Greenply Industries Ltd Q4 FY2024 Concall Summary

Key Takeaways

• Plywood margin squeezed, MDF turns profitable: Core plywood EBITDA margin fell ~290 bps YoY to 8.6% on raw material and ad spend pressure, while MDF achieved PAT positivity in its third full operating quarter, ahead of plan.
• Consolidated revenue up 40% YoY: Revenue reached ₹600 crores, excluding deconsolidated Africa operations, delivering a 26% CAGR over FY22–FY24 against an earlier guided 22%.
• Hardware JV begins commercial operations: The Samet JV started in March 2024, with full Phase-1 operations expected by mid-July and a long-term revenue ambition of ₹800 crores at 25%+ margins.
• Timber price relief pushed to FY26 H2: Management sees no price decline in FY25, but expects new crop volumes to enter the market in the second half of FY26, potentially surprising on incremental margins.
• What to watch next quarter: Whether plywood price corrections stick and volumes recover post-elections, the pace of MDF margin improvement toward the 15%–16% annual target, and the hardware JV’s initial sales ramp from Q2.

Plywood: Margin Pressure & Recovery Path

• Volume growth came entirely from the mid segment: FY24 volume grew 8.6%, but premium segment growth was only ~1%, with separate teams now dedicated to each segment.
• Raw material costs have risen significantly over three years: Pass-through to customers has been incomplete, though management says market acceptability for price increases is now better than last year.
• Strategic inventory build hit Q4: Raw material inventories of timber and core were increased in February/March, anticipating Q1 pricing pressure and availability issues, which also drove up payables.
• B2B grew ~20% but pressures margins: The opportunity exists, but competitiveness in the B2B channel puts pressure on realization and margins.
• Two manufacturing partnerships were wound down: Those products are now manufactured in-house in the value segment, so overall company realization did not drop even though the partner segment realization fell.
• Line balancing added capacity without large cost: All plants underwent line balancing, creating additional capacity to support FY25 growth; management may invest in additional capacity or a new location next year.
• Price corrections planned in phases: Management is looking at correcting prices in different pockets, hopeful of 50–75 bps margin improvement, with ad spend as a percentage of revenue possibly coming down even as absolute spend rises.

Manoj Tulsian: "The new crop should start hitting sometimes in H2 of the next financial year. Once that happens, we all might be surprised with the incremental margins, which will be because of the tailwinds."

MDF: Volume Ramp & Margin Trajectory

• PAT positive achieved ahead of plan: In only the third full operating quarter, MDF turned PAT positive, with EBITDA margin improving to 14.1% from 13.5% QoQ.
• Margin improved despite lower realization: Q4 realization dropped from Q3, but operational efficiencies at the plant level drove the margin gain; further improvement is expected from value-added product mix like prelam and HDF.
• Trade-focused strategy protects margins: With limited capacity from a single line, 85%–87% of topline comes from trade, while OEM business is restricted to ~13%–14%.
• Internal volume target of 200,000 CBM for FY25: Management assumes the MDF market will grow at ~15%, providing tailwind, and the focus is on consistent production and delivery.
• Raw material costs are flattish at ~₹6,000/ton: QoQ slightly down, but no room for further price cuts as industry RM costs are rising.
• Realization expected flat in Q1, then improve: No further price cuts are expected; post-February BIS implementation, realization should start moving up, possibly from Q4.
• Debottlenecking equipment purchased but installation timing undecided: Equipment to expand capacity from 240,000 to 300,000 CBM has been bought within the OEM timeline, but installation will happen either this year during an opportunity window or when the second line is installed in 2–3 years.
• 65%–75% of sales to remain in West and North: Management will work with OEMs to set up in the West for economies of scale; exports are not in the current strategy but remain an option if domestic volumes cannot be sold.

Sanidhya Mittal: "I think this is a cycle, the industry is putting capacity and then the capacities will get utilized. And then again, people will put capacity. So, I think every 2-3 years, there will be a cycle."

Hardware Joint Venture: A New Growth Leg

• Commercial operations started in March 2024: Full Phase-1 operations are expected by end of June or mid-July, with sales to begin from Q2 FY25.
• Total capital commitment is ~₹40 crores: ₹25 crores was invested by March 31, another ₹5–₹6 crores since, with the balance ₹9–₹10 crores to come during FY25; an additional ₹4–₹5 crores per partner may be needed for cost overruns and GST credits.
• Long-term revenue ambition of ₹800 crores: Total capacity built with ₹250 crores investment can yield that revenue; at ₹500 crores+ revenue, the margin profile can improve to 25% and above, as these are purely high-end engineered products.
• Ramp-up will be gradual: The first year may see a minuscule loss; FY26 should at least reach PAT break-even or a small profit; after 18 months, annualized revenue is expected beyond ₹200 crores with healthy EBITDA.
• New categories being explored: Beyond hardware fittings, management mentioned "maybe a few other things" going forward.

Manoj Tulsian: "...the type of capacity, what we are going to set up in phases, which will be with a total investment of close to around Rs. 250 crores can give us a revenue of almost Rs. 800 crores. And as and when we are able to reach to a level of Rs. 500 crores plus the margin profile can even further improve to 25% and above because these are purely high end engineered products."

Raw Material & Brand Investment Dynamics

• Timber prices have not risen further in Q1 FY25: Management sees no chance of decline during FY25, but expects reduction in H2 FY26 as new crop volumes enter the market, calling the current high-price cycle likely to end in the next 12–15 months.
• Q4 FY24 timber price was ~₹9,500: This compares to ~₹7,700–₹8,000 in Q4 FY23, though management acknowledged some imprecision in the year-ago figure during the call.
• Like-to-like price increase over three years is ~10%: Management gave this as a ballpark, noting that last year was particularly difficult for pass-through.
• Brand investment will continue at 3%–4% of annual consolidated revenues: Management credits the Greenply brand strength for MDF’s rapid ramp, arguing that without it, year-one numbers would not have been achievable.

Manoj Tulsian: "Had it not been with Greenply MDF, I'm not very sure whether you would have been able to deliver these type of numbers in year one. So that shows the strength of the brand."

Balance Sheet & Capital Allocation

• Net debt reduction of ~₹50 crores targeted for FY25: This would bring net debt to ~₹450 crores by year-end, with a debt-equity ratio of ~0.55–0.6.
• FY25 capex planned at ~₹70–₹80 crores: Subsequent years have not yet been chalked out; management will update in Q2 or Q3.
• GMEL deconsolidation completed: Purchase consideration was received for the sale of the 51% investment in the Africa subsidiary, and operations are effectively deconsolidated.
• ESOP run rate expected to continue at current level: Approximately ₹30 lakhs per quarter.

Guidance & Commitments

Key Metrics