Rushil Decor - Real Estate revival + MDF Adoption Play

Greenpanel is now trading at 25x TTM PE. Given the sentiments and valuation compression across the market but especially in commodities, its no longer realistic to expect Rushil to be valued at 30x 1-year forward EPS. Given the environment, probably a 20x FWD EPS multiple is fair valuation. This most likely translates into a price of 350-400 INR.

In addition, Greenpanel’s concall was cautionary about the demand environment. They are projecting a 15-18% volume growth in FY23 and have said that prices have reached a point where they can’t be increased too much more without affecting demand. Raw material prices are likely to come down due to rate hikes, so there likely won’t be a margin compression soon but realizations have most likely peaked out.

RBI’s next few rate hikes and general commentary will be key monitorables for anyone invested in real estate or ancillary companies.

I exited my position in Rushil for now at no profit no loss because of present risk reward setups. Technically, the price has breached 100EMA and is on the way to 200 EMA. Once technical signals point towards price stability, I intend to re-enter at lower prices. Risk-reward will be much more in my favour at that point.

Assigning a fair valuation multiple to a stock is one of the hardest things in investing in my experience. In bull markets, it doesn’t matter as much because stocks often overshoot intrinsic values by a lot so any valuation seems fair; but in bear markets, being cautious when factoring in a fair valuation multiple is the prudent thing to do.

The rate hikes will impact not only Rushil and Greenpanel but all stocks exposed to real estate, financial and auto sectors. These 3 sectors were considered to be ripe for expansion of valuation multiples, but looks like that will have to be on hold for now at least.


Another view - Greenpanel and Rushil sort of have a very different dynamics below EBDITA. For reaons connected to debt heavy balance sheet of Rushil.

On EBDITA basis, Greenpanel mkt cap is 12-13X( considdring normalized Q1 22), Rushil on 9-10X( Q3, Q4 annualized), discount and some derating connected to whole environment is visible already.

Greenpanel has guided Annual numbers as sustainable ( both margins and realization), i.e. 26-27% EBDITA and high teen volume growth. Key is volume growth guidance is good and annual realization sustainable.

Rushil may have more levers to play out.

  1. Reduce interest burden - 6 cr interest and 7 cr PAT, a lot can happen here.
  2. EBDITA margins catch-up- keeping a distance from leader Greenpanel 27%, a 18-20% looks doable, currently at 13% type. Can Q4 deliver 15% against 30% of Greenpanel?
  3. Per Q4 call, Greenpanel lost volumes in OEM segment, somebody has gained - Rushil is strong in OEM?

Barring overall market sentiments driven moves, Risk reward tilts in Rushil favor as long as they execute well.

Near term - At 200 cr qtrly runrate and 15% EBDITA - we get 120 cr annualized runrate, at 10X multiple, they could get 1200 cr near about Valuations( 20% discount to peers). Currently mkt cap at 790 cr.

Q4 numbers are key. Plan to add if execution is good.

Continue to hold tracking positions.


Agree, reduction of debt will not only improve the PAT but will also lead to some valuation expansion as the company gets de-risked.

But I am not sure about EBITDA catch-up with Greenpanel or even coming near their figures. Let’s compare EBITs of the 2 companies:

  1. Greenpanel FY22 EBIT = 22.5%
  2. Rushil FY22 EBIT (Q3-Q4 annualized) = 9.4%

Laminate business has delivered excruciatingly low EBIT of 6% in the last 2Qs for Rushil. MDF EBIT is also 11% only although full impact of new plant (with no disruption to Karnataka plant) will be felt in this quarter only. I am not expecting MDF EBIT > 15% in the best case in Q4.

As discussed earlier in this thread, need to pin down the reasons for substantially higher realizations and gross margins for Greenpanel vs Rushil. Is it all down to value added product mix or are there other factors in favour of Greenpanel which are difficult to equalize such as North plant which is not exposed to imports, cheaper sourcing, greater pricing power, more efficient ops?

My conservative assumptions for FY23 - 75% MDF capacity utilization @ average 23000-25000/CBM realizations - is 95 to 105 Cr of EBITDA at consolidated levels.

If price breaks below 200EMA of 378, good accumulation levels may materialize.


Some data points on Q3 call - AP plant EBDITA at 22%, Chikmangalur realization in Dec at between 28500 - 30000 per CBM( has value added products), Laminates EBIDTA in normal times at 10%. Though we should build some buffer but the data points paint a decent margin profiles. Also 17% price hike taken by mid Nov will also reflect majorly in Q4.

Summary - they reported 12% EBDITA nwar 22000 realization( xonsidering Chikmangalur had negative EBDITA dor Qtr due to closure)- higher realization should mostly flow through and help EBDITA inchup, alongwith higher utilization.

On broader context RE and ancillary stocks are under pressure with overall negative sentiments in global equity market, hopefully business performance is intact and demand scenario healthy. Tend to believe that RE cycle once active , will run its course ( stock price is a different matter and can oscillate between pessimism and optimist), one anecdote is Embassy REIT has accelerated office expansion plans given good demand - office space is a big driver for MDF adoption.