Greenlam Industries Limited

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.

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.

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.

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.

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.

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^⏳.

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.

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.