Greenply Industries

(Rudra Chowdhury) #41

Hi Ayush,

One of the growth scenarios highlighted in the HDFC Sec report was companyfocusing entirely on MDF in the future. All other non-MDF businesses are already running at over 100% capacity.

Now company needs to take a consious call to whether not to put more money in those existing lines (as that will dilute margins and hurt ROE) and put all incremental capacity & expansions in MDF only (this will slowly improve the product mix in favor of MDFs, improve NPMs, boost ROE)

Given your interactions with clients who are into this business, what according to you are the chances of this panning out ?

If they follow the regular path and expand everything, it will again fall in the vicious cycle of (high capex - low margin - interest & depreciation hurting margins - low roe) saga.

Views invited.

(Hitesh Patel) #42


Coming to your query about company focussing entirely on MDF, I think it is a very very remote possibility. Nobody in their right mind would give up a dominant position in a sub sector to pursue another sub sector.

What could happen is that incremental resources would be put up in MDF facilities but the bread and butter business of plywood and laminates would always remain important to the company.

Plus company would always like to be known as a company that offers all the products needed in wooden furniture – the whole range --ply, laminates, veneers, MDF etc

Just think about Astral offering only CPVC pipes and not offering PVC and other cementing compounds.

(Soumya Kanta Panigrahi) #43

Greenlam green design studio’s another indicator that greenply is leaning towards products with high margins.

Already they have presence in around 15 cities that have high buying power.

It is really far away from wherever I stay in Bangalore. However there are a plenty more of normal Greenlam stores that reaffirms what hitesh has stated, that, while the company is moving towards high end products it is also committed to keep its core business growing as we’ll

(Rudra Chowdhury) #44


So for a future only perspective, company do need to put incremental capital in other sub sectors as well, which are bound to drag the roe.

So the headwind and margin improvement from increasing utilization of MDF capacity will be diluted again and things will be back to suboptimal ROE and margins again.

Doesn’t excite me as a superior long term play. What am I missing here ?

(Soumya Kanta Panigrahi) #45


Besides some of the interiors that they have put on their site is really impressive, high end, and pretty attractive to say the least. Bound to attract consumers who can afford it. Not sure of the value for money proposition though.


(manish) #46

Did some checks in lucknow.

After enquiring in about 10 shops i noticed following things -

)- Greenply was available in only 1 of them, century ply in 3 shops and rest had local brands - burma, srg, marcos, silver oak … No 2 shops had same local brands. looks like there are plenty of brands in the market.

Cost of century ply was 113 rs / sq ft ( 18mm ply), local brands are costing 25 - 30 % less. The cost difference is quite big and is difficult to ignore. As per the dealers ( all of them) the local brand is also equally good in strength and hence makes more sense to buy same. They are offering guarantee in both branded and local brands, however, i have no idea how would someone be able to claim the warranty.

)- regarding veneer sheets, none of the shop had greenply or centryply though the displays were put at most of the places. no two shops had the same brand of veneer sheets. The choice of colours / textures available is huge.

the market is highly unorganized and there are numerous players.

I did see the greenply , greenlam, green panelmax displays in shops which shows that the company is trying to improve visibility but the products were not kept by a majority of the dealers.

(Ayush Mittal) #47

@Rudra: Agree with Hitesh that the co will continue investing in other segments too and I do agree that the long term story is not very clear.

(Bhupesh) #48

I had raised 3 questions to company in August 2010

  1. What % volume growth you see in coming 3-5 years in this business segment for the company?

  2. How you plan to meeting this growth in this segment, how much more volume these unit can provide with out much signification investment?

  3. Do company has any investment plan in this segment in coming years either on existing units or on new units?

Following answers I got …

  1. We expect a volume growth of 15% in coming 3 years in this segment.

  2. We expect to meet this growth through a three-pronged strategy:

a) Scale up utilisations by another 8-10% from existing capacities.

b) Meet the increased demand from outsourcing. We are working on a strategy to meet the demand for mid-segment plywood from outsourcing and produce maximum premium plywood from our own units. This will enable us to achieve volumes as well as improve our value-mix.

c) If required, we may also do a small expansion to meet increased demand with minimum investments.

  1. At present, we do not intend to make any major investments in plywood segment.

(Bhupesh) #49

I am invested in this company from Dec 2008 (when it was dirt cheap) , not a significant investment though.

My reason of keep holding it was

  1. It is not easy to enter and grow in this market

  2. Not all are interested in this business

  3. Good brand recall and leadership position

  4. Steady growth

  5. Transparency

  6. Consistent dividend payment

Things which I still do not understand (primarilyI have been lazy not toinquire)

( In our apartment’ 30+ apt which I know non used Greenply for ply, most of the contractors goes with relatively un-known brands, they assure client about quality of product … and 25-30% price difference does help push other brands) 1) Who really are theirply-boardcustomer?


  1. I do not see PE re-rating chances, It is more of consumable then the end product , not much pricing powerbeyondthis point.

  2. Average ROCE &RoE

(Hitesh Patel) #50

greenply stock seems to be on fire last few days.

Stock crosses 400 today ad currently stock is up 15-16% at around 420.

wow what a ride.----

(Manish Vachhani) #51

The stock isup 30% since your first posting. Great pick!

(Hitesh Patel) #52

greenply seems to be forming a flag pattern. breakout point is closing above 400-405. targets as mentioned on chart are around 500 plus. Needs to be seen if and when targets are achieved.

(Hitesh Patel) #53

greenply has come up with excellent quarterly results.

period q3 fy 13 q3 fy 12 9M fy 13 9M fy 12 fy 12(12M)

sales 509 418 1470 1185 1642

NP 29 14 79 37 53

eps 12.1 5.9 32.8 15.4 22

company looks on track to report eps of around 45 for fy 13.

the theme of increasing sales with margin improvement seems to be playing out.

(hemant gupta) #54

very true hitesh. this was an excellent find by you!

(Deepak Swamy) #55

Indeed… Its a Hit!

Total Income up 21.9% to 510.18 Cr from 418.66 Cr.
EBIDTA up 37.1% to 67.77 Cr from 49.45 Cr.
Net Profit more than doubled to 29.37 Cr from 14.09 Cr.

EBIDTA margin is 13.3% v/s 13.7% (SQ-12) and 11.8% (DQ-11)
NET Profit margin is 5.8% v/s 6.2% (SQ-12) and 3.4% (DQ-11)

Total Raw material costs as a %ge to Income is 59.5% v/s 59.9% (SQ-12) and 59.3% (DQ-11)
Employee costs to Income is 8.1% v/s 7.9% (SQ-12) and 7.6% (DQ-11)
Other expenses to Income is 19.1% v/s 18.5% (SQ-12) and 21.3% (DQ-11)

Financial costs to EBIT is 28.1% v/s 26.6% (SQ-12) and 44.2% (DQ-11)

Tax Rate 27.4% v/s 27.5% (SQ-12) and 12.6% (DQ-11)

Lesser increment in other expenses helped EBIDTA.
Almost zero forex loss v/s a loss of 6 Cr and lesser Financial costs helped to zoom Net Profits.
(Note: Company has adjusted Rs. 6.4 Cr forex fluctuation to its fixed assets)

Plywood: Sales up 14.1%, PBIT up 80.5%, margin 10.1% v/s 8.8% (SQ-12) and 6.4% (DQ-11)
Laminates: Sales up 23.8%, PBIT up 83.4%, margin 12.1% v/s 13.5% (SQ-12) and 8.1% (DQ-11)
MDF: Sales up 42%, PBIT up 69.7%, margin 19.2% v/s 20.2% (SQ-12) and 16.1% (DQ-11)

9M/Fy-13 v/s 9M/Fy-12:
Total Income up 23.1% to 1458.82 Cr from 1184.94 Cr (Fy/11-12: 1643.66 Cr)
EBIDTA up 39.7% to 195.75 Cr from 140.1 Cr (Fy/11-12: 184.72 Cr)
Net Profit more than doubled to 79.19 Cr from 37.15 Cr (Fy/11-12: 53.41 Cr)

Reported 9-month EPS 32.81 v/s 15.39 (Fy/11-12: 22.13)
Recorded TTM diluted EPS: Rs. 39.55

On 23/01/2013, stock on BSE Closed at Rs. 441/- Up 3%

(hemant gupta) #56

thanks for the regular result updates deepak.

one small thing that i saw as a cause for concern is the margins have deteriorated sequentially in all segments except plywood. could there be a seasonality with respect to margins as well?

(manish) #57

Hitesh sir has hit the jackpot …again.

(anil) #58


Con call takeaways (this is what I heard and remember) :

  • As per the management, theydon’tsee margins improving further (in next 3-4 quarters), this is attributed to industry factors and lots of competition.
  • In terms of topline growth, they suggested somewhere around ~10-15% in laminates segment, close to 50% in MDF, however I feel the figure given for plywood segment (not even 10%) for FY13 was on a very lower side, (most probably the management said it in error)
  • Capacity utilization was close to 90% for MDF compared to ~60-70% last year. For other segments it was~100% or above 100%.

As per my understanding, apart from MDF segment, there was not any significantimprovementin ‘volumes’ in other segments. The sales growth is mainly from better realisations across segments. So, how long can this be sustained? as management has already indicated that further price increase may not be possible…!!

Others, whoattendedthe con call, please share further takeaways.


(Hemant V Bhatia) #59

Key highlights ofConference Call By Capital Market :

  • Net sales for Greenply industries for Q3 FY’13, grew by 22% and OPM was up by 144 bps for Q3 FY’13 due to higher capacity utilization and better sale of value added products.
  • Exports grew by 37% for the quarter and constituted about 12% of net sales. Forex loss of about Rs 6.3 crore was capitalized during the quarter.
  • On segmental basis, sale of Plywood and allied products grew by 14% and stood at about 34% of total revenue. Volume wise the growth was about 6-7%. OPM for the segment was slightly lower to 9.81%.
  • As per the management, the focus on Plywood segment will be to use the own facility for manufacturing high value added products and to outsource the low value added products. Also some products are imported from China.
  • No new capacity has been planned for Plywood segment, but the intention is to optimize the existing facility with high value added product and to make optimum use of outsourcing. Management expects the segment can see a margin increase of about 100-150 bps in next couple of quarters predominately due to higher value added product sales.
  • For laminates segment, sale grew by about 23% and the segment constitutes about 34% of total revenues. On volume wise, the segment grew by about 8% and realization was up by 17%. Capacity utilization was also higher and stood at about 108%.
  • Going forward, the management expects the margin for laminates to improve by about 150 bps in coming quarters.
  • For MDF segment, which stood about 19% of total sales, the sales grew by about 41% y.o.y. Avg realization was up by 17% and utilization stood at about 90% of the capacity. The EBIDTA margin for the segment stood at around 21%.
  • As per the management, MDF margin will gradually rise over next 2-3 quarters, will see, EBIDTA margin up from current 21% to around 24%. Increase in capacity utilization, sale of high value added product and better product mix will contribute the higher margins.
  • On demand side, management does not see any issue at all. Growth will come on more high value added products and increase of reach and presence.
  • The new facility of MDF is on discussion and final call by the management will be made in next 6 months. Although demand is pretty strong, imports continue to remain a challenge in MDF segment. Also the international prices of MDF segment are under pressure.
  • Current debt stands at around Rs 600 crore. Company has plans to spend about Rs 55 crore for FY’13 in form of increase in MDF facility and in some balancing equipment. Management aims to bring down the debt equity ratio of current of about 1.4 to about 1.1 in next 9-12 months.
  • Overall for Plywood segment, management aims sale of around Rs 850 crore for FY’13 and about Rs 1000-1050 for FY’14 and about Rs 1200 crore for FY’15.
  • For laminate segment, management expects turnover of about Rs 700-720 crore in FY’13 and about Rs 800-820 crore in FY’14.
  • For MDF, management expects sales of about Rs 380 crore in FY’13 and about Rs 450 crore in FY’14.

(Hemant V Bhatia) #60

Result Update by HDFC Sec;