Greenply Industries


(anil) #61

Seems today HDFC MF has bought around 5-6L shares @ 408 in a bulk deal…a positive I believe.


(Hardtoget) #62

here is the another report confirming the above deal

on a lighter note

HDFC Sec analyses
HDFC MF buys

all in the family


(Utkarsh Patel) #63

I went through the entire thread, and read the presentation and HDFC report.

So, currently after Q3, the company is at record utilisation level which doesn’t leave much room currently for increase in Volume, but the management has suggested that they are concentrating on products with higher margin and optimise accordingly.

Utilisation rates are already high at 113% Plywood, 99% laminates and 90% MDF.

Higher utilisation levels in MDF are possible and further growth and margin improvement is possible on this account which may increase Return on capital above 20% temporarily but after that, there seems to be no further way to continue growth thereafter without expansion.

To continue on growth thereafter, there needs to be further expansion which would lead to decrease in ROCE.

But if company wants to improve its return ratios thereafter alongwith growth, it needs to concentrate on MDF plants.There has been some action from management in this regard, that they have outlayed 40 crore for value added products in MDF (which is part of their optimisation process as capacity will remain the same but margin will improve)

Company further plans to have MDF plants in Andhra Pradesh which is a good sign alongwith expansion in Plywood cum Lamination plant in Myanmar.

So if company increases the part of MDF in revenue mix, it will surely lead to better profitability and sustainable profit growth.

In short, continuous capex with priority on MDF can lead to better return ratios.

One another thing, its a capital intensive business, which would need company to keep expanding to have growth and so debt will always be an issue.

There would be significant erosion in market share in MDF if another domestic player comes up or international price goes down.

So,although there seems to be improvement in the operations, it would really test the management if they can continue it further in competitive environment.

So, in the end, aren’t there too many variables that need to be fulfilled for the company to be a significant wealth creator in future?


(Hemant V Bhatia) #64
Greenply Industries Conf call by Capital Market
The CFO of the company Mr. V Venkatramani addressed the call

Key highlights

  • The company posted excellent set of numbers in Q4FY13. Net sales posted a growth of 18% Y-o-Y to Rs 540.69 crore, while net profit increased 116% Y-o-Y to Rs 35.12 crore.
  • Export sales for the quarter ended March 31, 2013 grew by 28.42% Y-o-Y to Rs 65.29 crores in Q4FY13 and it contributed 12.08% of the net revenue during the quarter.
  • The EBIDTA Margin for the quarter improved 283 bps to 12.49% in Q4FY13 as compared to 9.66% in Q4FY12.
  • The absolute EBIDTA for the quarter rose 52.48% Y-o-Y to Rs 67.52 crores in Q4FY13.
  • On segmental basis, sale of Plywood & allied products grew by 21.6% and stood at about 49% of total revenue, while the Laminates & allied products sales rose 11.6%, thus contributing 33% to the total revenue of the company during the quarter. The medium density fibre boards (MDF) segment revenue rose 20.5% Y-o-Y to Rs 98.92 crore in Q4FY13 and it contributed 18% of the total revenue.
  • The sales value of Plywood & allied products and Laminates & allied products during the quarter stood at Rs 264.21 crore and Rs 177.56 crore respectively.
  • In terms of volumes the plywood & allied products witnessed 0.69% increase in production to 8.79 mn square meters as the average capacity utilizations stood at 109%.
  • The sales volumes registered a growth of 8.24% during the quarter, Gujarat Unit volumes increased by 26% and outsourcing volumes by 41%.
  • The average realization of plywood was Rs 229 as compared to Rs 202 in the corresponding quarter of last year.
  • The segment EBIDTA registered an increase of 788 bps to 13.14% from 5.26% in the corresponding quarter of last year primarily due to improvements in product mix and additional refunds of excise duty (for earlier years) relating to Nagaland Unit.
  • The Laminates & Allied Products production rose 11.16% to 2.59 mn sheets in Q4FY13 as compared to 2.33 mn sheets in Q4FY12 as the average capacity utilization increased to 103% from 93% in Q4FY12.
  • The average realizations of laminate stood at Rs 563 in Q4FY13 as compared to Rs 564 in Q4FY12.
  • The average realizations of decorative veneers fell to Rs 640 as compared to Rs 683 in Q4FY12.
  • The EBIDTA margin from the segment declined 388 bps to 7.60% from 11.48% in the corresponding quarter of last year.
  • The MDF production rose 2.25% to 40975 Cu meter in Q4FY13 as compared to 40075 Cu meter in Q4FY12, while the sales volumes increased by 6.15% Y-o-Y to 39926 Cu meters.
  • The average capacity utilization of the company's MDF facilities improved to 91% in Q4FY13 as compared to 89% in Q4FY12.
  • The average realizations of MDF improved 13.52% to Rs 24774 per Cu meter.
  • The EBIDTA margin of the MDF division improved 172 bps to 19.51% in Q4FY13.
  • The net sales of the company for the full year (FY13) posted a growth of 21.6% to Rs 1997.69 crores, while the net profit during the year increased 114% to Rs 114.31 crores.
  • Exports contributed 12.8% of the total sales during FY13 and it rose 39.14% to Rs 255.62 crores.
  • The EBIDTA during FY13 increased 42.6% to Rs 261.45 crores.
  • On segmental basis for FY13, sale of Plywood & allied products grew by 15.3% and contributed 47% of total revenue, while the Laminates & allied products sales rose 17.2%, thus contributing 34% to the total revenue of the company during the quarter. The medium density fibre boards (MDF) segment revenue rose 53.53% to Rs 374.18 crore in FY13 as it contributed 19% of the total revenue.
  • The sales value of Plywood & allied products and Laminates & allied products during the year stood at Rs 940.17 crore and Rs 683.34 crore respectively.
  • The volumes for the full year were impressive too, as the Plywood & Allied Products segment witnessed 6.66% increase in production to 34.28 mn square meters.
  • The division sales volume rose 9.26% on the back of increase of 25.18% in Gujarat unit.
  • The average realization of Plywood rose to Rs 215 in FY13 as compared to Rs 203 in FY12.
  • EBIDTA margin of plywood & allied division improved 74 bps to 10.56% from 9.82% in FY12.
  • Laminates & Allied Products division's production rose 4.54% to 10.37 mn sheets in FY13 as the average capacity utilizations of the division improved to 104% compared to 99% in FY12.
  • Sales volumes of laminates & allied products division rose 7.37% to 9.64 mn sheets, while its average realization rose 13.65% to Rs 566 from Rs 498 in FY12.
  • The production of decorative veneers registered a decline of 9.42% to 1.25 mn square meters.
  • The average capacity utilization of decorative veneers stood at 30% in FY 13 as compared to 33% in FY 12, while the average realizations of decorative veneers improved by 5.04% to Rs 708.
  • The MDF production rose 35.12% to 157948 Cu meters in FY13, while sales rose 31.56% to 153426 Cu meters. The average realization rose 16.69% to Rs 24386 per Cu meter.
  • Company's consolidated net sales rose 20% to Rs 2044.06 crores in FY13, while the net profit posted a growth of 111% to Rs 119.80 crores.
  • The Singapore subsidiary of the company posted a turnover of Rs 151.40 crores in FY13 as compared to Rs 135.68 crores in FY 12, while it posted a profit of Rs 1.82 crores in FY13 as compared to Rs 2.30 crores in FY 12. The US subsidiary recorded a turnover of Rs 46.39 crores in FY13 as compared to Rs 33.34 crores in FY 12. The subsidiary posted profit of Rs 3.87 crores in FY13 as compared to Rs 0.98 crores in FY12.
  • The Debt equity ratio of the company in FY13 was 1.38 as compared to 1.85 in FY12, while the working capital cycle reduced to 69 days in FY13 as compared to 90 days in FY12.
  • The demand situation continues to remain challenging across all the company's product segments, but the company is confident of posting a top-line growth of 18-20% in FY14. The EBIDTA margin is expected to be sustained at the current levels.
  • The company would be paying off Rs 104 crore worth of debt in FY14. The current average cost of debt of the company 10% -10.2%
  • The company's current market share in the plywood segment is 40%, while it enjoys 30% market share in the laminates and MDF segments.
  • The ROCE of the company in FY13 was 19%, which is expected to improve to 22-24% going ahead.
  • The company plans to spend Rs 115 â 125 crore for its capital expenditure in FY14 and FY15. Half of this amount would be spend in the current year.
  • Rs 15 - Rs 20 crore would be spend to set up manufacturing unit of value added products in the company's existing MDF plant at Pantnagar, Uttarkhand. The company would be setting up lamination capacity and introduction of laminated flooring and UV coated panels. The civil construction work has been completed and the plant would be ready by the end of this year.
  • Rs 18 â Rs 20 crore would be spend in the plywood plant in Myanmar, while Rs 30 â RS 35 crore would be spent as normal maintenance capital expenditure.
  • The company also plans to commence the Laminate unit in Rajasthan in the current year.
  • The company has already acquired the required land for MDF manufacturing unit in Andhra Pradesh, while various statutory approvals for the project would take at least 6 â 8 months.
  • The company is naturally hedged from currency volatility

(Deepak Swamy) #65

Q1/Fy 13-14 Results out…

Total Income up 11.6% to 480.79 Cr from 430.84 Cr.
EBIDTA up 7.7% to 61.36 Cr from 56.99 Cr.
Net Profit up 25.6% to 22.57 Cr from 17.97 Cr.

EBIDTA margin is 12.8% v/s 12.7% (MQ-13) and 13.2% (JQ-12)
NET Profit margin is 4.7% v/s 6.5% (MQ-13) and 4.2% (JQ-12)

Total Raw material costs as a %ge to Income is 58.8% v/s 59.5% (MQ-13) and 58.3% (JQ-12)
Employee costs to Income is 9.9% v/s 7.9% (MQ-13) and 8.6% (JQ-12)
Other expenses to Income is 18.5% v/s 19.9% (MQ-13) and 19.9% (JQ-12)

Financial costs to EBIT is 30% v/s 25.5% (MQ-13) and 35.5% (JQ-12)
Tax Rate 25.7% v/s 20.5% (MQ-13) and 22% (JQ-12)

Employee expenses went up 28.6% that affected EBIDTA.
Lesser Forex loss and Lower financial costs compared to last year helped Net profits.

SEGMENTS:
Plywood: Sales up 12.6%, PBIT up 21.6%, margin 8.23% v/s 13.7% (MQ-13) and 7.6% (JQ-12)
Laminates: Sales up 13.9%, PBIT up 5.4%, margin 8.8% v/s 7.1% (MQ-13) and 9.5% (JQ-12)
MDF: Sales up 4.1%, PBIT up 16.2%, margin 20.5% v/s 17.4% (MQ-13) and 18.3% (JQ-12)

EPS 9.35 v/s 7.44
Recorded TTM (sum of 4 quartr) diluted EPS: Rs. 49.21

At 02:45 pm on 23/07/2013, stock on BSE trading down 2.2% at Rs. 495/-


(Sagar Saxena) #66

In the past quarters,the PAT was growing at a scorching pace.There is a marked slowdown in that sense in Q1.Has this got anything to do with the rupee depreciation? What do they import? How does the currency volatility affect them? Appreciate if Seniors could shed some light on this aspect.


(Bhupesh) #67

Greenply is looking to de-merge Greenlam business and list as separate entity.

Plywood Laminates

2013 2012 2013 2012

Net Sales 94366.60 84230.84 72456.71 61877.22

Result 9698.75 6904.38 7868.91 7610.23

Assets 53647.66 45902.78 58695.52 53852.50

Liabilities 14573.01 9991.59 13799.75 12406.14

Why entity will be more promising among the two?


(Excel Monkey) #68

Hitesh bhai

Are you still following this one?

Do you think the company is on track?


(Hitesh Patel) #69

excel

I dont follow it closely. debt was a big overhang and with the continuous need for capex it doesnt seem like debt is coming down soon.

hitesh.


#70

Hitesh and others, interest cost has been coming down or at least stabilized in Q2 and Q3 of FY14. Cursory glance at screener numbers support that capital (reserves) has been increasing faster than debt, and with that D/E has been coming down, it is ~1 after many years. Expecting still lower D/E in FY14 results.

Remember that this #1 player in interior infra space, with 20pct+ ROE, with excellent distribution and brand recall is available at PE less than 8.5. It is one of few scrips that have not run up as yet.

I could not find further news on 350cr MDF expansion in AP that was proposed in Jun-13. Anyone has any info on that? Becasue MDF expansion can bring growth that has slowed down in recent quarters.


(Hemant V Bhatia) #71

Mr. Saurabh Mittal, Jt. MD & CEO,& Mr. V. Venkatramani, CFO, of the Co.add the call.Key highlights by Capital mkt;

  • **Plywood & Allied Products:(A)Plywood production rose 0.8% to 9.15 million square meters) in Q2FY15. Average capacity utilisations were 113%. Sales volumes registered a growth of 1.47% to 12.29 million square meters on the back of 28% volume increase in the Outsourcing division.(B)Average net realisation of Plywood improved by 10% to Rs 241 in Q2 FY15.©**Operating Margin registered an increase of 36 basis points to 9.51%.
  • **Laminates & Allied Products: (A)Laminates production fell 1.1% to 2.72 million sheets) in Q2FY15. Sales volumes registered a growth of 4.54% at 2.97 million sheets; average capacity utilisations at 108% compared to 110% in the corresponding quarter.(B)Average realisations of laminate fell by 1.4% to Rs 629.©Average realisations of decorative veneers rose by 17.4% to Rs 889 per sqm.(D)**Operating Margin fell by 169 basis points to 11.07%.
  • **Medium Density Fibreboards: (A)MDF production declined 1.8% to 35661 Cubic Meters (CBM) in Q2FY15. Sales volumes fell by 6.6% to 37667 CBM.(B)Average Capacity Utilisation was 79% compared to 81% in Q2FY14.©Average realisations of MDF improved by 1.6% to Rs 26158 per CBM.(D)**Operating Margin rose by 320 basis points at 23.19%.

**Financial performance:**Co net revenue grew by 6.7% YoY to Rs 623.16 crore. OPM fell by 13 basis points to 12.21%. Thus, OP was up by 5.58% at Rs 76.08 crore. NP rose by 39.7% at Rs. 37.04 crore. NP margin stood at 5.94%. EPS (fully diluted) for Q2FY15 at Rs 15.35.

  • Segment wise revenue breakup for Q2FY15, revenue from Plywood & Allied Products division (contributes 50% of total revenue) rose by 13.3% to Rs 312.09 crore and Laminates & Allied Products division (contributes 34% of total revenue) gained by 4.2% to Rs 212.90 crore. Medium-density Fibre Boards segment (contributes 16% of total revenue) fell by 4.9% to Rs 98.80 crore.Exports for Q2FY15 were lower by 3% at Rs 86.73 crore and contributed 13.92% of the net revenue for the quarter.
  • For H1FY15, net revenue grew by 7.1% to 1139.90 crore. OPM increased by 15 bps to 12.66%. Operating Profit was up by 8.4% at Rs. 144.28 crore. Net Profit gained 37% at Rs. 67.27 crore. Net Profit margin for H1FY15 stood at 5.90% compared to 4.61% in H1FY14.Segment wise revenue breakup for H2FY15, revenue from Plywood & Allied Products division (contributes 49% of total revenue) rose by 11.9% to Rs 563.52 crore and Laminates & Allied Products division (contributes 35% of total revenue) gained by 5.1% to Rs 398.91 crore. Medium-density Fibre Boards segment (contributes 16% of total revenue) fell by 1.4% to Rs 178.46 crore.
  • Exports for H1FY15 at Rs 164.29 crore grew by 0.40% over H1FY14 and contributed 14.41% of the net revenue for the period.The Company expectsIndian furniture industry, pegged at Rs. 71,000 crore, reputed for its design, fashion and technological quality, likely to grow at 13-15% across five years, on the back of growing real estate, tourism and hospitality sectors on the one hand and rising per capita consumption and lifestyle product consumption on the other. Around 80% of the furniture manufacturing industry is unorganised while 20% comprises organised manufacturers.
  • The fragmented Rs. 23,700 crore Indian panel products and laminate industry, which provide the raw materials to the furniture industry, is growing at 5-7% annually.Although the unorganised sector accounts for around 80% of the plywood and 40% of the laminate industry, the organised sector’s 15-20% annual growth outperformed overall industry growth. MDF growth is expected at 20-25% because of its low base and also shifts of cheap plywood segment to MDF.

The Company expects following are demand drivers to provide the stimulus for real estate growth:

  • **Semi Urban Demand:**Real Estate demand is accelerating in Tier II and III cities and towns. Cities like Bhopal, Bhubaneswar, Coimbatore, Indore, Jaipur, Lucknow, Surat, Vadodara and Visakhapatnam are expected to add over 354 million square feet of residential space in 3 years with sales expected to generate Rs 180 billion in the next 8 years. An increasing number of corporates are shifting focus to Tier II and III cities, accounting for over 61% of the total job creation in India in 2010-11. (Enam)

  • **Premium Housing Demand:**The Net worth of HNIs in India is expected to increase from Rs 45 trillion in 2010-11 to Rs 235 trillion in 2015-16 widening the market for premium housing. HNIs use a fifth of their earnings for investments, of which 37% is in real estate. (Kotak)

  • **Commercial office space and retail sector:**Office space supply in top seven Indian cities is expected to reach 243.5 million square feet in 2011-15 and malls and other retail spaces are expected to account for 57 msf and 112.57 msf respectively (Cushman and Wakefield).

  • **Hospitality:**Tourist arrivals expected to increase to 11.1 million in 2021 from 6.29 million in 2011 leading to an additional demand for 150000 hotel rooms in 5 years (Care).

  • **Healthcare:**India needs to add 1.8 million beds by 2025 to reach its targeted ratio of two beds per 1000 people with an investment outlay of USD 86 billion (India Brand Equity Foundation).


(Varun) #72

Any thoughts on Century vs Greenply ? Why does century seem to be growing so much faster ?


(Hemant V Bhatia) #73

Mr.ShobhanMittal, Jt. MD & CEO,&Mr. V. Venkatramani, CFO, of Co.add the conf.call. Key highlights by Capital Mkt;

Business Updates

  • The Company has completed the demerger of the decorative business (comprising of laminates and allied products and accounting for 37.2% of FY14 consolidated sales) with all its assets and liabilities into Greenlam Industries on 27 November 2014. Greenlam Industries has issued and allotted to the shareholders of Greenply Industries one equity share of Rs. 5 each in Greenlam Industries for every one equity share of Rs. 5 each held by them in Greenply Industries.
  • The completion of the demerger of the Decorative Business during Q3 will enable Greenply to greater focus on its core business and leverage its strengths towards improving market reach and better cash management and utilisation to drive growth.

Operational performance

  • The company holds largest pan-India player with 32% share of organised plywood market and 30% share of domestic MDF market.
  • **Plywood:(A)Plywood production fell 4.6% to 8.1 million square meters (million sqm) in Q3FY15.(B)Average capacity utilisations were at 100%. Sales volumes registered a growth of 7.6% to 11.1 million sqm.©Average net realisation of Plywood improved by 7% to Rs 245 in Q3FY15.(D)**EBITDA Margin registered adecrease of 370 basis points to 8.1%.
  • **Medium Density Fibreboards (MDF): (A)MDF production surged sharply 35.8% to 44808 Cubic Meters (CBM) in Q3FY15. Sales volumes rose by 40.2% to 44379 CBM.(B)Average Capacity Utilisation was 100% compared to 73% in Q3FY14.©Average realisations of MDF reduced by 1.4% to Rs 25172 per CBM.(D)**EBITDA Margin rose by 220 basis points at 24.1%.

Financial performance

  • The Company net revenue grew by up 19% YoY to Rs. 390.52 crores for Q3FY15. Plywood division recorded a growth of 12.6% YoY to Rs. 278.70 crores and accounted for 71% of total revenues. MDF division recorded a growth of 38.4% YoY to Rs. 111.96 crores and accounted for 29% of total revenues. Gross margins expand 60 bps YoY to 42.4%, driven by higher volumes in MDF. EBITDA was up 6% YoY to Rs. 9.68 crores; EBITDA margins stood at 12.72%, down 155 bpsYoY due to rise in advertisement expenditure. Advertisement expenditure to sales at 2.7% in Q3 FY15 as compared to 1.3% in Q3 FY14 PAT was up 33% YoY to Rs. 26.14 crores.
  • Working capital cycle improved by 4 days YoY to 48 days in Q3FY15, led by 16 days improvement in inventory days to 45 days.Net debt to equity at 0.77x as on December 31, 2014 as compared to 1.05 as on December 31, 2013.
  • For 9MFY15- Revenues were up 11.74% YoY to Rs. 1132.16 crores. Plywood division recorded a growth of 12.11% YoY to Rs. 842.22 crores and accounted for 74% of total revenues. MDF division recorded a growth of 10.88% YoY to Rs. 290.43 crores and accounted for 26% of total revenues. EBITDA was up 8.75% YoY to Rs. 147.12 crores; EBITDA margins stood at 13%, down 35 bps YoY. PAT was up 39.32% YoY to Rs. 76.25 crores.
  • The Growth during Q3 & 9M FY2015 has been achieved mainly through gaining market share from the unorganised segment and the company expects this trend will continue and is a reflection of proven quality, strong brand portfolio and well developed distribution infrastructure.
  • The MDF business has made good strides during the year on the back of increasing customer preference. The company expects given leadership position and capabilities will be a key growth driver going forward.

Growth Outlook

  • With Plywood industry size of around Rs 160 billion and MDF industry size of around Rs 18 billion, the Company expects rising demand from the real estate sector, increasing urbanisation, higher disposable incomes and growing middle classand Government Announcement regarding construction of 100 smart cities would be key industry driver going forward. Also, rollout of GST helps the industry to facilitate faster shift from unorganised to organised players.

  • The company plans to increase the number of distributors and retailers going forward. Presently, the company has around 1100 plywood and 450 MDF distributors/stockist and 6000 plywood and 4000 MDF retailers.

  • The company plans to continue investments in advertisement and promotional spends to increase brand visibility pan-India, with higher Ad spends at around 3% of net sales.

  • On expansion side- With Plywood utilization of 103% in 9MFY15, the company plansto optimise utilisation of plywood plants in existing facilities and increase outsourcing proportion to 30% from 18% presently over the next 3 years. Also, with MDF 83% utilization in 9MFY15, company plans to undertake greenfield expansion of new MDF plant in Andhra Pradesh over FY16-19 to cater to future demand.

  • For raw material sustainability, the company focus on plantation of fast growing and improved species of clonal plantations to improve quality of wood availability and plywood manufactured. Also with backward integration through 50% JV in Myanmar for production of face veneers; to start manufacture of plywood in FY17The company upgrades IT infrastructure for implementing SAP Hana to strengthen overall supply chain.

  • The company expects a 10-12% growth in FY16 trough volume utilization and better product mix realisation. Margins expected to improve by 50-70 bps in FY16 driven by better product mix and cost control.


(Punit) #74

Though GreenPly (GP) and CenturyPly (CP) play in the same industry, they have quite a different strategy

  1. GP believes that MDF segment will grow faster than plywood in line with global markets and hence has been ramping up its MDF capacity. CP, on the other hand, believes that consumer behaviour in India will continue to favour custom built, durable furniture creating a demand for plywood, so CP has been ramping up plywood capacity. MDF is lower quality and durability, so more of a substitute for cheaper plywood which is mainly used by furniture manufacturers.
  2. Even with plywood segment, most unorganised players mainly cater to cheaper category of plywood. CP targets mid to high category whereas GP targets the very high end category and that is reflected in its average realisations which is higher than CP. Within plywood segment, GP plans to ramp up through outsourcing model rather than in-house production. On the other hand CP is building MDF capacity using outsourcing model.
  3. EBITDA margins of CP are better than GP because the way each company manages its Forex exposure, giving better margins (and some sense higher risks) to CP
  4. Since CP is big believer of growth of plywood over MDF they have been diversifying their raw material sources. They already have plant in myanmar and are adding alternative sources from Laos, PNG, Solomon islands etc. This will provide some advantage to CP to ensure raw material availability as more and more countries become restrictive on deforestation
  5. MDF requires more Capex than plywood, and that is reflected at EBIT level margins for both companies.

Couple of other comments

  1. GST will certainly move the industry towards organized sector, benefitting both GP and CP. Unorganised sector currently constitutes almost 70% of the plywood market which will slowly shift to organized sector.
  2. Timber export ban from countries such as Myanmar will benefit organised players such as GP and CP that will have local units in these countries
  3. CP still has laminate business within the same company which provides healthy support to the plywood business. CP has been ramping up its laminate production

Both companies should do extremely well going forward, but one may do better than other depending on how consumer behaviour pans out in future.

Disc: Invested in CP


(Kunal) #75

This is superb comparison Punit.

You are right. Though Both CP and GP are in same business they have identified their niche market.

GP looks more ambitious and growth oriented which has 30% market share in MDF in India. I think GP strategy is perfect as MDF user base is increasing - just check online for housefull and other furniture portals where MDF has more options.

On the other side, CP is targeting growth with better risk management and higher margin.

I hold basket of CP, GP and Stylam Industries in GST area. Even if GST got delayed, there is nothing much to loose here as these 3 are fundamentally strong and growing. Available at fair valuation.


(Ishaan Gupta) #76

@kunalpatel_5267 & @punitm306 - Wonderful analysis. Dont you think the returns on capital on these businesses are as decent as the brand? I mean sub 20% returns on capital for such well known brands just seems off.

My review of the Greenply from the time of the spin off is here:

Thanks.


(Punit) #77

ROCE for CP at above 25% seems to be pretty good. ROIC 5 year average seems to be around 16% which I feel is pretty decent as well. As the capacity utilisation goes up on the incremental capex, we can expect to keep ROCE > 25%. WC is a big drag and is quite high in this industry.

Given the quality of analysis on VP, i feel that this thread on GP and CP seriously lacks quality. Recently I’ve been reading and trying to get more rounded analysis on the plywood industry and more specifically CP. I’ve various unanswered questions

  1. Why do consumers buy branded plywood over unbranded? How does one brand differentiate over other? I dont remember knowing the plywood used for furniture at my house, so thats means its the preference of the carpenter and/or architect? Why do they prefer one over the other?
  2. Threat of Chinese import? Recently i’ve been reading that the market is flooded by chinese plywood which are cheaper. Though manufacturers discount it by terming Chinese plywood as low quality, dealers and distributors think otherwise? Do consumers specifically check if it is chinese make or Indian make?
  3. Importance of raw material sourcing? How does one company differentiate by better sourcing? Does it provide any cost advantage or operating leverage?
  4. Impact of GST on chinese imports?
  5. MDF vs. Plywood. My take is that there will be enough demand for both products. Indian families own their apartments so they dont move apartments regularly as the western world. So indian families prefer to custom make the furniture creating a demand for plywood. This may be changing in many metros but will probably take another decade or two to completely play out, until then the demand for plywood will stay strong.

I’ve many such open questions and I’m looking to dig deeper to understand the sector/companies better. Any helping hands would be most welcome.


(Hemant V Bhatia) #78

Mr.Shobhan Mittal, Jt. MD & CEO,& Mr. V. Venkatramani, CFO, of the Co add the call.Key highlights by Capital Mkt
The company holds largest pan-India player with 32% share of organised plywood market and 30% share of domestic MDF market. The company have 4 state–of-the-art manufacturing facilities for Plywood and 1 facility for MDF –largest in the country.
Plywood:
For Q4FY15- (A) Plywood production declined by 4.7% to 7.97 million square meters (million sqm).(B) Average capacity utilisations were at 98%. Sales volumes registered a growth of 4.9% to 12.55 million sqm. © Average net realisation of Plywood improved by 6.1% to Rs 242 per sqm. (D) EBITDA Margin decreased to 8.6% from 10.5% corresponding previous quarter.For FY 2015- (A) Plywood production declined by 4.6% to 33.08 million sqm. (B) Average capacity utilisations were at 102%. Sales volumes grew by 3.6% to 46.11 million sqm. © Average net realisation of Plywood improved by 8.6% to Rs 241 per sqm. (D) EBITDA Margin decreased to 9.1% from 10.3% corresponding previous quarter.
Medium Density Fibreboards (MDF):
For Q4FY15- (A) MDF production grew sharply 50.7% to 48563 Cubic Meters (CBM). Sales volumes rose by 41.2% to 49028 CBM. (B) Average Capacity Utilisation was 108% compared to 72%. © Average realisations of MDF reduced by 7.8% to Rs 24081 per CBM. (D) EBITDA Margin rose by 140 basis points at 22.7%.For FY15- (A) MDF production grew 17.9% to 161229 CBM. Sales volumes rose 17% to 161424 CBM. (B)Average Capacity Utilisation was 90% compared to 76%. © Average realisations of MDF reduced by 1.2% to Rs 25238 per CBM. (D) EBITDA Margin rose by 170 basis points at 22.7%.
Financial performance
The Company revenues were up 14% YoY to Rs. 428.42 crore in Q4FY15. Plywood division recorded a growth of 8.35% to Rs. 310.23 crore and accounted for 72% of total revenues. MDF division recorded a growth of 30% to Rs. 118.37 crore and accounted for 28% of total revenues. Gross margins expanded to 41.2% from 38.7% in Q4FY14, led by better product mix. EBITDA margin was down to 9.9% from 11% over a year due to rise in logistic cost to sales at 6.1% in Q4FY15 as compared to 5.5% in Q4FY14. EBITDA was up 8% to Rs. 53.52 crore. PAT was up 102% to Rs. 45.56 crore.For FY 2015- Revenues were up 12% YoY to Rs. 1560.58 crore. Plywood division recorded a growth of 11.04% to Rs. 1152.33 crore and accounted for 74% of total revenues. MDF division recorded a growth of 15.8% to Rs. 408.78 crore and accounted for 26% of total revenues. Gross margins expanded 140 bps YoY to 41.7%, led by better product mix. EBITDA margin was down 30 bps YoY to 12.9% due to rise in staff cost to sales at 9.3% in FY15 as compared to 8.69% in FY14 and Ad expenditure to sales at 2.8% in FY15 as compared to 1.9% in FY14. EBITDA was up 9% to Rs. 200.64 crore. PAT was up 58% to Rs. 121.82 crore.Working capital cycle improved by 4 days YoY to 52 days in FY15, led by better inventory & debtor management.
Net debt to equity at 0.7x as on March 2015 as compared to 1.0x as on March 2014.
Demerger of Decorative Business
The Company has demerged the decorative business (comprising of laminates and allied products and accounting for 37.2% of FY14 consolidated sales) of the company with all its assets and liabilities into Greenlam Industries. Record date for the demerger was 27 November 2014; Greenply Industries stock traded as a demerged entity from 26 November 2014. Greenlam Industries has issued and allotted to the share holders of Greenply Industries on equity share of Rs.5 each in Greenlam Industries for every one equity share of Rs.5 each held by them in Greenply Industries. Mr. Sarah Mittal, Joint Managing Director & CEO resigned from the Company with effect from the close of the working hours of November 10, 2014, to take up assignment in Greenlam Industries.
Rationale for Demerger
Different product characteristics-The wood based products (plywood and made) form the backbone materials for furniture. The decorative products (laminates and decorative veneers) are surfacing materials.Separate marketing reach-Both businesses require different sets of dealers, distributors and intermediaries. Plywood and MDF are sold primarily in the domestic market. Laminates are sold both in domestic as well as international markets.Dedicated management focus-Dedicated management focus and resource allocation in line with respective market trends to enable diversification and expansion into newer product portfolios for faster growth.Better cash management / utilization-Two separate companies will have independent cash flows and strengthen the prospects of each of the businesses towards mobilising funds to service their respective growth plans
Growth Outlook
The Company expects rising residential/commercial construction, increasing urbanization, high disposable incomes and Government Announcement regarding construction of 100 smart cities will be key industry driver going forward.With Plywood industry size of around Rs 160 billion and MDF industry size of around Rs 18 billion, the Company expects rollout of GST helps the industry to facilitate faster shift from unorganised to organised players.The company plans to increase the number of distributors and retailers going forward. Presently, the company has around 1100 plywood and 450 MDF distributors/stockist and 6000 plywood and 4000 MDF retailers. Also, serviced by 33 branches for ply and 12 branches for MDF pan-India.The company plans to continue investments in advertisement and promotional spends to increase brand visibility pan-India, with higher Ad spends at around 3% of net sales.
On expansion plans- The Company plans to optimise utilisation of plywood plants in existing facilities and increase outsourcing proportion to 30% from 20% presently over the next 3 years. Also, with plans to setting up new MDF plant in Andhra Pradesh over FY16-19 to cater to future demand.The company plans to upgrade IT infrastructure through implementing SAP Hana to strengthen overall supply chain.The company expects a 10-12% growth in FY16 trough volume utilization and better product mix realisation. Margins expected to improve by 50-70 bps in FY16 driven by better product mix and cost control.


(NMB) #79

Hey buddy,

I had attended the investor meeting last weekend in Mumbai. The management was very prudent and cautious in giving a guidance in growth.

Basically guided for great growth in MDF segment which enjoys almost 1000bps higher margins than Plywood.

FY16 revenue growth will be 10-12% with 70bps margin expansion guided.

3x capacity coming in MDF by CY2018 which will take the company to the “next level”.

They also are retiring debt aggressively as they will be taking debt for new MDF plant. Net debt in 2018 will be lower than current levels even though company is going for 3x expansion in MDF.

Future is extremely bright for Greenply and largely for MDF segment.

**But looks like some major investor has been dumping the stock recently. Since there is no liquidity in the counter, its buckling under pressure.

I will start adding to my 6% allocation around 775-800 levels. Its going to be an awesome winner in the next 5-7 years for everyone!

Cheers
Neil Bahal


(Hemant V Bhatia) #80

Mr. ShobhanMittal, ED & Mr. V. Venkatramani, CFO,add the call.Highlights by Capital Mkt
Operational performance
The company holds largest pan-India player with 30% share of organised plywood market and 30% share of domestic MDF market. The company have 4 state–of-the-art manufacturing facilities for Plywood and 1 facility for MDF –largest in the country. The Company plywood plants utilization was at 95% and MDF plants utilization at 92% in Q1FY16.
Plywood: (A) Plywood production declined by 2.7% to 7.65 million square meters (million sqm). (B) Average capacity utilisations wereat 95% as compared 97% corresponding previous quarter. Sales volumes grew by 7.8% to 11.01 million sqm. © Average net realisation of Plywood improved by 3% to Rs 241per sqm. (D) EBITDA Margin decreased to 8.6% from 10.5% corresponding previous quarter.
Medium Density Fibreboards (MDF): (A) MDF production grew sharply 28% to 41250 Cubic Meters (CBM). Sales volumes stood at 39494 CBM, up by 30.1% from 30350 CBM in Q1FY15. (B) Average Capacity Utilisation was at 92% compared to 72% corresponding previous quarter.© Average realisations of MDF increased by 4.2% to Rs 27166 per CBM. (D) EBITDA Margin rose to 30.1% from 23.4% corresponding previous quarter.
Financial performance
The Company toplinegrew 15.1% YoY to Rs. 380.7 crore in Q1FY16, on the back of a significant improved performance from the MDF Segment. Plywood Segment revenue grew by 8.8% to Rs. 273.40 crore, accounting 72% of net sales. MDF Segment grew by 34.9% to Rs. 107.34 crore, contributing 28% of net sales. Gross margins expanded 260 bps to 44.6% in Q1FY16, led by better product mix. EBITDA margin was up 110 bps to 14.7%, as a resultEBITDA jumped by24.6% to Rs. 55.93 crore. PAT was up 14.8% to Rs. 26.70 crore.Working capital cycle rose by 3 days YoY to 57 days in Q1FY16. Net debt to equity at 0.6x as on June 30, 2015 as compared to 0.9x as on June30, 2014.
Outlook
The Company targets a plywood volume growth of 7-8% and MDF volume growth of 10% for FY2016.Also targets to achieve operating margin of around 10% for plywood segment in FY2016.The Company plans for a small price increase in the range of 4% in current fiscal.The Company plans capex of around Rs 600 crore for period of FY16-FY19. Ofthe total capex, the Company plans to utilise Rs50-60 crore in FY16, Rs 100-120 crore in FY17, approx. Rs 350 crore in FY18 and remaining balance in FY19. Thecompany expects to generate 50% of total capex from internal accrual and remaining 50% from debts.The Company expects rising demand from the real estate sector, increasing urbanization, higher disposable incomes and growing middle class will be key industry driver going forward. Meanwhile government announcement regarding construction of 100 smart cities would facilitate further to boost to the industry.
With Plywood industry size of around Rs 160 billion and MDF industry size of around Rs 15 billion, the Company expects rollout of GST helps the industry to facilitate faster shift from unorganised to organised players.The company plans to increase the number of distributors and retailers going forward. Presently, the company has around 1170 plywood and 450 MDF distributors/stockist and 6000 plywood and 4000 MDF retailers. Also, serviced by 33 branches for ply and 15 branches for MDF pan-India.The company plans to continued its investments in advertisement and promotional spends to increase brand visibility pan-India, with higher Ad spends at around 3% of net sales.
On expansion plans- The Company plans to optimise utilisation of plywood plants in existing facilities and increase outsourcing proportion to 30% from 20% presently over the next 3 years. Also, with plans to setting up new MDF plant in Andhra Pradesh over FY16-19 to cater to future demand.The Company plans to improve mix of plywood through increase in mix of value-added products like Green Defender and Green Gold Prima. Also, the company plans to increase ratio of value added products in MDF like Exterior Grade MDF, Pre-laminated MDF and Laminated Flooring / Veneer flooring.The company expects a 10-12% growth in FY16 trough volume utilization and better product mix realisation. Margins expected to improve by 50-70 bps in FY16 driven by better product mix and cost control.