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    Greenpanel Inds.

    GREENPANEL
    Consumer Durables·7 Feb 2025
    Management Summary

    Greenpanel Industries reported a challenging Q3 FY25 with net sales declining 7% YoY to ₹358.12 crores and post-tax profits plummeting 75% to ₹8.5 crores. This was primarily driven by a steep 25% increase in wood prices, lower domestic MDF realizations, and a 17% decline in plywood volumes. The company's EBITDA margins contracted significantly to 5%. Management expects the new plant to be commissioned by end of Q4 FY25 and anticipates an improvement in plywood volumes post-restructuring.

    Highlights

    4
    • MDF domestic sales volume grew 11% quarter-on-quarter.

    • Plywood realizations increased by 1.2% year-on-year to ₹252 per square meter.

    • Net debt stands at a manageable ₹104 crores as of December 31, 2024.

    • Expansion project is progressing, with commercial production expected by end of Q4 FY25.

    Concerns

    5
    • Net sales declined 7% year-on-year to ₹358.12 crores.

    • Post-tax profits were lower by 75% year-on-year at ₹8.5 crores.

    • EBITDA margins compressed significantly by 1,229 basis points to 5% due to steep increase in wood prices and lower domestic realizations.

    • Plywood volumes were lower by 17% year-on-year, impacting EBITDA margins at 3.1%.

    • Net working capital increased by 11 days year-on-year to 36 days due to higher wood inventories.

    What Changed2

    vs Q4 FY25

    Guidance items14 → 6 (-8)Risks discussed3 → 5 (+2)

    Key financials

    Single quarter

    06 metrics
    1. 01Net Sales₹358.12 Cr-7.0%YoY
    2. 02EBITDA₹17.78 Cr
    3. 03EBITDA Margin5%
    4. 04Post-tax Profit₹8.5 Cr-75%YoY
    5. 05Gross Margin43.2%

    Segment breakdown

    • MDF₹325.93 Cr91.0%
    • Plywood₹32.19 Cr9.0%
    Donut· Share of Sales

    Capital allocation

    2
    high confidence
    CategoryHeadline
    Capex

    Capex disclosed

    Debt

    Net ₹104 crores

    Guidance & targets

    6
    CategoryTargetPriority
    Volume
    Domestic Volumes
    reach FY24 levels
    Medium
    Volume
    Volume Growth (Existing Capacity)
    8% to 10%
    Medium
    Volume
    Plywood Volume Improvement
    15% to 20%
    Medium
    Capacity
    New Plant Capacity Utilization
    40% to 50%
    Medium
    Capacity
    New MDF Project Commissioning
    end of March
    High
    Profitability
    New Plant Breakeven Utilization
    40%
    High

    New MDF Plant Commissioning

    next quarter
    CurrentExpected end of Q4 FY25
    TargetCommercial production commenced

    Why it matters

    Crucial for future capacity, volume growth, and margin improvement.

    Work is progressing on the expansion project, and we estimate commercial production towards the end of Q4 FY'25.

    How to verify

    capital_allocation.capex

    Risks & concerns

    5
    RiskSeverity

    Steep increase in wood prices

    Wood prices increased 25% YoY, impacting EBITDA margins significantly. Further increases possible until new crops in July.Management acknowledged

    high

    Lower domestic MDF realizations

    Domestic MDF realizations were lower by 5.5% YoY, partly due to a 4% price cut implemented in mid-August.Management acknowledged

    medium

    Increased imports before BIS norms

    MDF imports doubled QoQ to 20,000-22,000 cubic meters, likely due to stocking before BIS implementation, creating pricing pressure.Management acknowledged

    medium

    Plywood volume degrowth

    Plywood volumes declined 17% YoY due to ongoing restructuring of sales team and dealer network, taking longer than expected.Management acknowledged

    medium

    Demand-supply gap in MDF market

    Current MDF capacity (4.2M cubic meters) exceeds market demand (2.7-2.8M cubic meters), with the gap expected to bridge over the next two years.Management acknowledged

    medium

    Q&A highlights

    7

    “I would say we are probably towards the end of the cycle, but I won't completely rule out few percentage points increase in the next couple of quarters.”

    Analyst sought clarity on whether the current high timber costs were a peak and management indicated potential for further, albeit smaller, increases.

    asked by Parth Bhavsar

    2 min read6 chapters

    Detailed Narrative

    01

    Q3 FY25 Financial Performance Overview

    Greenpanel Industries reported a challenging Q3 FY25 with net sales declining 7% year-on-year to ₹358.12 crores, compared to ₹384.99 crores in the corresponding period. Post-tax profits saw a significant 75% drop, falling to ₹8.5 crores from ₹34.61 crores in Q3 FY24. EBITDA margins compressed sharply by 1,229 basis points, settling at 5% (₹17.78 crores), primarily due to increased raw material costs and lower domestic realizations.

    02

    MDF Segment Performance

    The MDF segment contributed 91% of the top line, with sales of ₹325.93 crores. Domestic MDF sales volume remained flat year-on-year but showed an 11% quarter-on-quarter growth. However, domestic realizations were lower by 5.5% YoY at ₹29,867 per cubic meter, while export realizations increased by 2.2% YoY to ₹19,479 per cubic meter. Blended MDF realizations were down 4.2% at ₹28,079 per cubic meter. Capacity utilization for Uttaranchal was 82% and Andhra was 58%, leading to a blended utilization of 66%.

    03

    Plywood Segment Performance and Restructuring

    Plywood sales experienced a de-growth of 16.1% to ₹32.19 crores, with volumes lower by 16.9% at 1.28 million square meters. The unit operated at 44% utilization, and EBITDA margins stood at 3.1%. Realizations were up by 1.2% YoY at ₹252 per square meter. Management indicated that the segment is undergoing significant restructuring, including changes to the sales team and dealer network, which is taking longer than expected but is projected to yield 15-20% volume improvement from FY26 onwards.

    04

    Raw Material and Cost Pressures

    A steep 25% year-on-year increase in wood prices significantly impacted margins. Timber procurement costs were ₹7.15 per Kg in North India and ₹6.23 per Kg in South India, with a blended rate of ₹6.66 per Kg. This, combined with a 4% price cut introduced in mid-August and increased fuel costs, led to the substantial margin compression. Management expects wood prices to remain volatile and potentially increase further until new crops arrive in July.

    05

    Expansion Project and Future Outlook

    The company's expansion project, involving ₹219 crores, is progressing well and is expected to achieve commercial production by the end of Q4 FY25. For FY26, Greenpanel targets 8-10% volume growth on existing capacity and 40-50% utilization for the new plant. The new plant is anticipated to significantly improve margins due to low incremental fixed costs once it reaches 40% capacity utilization, which is also its breakeven point.

    06

    Impact of Imports and BIS Norms

    MDF imports into India surged from approximately 10,000 cubic meters per month in Q2 FY25 to 20,000-22,000 cubic meters per month in Q3 FY25. This increase is attributed to OEMs stocking up ahead of the expected implementation of BIS norms, which were announced for February 11th. Management hopes that BIS norms will restrict imports and alleviate some pricing pressure in the domestic market, particularly in the OEM segment.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.