. The lead time has been

prolonged now because everyone around the world is investing in capacities.Once they have chosen a supplier and a configuration of the line, they will have a clearer picture of the lead time. But it will take anywhere between 18 to 24 months to set up a new manufacturing facility

23.Future capacity expansion is going to be in MDF. They are not considering any expansion in plywood or entry into particle board at the moment.
24. Value added products contribute about 48% in volume terms and 59% in value terms for the domestic market.

Value added products are Club grade MDF, Exterior grade MDF, Pre-laminated MDF and Wood Pro.

24. For FY21, domestic capacities were around 1.9 million cubic meters and the demand was 1.5 million cubic meters, which is about a 77% capacity utilization. For this year, it is estimated that capacity will be at 2.3 million cubic meters

and demand should be somewhere around 1.7 to 1.8 million cubic meters.
25. By the end FY22, considering Rushil’s expansion in South India, we should have about 2.3 million cubic meters of domestic MDF capacity.

Capacity utilization is expected to be at 75% for the industry as a whole by the end of this year. Domestic capacity can reach 3 million cubic meters in the next few years considering the expansions that have already been announced by various listed and unlisted players.

Any capex by Greenpanel will be in addition to that. Demand should be around 2.5 million cubic meters. So there won’t be any significant reduction in capacity utilization which should give stability to the prices.

26. Particle board has been in the country longer than MDF, but hasn’t gained market share because it has lesser number of applications compared to MDF and plywood primarily because it has lower density and is more suitable for vertical applications rather than horizontal

applications where a higher load bearing density will be required.