Greenply Industries LtdQ1 FY23Consumer Durables

Greenply Industries Ltd

Q1 FY23 Earnings Call Analysis

Management growth scorecard

Revenue

Category 3

Margin

Category 3

Fundraise

Yes

Order

N/A

Capex

Yes

2 of 4 growth signals are positive.

Full analysis

Revenue guidance

Category 3

→Plywood volume growth targeted at double-digit, around 10%-12% annually for FY '24 and FY '25.
→Revenue growth expected to be similar to volume growth, though premium segment under pressure may limit pricing power.
→MDF segment aims for 100,000 CBM volume in the first year with revenue around INR 275-300 crores, focusing on ramp-up and value-added products.
→Blended margin expected to improve over next 2-3 years as MDF utilization rises to 75%-80%.
→Working capital practices and credit terms aligned with industry standards; volumes expected to ramp up from 45%-50% initially to full capacity sales.
→Growth driven by shift from unorganized to organized sectors and expanded distribution network.
→New business segments like furniture fitting expected to contribute positively from year 3 onwards with high EBITDA margins.

Margin guidance

Category 3

→The company targets a sustainable EBITDA margin of 20-22% from its European MDF business in the long term, with a conservative design at 17% for cash flow and payback purposes.
→Plywood volume growth is expected at a double-digit rate of 10-12% over the next 2-3 years, driven by growth in organized branded segment and internal organizational strengthening.
→The MDF business margin is anticipated to improve as utilization rises to 75-80% in the next 2-3 years, contributing to blended margin improvement.
→Consolidated margins in the plywood segment are expected to remain stable or improve slightly with double-digit volume growth.
→The company aims to match industry margins and remains confident in selling full production capacity eventually, implying steady earnings growth aligned with industry peers.
→A high EBITDA business in furniture fittings (a JV) is expected to contribute positively from year 3 onwards.

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Fundraise plans

Yes

- Currently, Greenply Industries has committed capex costs of around INR 50-60 crores on the MDF side for the ongoing projects, with cash flows expected this year. - Peak debt is expected considering ongoing capex for plywood plants (INR 20-25 crores) and MDF. - There are repayments scheduled in FY24, approximately INR 40-50 crores. - No explicit mention of new debt or equity fundraising plans as of May 31, 2023. - The company is focusing on completing current investments and maintaining a net debt-equity ratio within 1. - Future capex beyond current commitments is not detailed, implying limited immediate new fundraising plans. In summary, Greenply is managing existing debt and capex commitments conservatively without announcing fresh debt or equity raises at this time.

Order book

→For the Gabon subsidiary, the company had a better last quarter with a good order book.
→The Europe region's manufacturing scenario has slightly improved post Ukraine war, aiding better traction.
→The current quarter has a decent amount of orders expected to stabilize the business at levels similar to Q4.
→The company is focused on cost-cutting and rationalization measures wherever possible in Gabon operations.
→Overall, the company is confident in ramping up and selling its production capacity in line with market scenarios.

Capex plans

Yes

→Committed capex of around INR 50-60 crores on MDF side; cash flow for this is expected during the year (Page 6).
→Maintenance capex for regular plywood plants is around INR 20-25 crores (Page 6).
→Recent plywood capacity expansion at Sandila is commissioned and currently at 60% utilization, with plans to improve further (Page 3).
→Early-stage JV in furniture fitting segment with a serious partner planning to set up manufacturing facility in India; expected to start contributing in 2-3 years (Page 5).
→No finalized JV papers yet, but focus on quickly establishing the team and manufacturing setup post-finalization (Page 5).

How does Greenply Industries Ltd rank vs peers in Consumer Durables?

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