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Greenlam Industries Limited — Q3 FY25 earnings call

Call held 3 Feb 2025

Management summary

Greenlam Industries reported a subdued Q3 FY25, with consolidated revenue growing modestly by 6.9% YoY but declining 11.6% QoQ. Profitability was significantly impacted by lower EBITDA, higher interest, and depreciation from new projects, leading to a net profit of Rs.12.5 crores. The company completed its major CAPEX with the commissioning of the Particle Board plant and revised its FY25 revenue growth guidance downwards, though it maintains an optimistic 18-20% growth outlook for FY26.

Highlights

Consolidated net revenue grew by 6.9% YoY to Rs.602 crores, but degrew 11.6% QoQ.
EBITDA margin contracted by 200 bps YoY to 10.6% in Q3 FY25.
Net profit for Q3 FY25 stood at Rs.12.5 crores, a significant decline from Rs.25.3 crores in Q3 FY24.
Laminate segment revenue grew 4% YoY to Rs.520 crores, but its EBITDA margin fell 270 bps YoY to 13.2%.
The Particle Board plant commenced commercial production on January 23, 2025, with 40-50% utilization targeted for FY26.
FY25 revenue growth guidance was revised downwards from 18-20% to 12-13%, while FY26 guidance remains 18-20%.
Net debt reached Rs.1,012 crores, with a debt-to-EBITDA ratio close to 4X, expected to reduce below Rs.1,000 crores by FY26.

Key financials

01 Net Revenue ₹602 Cr +6.9%YoY
02 Gross Margin 55%
03 EBITDA Margin 10.6%
04 Net Profit ₹12.5 Cr
05 Net Debt ₹1,012 Cr
06 Working Capital Cycle 67 days

What they filed

Q1 FY27: revenue up 18.2%, net profit up 231.3% against the same quarter last year.

₹ Cr · quarterly

Line item	Q2 FY25	Q3 FY25	Q4 FY25	Q1 FY26	Q2 FY26	Q3 FY26	Q4 FY26	Q1 FY27
Revenue	681	602	682	674	808 +19%	706 +17%	858 +26%	797 +18%
Expenses	599	538	618	630	704	638	749	717
EBITDA	81	64	64	44	104 +28%	68 +6%	108 +69%	80 +82%
Margin	12%	11%	9%	7%	13%	10%	13%	10%
Other income	8	1	0	2	1	-4	2	6
Interest	16	16	20	26	24	23	23	19
Depreciation	27	27	33	35	36	36	35	35
Profit before tax	47	21	11	-14	46 −2%	6 −71%	52 +373%	31 +321%
Tax rate	27%	41%	86%	8%	31%	111%	22%	31%
Net profit	34	13	1	-16	32 −6%	-1 −108%	41 +4000%	21 +231%
EPS	1.36	0.50	0.08	-0.60	1.27	-0.01	1.55	0.84

How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Share of Revenue (Q3 FY25)

₹602.3 Cr Total

Laminate ₹520 Cr 86.3%
Plywood ₹30.4 Cr 5.0%
Decorative Veneer ₹26.3 Cr 4.4%
Engineered Wood Flooring ₹15.2 Cr 2.5%
Engineered Doors ₹10.4 Cr 1.7%

Guidance & targets

Revenue

FY25 Top Line Growth Revenue · FY25 · Medium confidence 12-13%

Previously 18-20% → 12-13%

So, FY'25 I think we will miss the 18%, 20% growth, we are about 12% in nine months and my sense is as we see things probably we will end the year somewhere in the PAT of 12%, 13% of growth in FY'25.

— Saurabh Mittal, Managing Director & Chief Executive Officer
FY26 Top Line Growth Revenue · FY26 · High confidence 18-20%

FY'26, we maintain that we should be in the band of 18%, 20% type of a top line growth.

— Saurabh Mittal, Managing Director & Chief Executive Officer

Capacity

Particle Board Utilization Capacity · FY26 · Medium confidence 40-50%

And we should be looking at 40% to 50% kind of utilization in FY'26 and we should be near breakeven at I think a 50% kind of a utilization level.

— Saurabh Mittal, Managing Director & Chief Executive Officer
Engineered Doors Plant Capacity (Value) Capacity · Ongoing · High confidence Rs.80-100 crores

And the full capacity of the of the door plant in terms of value, because either we produce doors, leafs or door sets is something in the band of Rs.80 to Rs.100 crores.

— Saurabh Mittal, Managing Director & Chief Executive Officer

Profitability

Particle Board Breakeven Utilization Profitability · FY26 · Medium confidence 50%

And we should be looking at 40% to 50% kind of utilization in FY'26 and we should be near breakeven at I think a 50% kind of a utilization level.

— Saurabh Mittal, Managing Director & Chief Executive Officer

Margin

Laminate EBITDA Margin Margin · Upcoming quarters · Medium confidence 14-15%

we just need to expand the volumes and then I think the profits, EBITDA margins, etc., should get back to that 14%, 15% in that band.

— Saurabh Mittal, Managing Director & Chief Executive Officer
Laminate Gross Margin Margin · Ongoing · High confidence 53-55%

So, this is at the similar level what we are and we believe that it should be in the range of around 53% to 55% kind of a thing, it should be within that range.

— Ashok Sharma, CFO
Veneer and Allied Products EBITDA Level Margin · FY26 · Medium confidence 4-5%

In FY'26, can we assume 4% to 5% land of EBITDA level in this category?

— Saurabh Mittal, Managing Director & Chief Executive Officer

Sales

Plywood Sales Sales · FY25 (9 months) · High confidence Rs.84 crores

we are hopeful like this year we are already Rs.84 crores of sales in ply.

— Saurabh Mittal, Managing Director & Chief Executive Officer
Plywood Sales Growth Sales · FY25 · Medium confidence 2x last year

My sense is versus what we did last year will be nearly 2x this year

— Saurabh Mittal, Managing Director & Chief Executive Officer
Plywood Sales Growth Sales · FY26 · Medium confidence Double FY25 number

I think the coming year, we should double from FY'25 number in FY'26.

— Saurabh Mittal, Managing Director & Chief Executive Officer

Capex

Particle Board Project Cost (Total) Capex · Next 6-9 months · High confidence Rs.875 crores

this will be there till as mentioned by sir also in next six to nine months it is going to be spent and it will be in the range of that what we have earlier intimated in the range of Rs.875 crores only.

— Ashok Sharma, CFO
Total Capex Capex · FY25 · High confidence Rs.250 crores

we expect including the project it should be in the range of around Rs.250-odd crores

— Ashok Sharma, CFO
Total Capex Capex · FY26 · High confidence Rs.100 crores

and for FY'26 including some of the CAPEX which we need to do for the project pending CAPEX for the project, it should be in the range of around Rs.100-odd crores.

— Ashok Sharma, CFO

Debt

Net Debt Debt · FY25 · High confidence Rs.1,050 crores

So, debt, within this year it will be in the range of similar to what we are around 1,050 crores only

— Ashok Sharma, CFO
Net Debt Debt · FY26 · Medium confidence Rs.1,000 crores

and next year it should come down from this level, it should be within Rs.1,000 crores.

— Ashok Sharma, CFO

Cost

Particle Board Depreciation (Annualized) Cost · Annualized · High confidence Rs.30-35 crores

So, the depreciation will be in the range of around Rs.30 to Rs.35 crores

— Ashok Sharma, CFO
Particle Board Interest (Annualized) Cost · Annualized · High confidence Rs.35-40 crores

and interest will be also in the range of around Rs.35 to Rs.40 crores.

— Ashok Sharma, CFO

Risks & concerns

Slower Demand Environment
medium

Demand has been slow in the last three to six months, leading to a Q3 performance lower than usual seasonal reduction.

Management acknowledged
Elevated Net Debt-to-EBITDA Ratio
medium

Net debt-to-EBITDA ratio is close to 4X, which an analyst noted as 'vulnerable', though management expects it to reduce.

Analyst acknowledged
Geopolitical Impact on Sea Freights
low

War between Israel and Hamas could impact sea freights, though currently stable, potential for further reduction if resolved.

Management acknowledged
Higher Inventory Levels
low

Certain inventories are slightly higher, including some particle board raw material.

Management acknowledged

Areas of evasion (1)

Quantifying segment-wise growth numbers for laminates, plywood, or particle board separately for FY26.

Q&A highlights

3 direct

Particle Board Plant Ramp-up and Market Scenario Direct

The initial feedback from a demand side and signing up of dealers, wholesalers is quite encouraging... we should be looking at 40% to 50% kind of utilization in FY'26 and we should be near breakeven at I think a 50% kind of a utilization level.

Provides initial operational and financial outlook for the newly commissioned Particle Board plant, a key growth driver.

Asked by Keshav Lahoti, HDFC Securities

Revenue Growth Guidance and Laminate Margin Outlook Direct

So, FY'25 I think we will miss the 18%, 20% growth, we are about 12% in nine months... FY'26, we maintain that we should be in the band of 18%, 20% type of a top line growth... EBITDA margins, etc., should get back to that 14%, 15% in that band.

Clarifies the revised FY25 growth target and reiterates the long-term growth and margin expectations for the core laminate business.

Asked by Keshav Lahoti, HDFC Securities

Net Debt-to-EBITDA Ratio and Future Trajectory Direct

I think this is at the highest level in terms of what we can see as of now. Debt is also at the highest level because most of the CAPEX has already been done. And since we don't have any large CAPEX going forward, so whatever cash will be generated, that will be used to bring this debt down and we believe that it will be lower than this year.

Addresses a key financial leverage concern and outlines the strategy for debt reduction post-CAPEX.

Asked by Utkarsh Nopany, BOB Capital Markets

3 min read 8 chapters

Detailed narrative

Q3 FY25 Consolidated Performance and Profitability

Greenlam Industries reported a consolidated net revenue of Rs.602 crores for Q3 FY25, marking a 6.9% year-on-year growth but an 11.6% sequential decline. Gross margin improved by 20 basis points YoY to 55%, and 340 basis points QoQ. However, EBITDA margin contracted by 200 basis points YoY to 10.6%, leading to a 10.7% decline in absolute EBITDA to Rs.63.5 crores. Net profit was significantly impacted, falling to Rs.12.5 crores from Rs.25.3 crores in Q3 FY24, primarily due to lower EBITDA, higher interest, depreciation from new projects, and a one-time tax.

Laminate Segment Faces Headwinds

The core laminate segment's revenue grew by 4% YoY to Rs.520 crores in Q3 FY25, but experienced a 12.9% sequential degrowth, indicating sales pressure. The EBITDA margin for laminates contracted by 270 basis points YoY and 150 basis points QoQ, settling at 13.2%. Sales volume for the quarter was 4.77 million sheets, a modest 2.6% YoY increase, but an 11.5% sequential decline. Management attributes the margin pressure to slower domestic market growth and aims to restore margins to the 14-15% band through volume expansion.

New Capacity Commissioning and CAPEX Completion

Greenlam announced the commercial production of its Particle Board plant on January 23, 2025, marking the near completion of the major CAPEX announced in FY22. Other significant projects, including the Plywood and Andhra Pradesh Laminate plants, and Gujarat plant expansion, were completed in FY24. The company expects to incur approximately Rs.250 crores in CAPEX for FY25 and Rs.100 crores for FY26, primarily for pending civil work and project completion, signifying a shift from capacity creation to execution focus.

Revised FY25 Guidance and Maintained FY26 Outlook

Due to the subdued demand environment, Greenlam revised its FY25 revenue growth guidance downwards from the initial 18-20% to 12-13%. Despite this, management expressed optimism for FY26, maintaining the top-line growth guidance at 18-20%. They anticipate a bounce back in Q4 FY25 and expect better growth in the next fiscal year, driven by the new capacities and market execution.

Particle Board Plant Outlook and Financial Impact

The newly commissioned Particle Board plant is a key focus for future growth. Management projects a 40-50% utilization level in FY26, with breakeven expected at around 50% utilization. The annualized depreciation for this plant is estimated at Rs.30-35 crores, and interest costs at Rs.35-40 crores. The initial feedback on product quality and dealer sign-ups is encouraging, and the company highlights the strategic advantage of aligning Melamine particle board with Greenlam's existing laminate and compact product programs.

Debt Management and Trajectory

Net debt for Q3 FY25 stood at Rs.1,012 crores, with the net debt-to-EBITDA ratio reaching close to 4X. Management acknowledged this as the highest debt level, resulting from the completed CAPEX. They project net debt to remain around Rs.1,050 crores by FY25 end and to reduce to within Rs.1,000 crores by FY26, as cash generated from operations will be utilized for debt reduction, with no large CAPEX planned going forward.

Performance of Veneer and Engineered Products

Within the Decorative Veneer Allied segment, engineered doors demonstrated strong growth, with revenue increasing by 49.5% YoY to Rs.10.4 crores in Q3 FY25. Engineered wood flooring also grew by 13.8% YoY to Rs.15.2 crores and has become EBITDA positive in Q3. Decorative veneer revenue, however, degrew by 4% YoY to Rs.26.3 crores. Management expects continued improvement in this category, targeting a 4-5% EBITDA level in FY26, leveraging existing capacities without significant fresh CAPEX.

Plywood Segment Growth and Expansion

The plywood business recorded Rs.30.4 crores in revenue for Q3 FY25, contributing to Rs.84 crores in sales for the first nine months of FY25. Management expects FY25 plywood sales to be nearly double that of the previous year and aims to double the FY25 sales number in FY26. This growth is supported by positive product quality feedback, continuous channel expansion in South India, and planned market entry into Maharashtra by April 2025.

This is an AI-generated summary of a publicly available earnings call transcript.

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