Thank you. Good day, everyone, and thank you for joining us on Greenpanel Industries Q1 FY27 earnings conference call.

We have with us today Mr. Shobhan Mittal, the Managing Director, and Mr.

Himanshu Jindal, the CFO. Before we begin, I would like to state that some statements made in today's discussion may be forward-looking in nature and may involve risks and uncertainties.

A detailed statement in this regard is available in the result presentation, which was shared to you earlier. I would now like to invite Mr.

Shobhan Mittal to begin the call. Over to you, Shobhan.

Thank you. Good afternoon, ladies and gentlemen, and welcome to our Q1 FY27 earnings call.

As you are all as you are all aware, the quarter commenced amidst increased volatility post the war in Middle East. The chemical costs increased significantly, forcing us and the industry to implement price hikes of around 15% in a phased manner in April to safeguard our margins.

In between, there were rollbacks by some of our peers, and we had no option but to react as well. Despite these challenges, we continue to focus on expanding our more sustainable and value-accretive revenues stream, which is retail MDF, which grew by around 20% year-on-year.

In continuation with our drive on new products and trade engagements, we stepped up investments to further strengthen our brand during Q1. We participated at Bharat Buildcon, relaunched our new website to deliver a premium digital experience for our customers, and also entered into strategic television partnerships with six leading news channels of the country to improve our retail connect.

However, the high volatility of volatility on cost, both chemicals and container freight, on account of the geopolitical developments in Middle East, did impact our OEM and export sales. OEM degrew by 14% year-on-year, while the exports reduced to zero in the quarter.

These, as are largely opportunistic low margin low-margin sales driven by pricing and credit decisions we choose to stay cautious cautious on, especially in the initial half of the quarter, given the overall macro situation. As a result, our domestic MDF volumes grew by 12% year-on-year, something we have demonstrated consistently for the last four quarters now.

Counting in the absence of exports this time, our total MDF volumes degrew by 2.3% year-on-year, but the price hikes coming into play, our total MDF revenues still grew by 8% year-on-year. On the ply side, our volumes increased by 10.4% year-on-year, while revenues increased by 5% year-on-year.

On a combined basis, revenues for the quarter grew to ₹350 crores, a growth of 8.5% over the last year, while the consolidated operating EBITDA, excluding the impact of currency movement on the euro borrowing for the new plant, was ₹33.5 crores, or 9.6% of revenues in Q1 MDF in Q1. MDF operating EBITDA margin expanded to 10.3% versus 4.4% for quarter one last year.

Moving to the current scenario on what to expect hereon. On the raw material side, while the timber costs are largely stable, chemical costs have corrected from the peak, but are still higher than pre-war levels, and they are still volatile.

On the other hand, competition continues to stay aggressive on offer offering discounts. We're continuously monitoring this and are realigning our discounts wherever needed to protect and grow volumes.

Thus, we are simultaneously treading two moving grounds currently, both costs and discounts, which change daily basis based on news flows from the Middle East. Given the overall situation, providing figurative guidance continues to be challenging.

However, we would continue to ramp up domestic volumes over the remaining nine months of this fiscal to improve our relative market share over our peers' portfolio. Once the condition in the Middle East returns to normal, we can also expect the export flows to gradually improve as well.

With this, I request our CFO, Himanshu Jindal, for the financial and other updates. Thank you.

Thank you, Shobhan ji. Good evening to you all.

We've already covered revenues in detail. On the margin side, our gross margins improved both sequentially and on a YoY basis as well between 5% to 6%, now in the quarter at 52.7%.

This is on account of multiple factors. The first one very clearly was the timely implementation of the price hikes post the escalation on the chemical cost front.

As Shobhan ji mentioned, our OEMs segment degrew, and even our exports was zero, there's a change in distribution product salience also, which is coming into play. The third reason was basically lower timber cost.

As we worked on the wood species that we use, there's a reduction on a YoY basis, and there's also improvement in our production efficiencies versus quarter one last year. Beyond that, there was also availability of the low-cost inventory coming in from the last fiscal.

Despite the increase in marketing investments, our reported EBITDA expanded to ₹32.5 crores versus a loss of ₹12.4 crores last year same period, while the PBT was ₹2.1 crores, and PAT was ₹1.2 crores. On the balance sheet side, our working capital requirements they increased slightly by five days by four days, primarily more inventory now, both on account of finished goods and timber, to factor seasonality.

Despite this, we are still five days leaner versus the same period last year. We continue to use our cash flows to deleverage.

Our gross debt has reduced further to ₹317 crores versus ₹353 crores at the beginning of the quarter. Also, our credit ratings from ICRA were recently reaffirmed as A+.

I think we can now request the moderator to open the Q&A, please.

Thank you so much for the opportunity. Sir, my first question is since we have seen such a drop in exports due to this ongoing war, do we plan to diversify into other international markets to mitigate all of this?

Yeah. Shubhi, we are looking at alternate options for exports.

Unfortunately, the freight volatility continues to be present in most parts of the country. Middle East is a unique situation where they don't have their own manufacturing, but most of the other foreign markets already have their own MDF manufacturing.

With the freight volatility in place, it's also difficult to be competitive factoring in. I would say about 80% to 85% of our exports earlier used to be Middle East.

We are exploring other options. We're trying to expand supplies to the other markets, but of course to make up for the lost volumes from the Middle East, that's not going to be enough.

We are in the process of exploring other markets.

Sure. Sir, my second question is if we would like to have some guidance regarding the margins for the full year and capacity also?

Shubhi, at this point of time, because of the uncertainties, we are not in control of what is happening with regards to the chemical costs. It's moving on a day-to-day basis.

Pricing is also quite challenging with many of the competition actively passing on discounts on a regular basis. At this point of time, we're not in a position to give you a long-term sort of guidance.

Sir, capacity utilization, do we expect it to maintain at about 51% or any color on that?

No. The plan is to definitely enhance capacity utilization this year, subject to market volumes.

Again, because exports is uncertain, we're not in a position to give you an accurate number on that, when exports would restart and what the whole year's utilizations would look like.

Sure. Okay.

Understandable. Thank you.

Hi, sir. Thank you for the opportunity.

My first question is related to the price hike, which you had mentioned that the rollback by the peers and as you also had. This 7.4% of ASP increase is largely due to a channel mix change towards the retail?

In the first quarter, we did have some benefit of the price hikes as well. A large part of that was also because of the change, because we had removed any additional discounts that we were giving to the OEMs because of the costs going up, we had bought them at par, which resulted in whatever OEM sales did happen were almost at retail levels.

You can say that because of the movement of the consumer sector from OEM to retail price levels, we saw this ASP going up as well.

This rollback is because of a overcapacity we have as a industry? Is that the main reason?

Kamal, yes. In principle, yes.

There was also some amount of corrections on account of the chemical cost, which were immediately passed on by some of our competitors. Yes, I think the primary reason for that is overcapacity and lack of enough orders for various customers, various companies, which is resulting in them reacting in this manner.

Second question is related to the OEM. Because as you have narrated, a 14% degrowth in there.

If you can give some color, how much is the OEM contribution to your business right now versus the others earlier, quarter to?

Himanshu, do you have some accurate numbers for last year's historical? Yeah.

Yeah. Praveen, we do something like 75%, 80% retail and the balance is OEMs.

This obviously fluctuates with the way things happen in the market space, right? Historically, this is how we've been doing.

Retail versus OEM.

Okay. Still we are facing the challenges related to OEM demand?

No, now that the prices have been corrected, Praveen, the OEM demand should come back into play this quarter.

Okay. Also

Because you see, what is happening with OEMs is imports always remain an option, right? If we outprice ourselves with imports, then the OEMs find an alternate source by importing materials.

Now that majority of the price hikes have been rolled back, we're again back to competitive levels and hence we should see the OEM demand coming back in.

Just to comparison to the some peers related to the realization. On the sequential basis, if I look at a peers also has taken some realization benefit.

When this price, whatever the taken has a rollback, when it's happened in the quarter?

It's happened over multiple phases. Firstly, there was a delay on account of certain peers in implementing.

It was supposed to be implemented in April, but a lot of people did not implement it fully till May. Then there were certain rollbacks taken towards end of May, June, and then again, some rollbacks were taken in July as well.

Okay.

Got it, sir. Last question on the numbers.

Forex loss, how much is that?

That's ₹2.5. Only for the ECB, is that ₹1.8, yeah, which is part in the other expenses or as part of the interest expenses.

It's

a ₹1.8, you said?

On the ECB. Overall, ₹2.5.

Yeah. Okay.

Thank you, sir. All the best.

Thank you. The first question is on the price hike.

I think at the very outset, we had taken somewhere around 15% price hikes in MDF.

Sorry, Resha, you're cutting out a little bit. Can you try and speak a little louder, please?

Yeah. Is this better?

Am I audible?

Yeah.

Yeah. I think we had taken around 15% price hikes in MDF, but effectively because we were offering trade discounts due to competitive pressure, it used to be effectively 7% to 8% kind of price hike that had transmitted in the market.

Now you're saying that with all the rollbacks basically, we are back to the old levels. There's no price hike effectively

in place,

right? In place.

Yes, we can say that. Maybe in certain segments 1% to 2% or certain markets because rollbacks have been sort of modified geographically as well, given the market condition and competition.

Certain places the rollbacks have been higher, certain places we tried to keep some of the price hikes in place, it's a mix. It's almost all of it has been rolled back, I would say.

This channel destocking scenario would have also played out because of these rollbacks. Do we see that on ground?

Sorry, what destocking? Can you repeat that?

Channel destocking.

It seems like because of these sort of rapid rollbacks, market sentiments have also come to a point where no one is willing to hold material, because the channel's gotten this impression that there may be further price hikes. Let's keep stocks on a hand-to-mouth level, because of course if someone's holding stocks and the companies choose to roll back prices, not necessarily they pass on the benefit on the stocks that are being held by the channel partners.

Even the channel partners are not buying to stock, but they're sort of only buying on a hand-to-mouth kind of a situation to continue supplies to the customers.

Understood. Now, with these rollbacks, do we see demand kind of coming back with

Sorry. The line just dropped off.

Yes. I was asking that now with the rollbacks happening, are we seeing the OEM demand kind of coming back?

Yes. As I mentioned in my previous answer, we are expecting the OEM demand to come back this quarter hopefully.

We're in active sort of discussions with all OEMs and sort of trying to get back our supply agreements with them. Now,

with this inflation, the raw material is pretty volatile. Let's say if we were on an index of 100 pre-war, what would we be at a blended raw material inflation level for the company?

At this point of time,

this is so volatile, Resha, on a daily basis this is moving. In fact, it's safe to say that if this moves further, there might again be a price hike that might come into play.

We're monitoring this quite closely. Chemical price hikes are also being negated by certain corrections by us on the timber side, where we're playing with the mix, where we're using more of mixed wood compared to eucalyptus, trying to negate the effect, because price hikes are not singularly in our control.

Cost controls are definitely more sort of singularly in our control. We're monitoring this on a regular basis.

I would say on a raw mat side at this point of time, I think there's at least a let's say pre-war levels 4% to 5% upward trend on the chemical side.

Got it. How much has timber cost reduced by for us year-on-year, or maybe quarter-on-quarter basis?

Himanshu, can you answer that? I

Yeah. It depends

Because again both plants again vary.

Hello?

Himanshu.

Yeah. I was saying, see, you rightly said, Shobhan ji, I think it varies on the species, it varies on the mixes that we use, and it's very different on the product, right?

It's a product-to-product alteration that we do. On a combined basis for quarter one, I can share with you that we saved between timber and the efficiencies, we were able to save 6%, 7% overall.

Okay. Just the last one on the ply business.

Ply, despite quarter-on-quarter us maintaining similar capacity utilization, why would the ply margins drop from 7.5% to 2.7% quarter-on-quarter?

Should I answer this, Shobhan ji?

Yes.

Yeah. It's largely a play of product mixes this time.

We maintained our volumes. We grew our volumes, more importantly on a YoY basis.

I think it's the product mixes which are playing against us on ply. This is why you're seeing the margins not really increasing.

The fixed costs have obviously gone up, therefore on the EBITDA front, you see us doing a little less than what we were doing sequentially. Still on a YoY basis, Resha, you see that our EBITDA levels have actually moved up with the volumes coming into play.

What kind of price hikes we've taken in ply, and is there still gap versus the inflation there, or are we seeing deflation there as well in raw materials?

We've taken around 5% price hike in plywood at this point of time, which we had taken in the quarter one. Very small percentage of that has been passed on as schemes.

We have some gain on the ply side and pricing.

Right. You said you've taken 5% price hike, but the transmission has been maybe much lesser, right?

Correct.

That is also again due to the competitive pressures and us offering discounts?

Yes. Correct.

Got it. All right.

Thank you so much.

Thank you.

Good afternoon. Thank you for the opportunity.

In terms of this entire pricing situation that we are in currently, it seems like a lot of our action is dictated more by what the competitor is doing rather than ourselves. What I'm trying to say is that being a market leader, I thought we should ideally be the price maker, but we seem to be the price taker.

So, I think we as a company have never sort of believed in cutting prices or undercutting prices, because our experience of being in this industry for so long has always maintained that there's not any substantial gains, because everyone reacts accordingly. Being in MDF continuing to be a commodity sort of type of business in India at this point of time, and being very price sensitive, we also don't have an option that if our competition reacts with rolling back prices, we also have to do the same.

When it comes to rolling back prices, I think we don't believe at being on the forefront. When it comes to taking price hikes in order to maintain margins, of course we do take the lead, but at the same time, have to monitor and concur with the industry before taking any decisions.

I think it's not safe to say that our actions alone will define what the market would do in today's scenario.

In a hypothetical scenario, we did not export anything this quarter. Couldn't we have used that export volumes to be a little more aggressive to take that market share in domestic market itself?

In terms of

Had I averaged out the pricing, that would have resulted in further price cuts in the domestic market. It's not that, if I had averaged out the pricing and let's say passed on the benefit into the market, then that would have resulted in the other players also reducing prices further.

Where do you see some kind of an end to this situation?

I think as slowly sort of demand catches up to the available supply in the market and not any substantial expansions are now projected anyways, barring one or two lines coming in, that's when we'll see better kind of undercutting of pricing going forward. At this point of time, this scenario remains.

Okay. Sir, wanted to also ask you regarding the maintenance shutdown, which usually takes a fortnight or so.

We've not done any kind of a maintenance shutdown, if I'm not mistaken, in the AP line. Before the market kind of recovers, would it be prudent to take the maintenance shutdown?

No. See, the maintenance shutdown, it doesn't necessarily have to be 15 days at a stretch is what you are saying.

It can be planned out over four or five days and broken up into parts as well. For example, this quarter we've already taken a 5, 7-day shutdown of the line due to lack of orders, and then we carried out majority of the works at that point of time.

We find the right opportunity to do it so that we don't necessarily have to take a 15-day shutdown.

Okay. Thank you and wish you all the very best.

Thank you.

Continuing from the earlier callers question, I just want to understand the competitive landscape industry is undergoing. You said that somewhere when the oversupply reduces, probably that is the time when the prices will rationalize.

In which year do you see maybe the increase in demand catching up with maybe 80 or 85% of the capacity of the industry?

Very hard to say, Jayesh, honestly. Competitively landscape-wise, you see players, in today's scenario, of course, the larger players like Century, Action, Greenply is also branded player, everyone is running at not complete full capacity utilizations.

At the same time, Action has a new line coming in the south of India. There's another continuous press coming up in Madhya Pradesh.

It'll be fair to say that we cannot disregard the sort of tier-2 players as well, who are actually cumulatively making an impact on demand for us, because pricing, of course, remains aggressive from them as well. That is how the current scenario is competitively.

I would say this pricing pressure or let's say demand pressure will remain this financial year, and we should hopefully start seeing some improvements coming in the next financial year.

Okay. Last question is, I understand that the price hikes have been completely rolled back, but due to raw material cost coming off, is it possible for you to maintain the margin which we did in this current quarter?

As I said earlier also, that price hikes have been rolled back assuming, because there was rollbacks on the raw mat cost also. At the same time, now chemical costs are again on the upward trend, and I think it's not wrong to say that if they do go back on the upward trend, the competition may look at or the industry may look at taking another price hike to account for that.

Yes, the objective would be to maintain these margins, although maybe there will be some lag in implementing price hikes, but the objective would be to maintain these margins at least.

Sir, if I may squeeze one more. Have we done any exports in this June, July, until last 2 months?

Have we done any exports? In July and?

A very small quantity, almost a negligible quantity, I would say. Because Middle East continues to remain shut off for us.

Freight costs, which were earlier about $400 to $500 a container, are currently at $5,500 to $6,000 level. That makes it unviable to sell material to the Middle East.

I get it, sir. Okay.

That's all from future. Thank you.

Thank you so much.

Hi, Shobhan ji.

Yeah. Hi, Arun.

Two things, Shobhan ji. What do you think would the industry grow at in last quarter as per you?

Industry growth in the last quarter?

Yes.

I would say somewhere sort of mid-teens.

The question why I'm asking this, Shobhan ji, is, when you look at our numbers, we have been losing market share even this quarter, last quarter, a quarter before that in India. I'm not talking about exports, because export is something beyond our control right now.

When I look at margins, there's no sign of revival. Optically yes, it's gone up in this quarter.

Again it comes down in next quarter. What's the game plan?

Because we've been losing our number one position. Actually, for the last two quarters, Century's done more volumes than us in India.

You might say

Arun, on the see, having a higher capacity in the south of India, of course, our focus on the OEMs has been much higher because there is a higher concentration of OEMs in the south of India compared to the north of India. Century still has a much higher, let's say, focus on north of India because of their higher production capacity utilizations in the north of India.

At this point of time, the quarter one for us, we almost intentionally chose not to sell to OEMs because of the raw mat cost increases. Now that situation has gone back, we will bring our focus back.

At this point of time, earlier we were priced at a premium to Century. We've now taken a decision that we're going to be price competitive against all the peers in the market and price ourselves at par with them.

The focus will be at enhancing volumes and capacity utilization. There has been a strategy shift, I would say, and that is why, I think as Himanshu also mentioned, that we have seen domestic volume growth for the past few quarters, and we'll continue to pursue this.

We need to,

for us to have the industry leading growth back, because in this quarter, on numbers base, just for the record, we had the lowest growth in industry.

Yes, correct.

I'm talking purely India business.

I appreciate that, and I think that's what we said that the OEMs went completely out of our picture, and to a certain extent that was intentional. There was a shortage of chemicals in the market, and we didn't want to supply to OEMs at the cost of not being able to supply to the retail segment.

If I price OEMs the same level at retail, then in a way I'm giving them an option of take it or leave it kind of a scenario. That's keeping in mind that if it goes it goes at retail prices.

If not, then we lose the business. We were willing to accept that.

Sure.

Also, I think, Arun, there was a delay on our competitors' part in implementing the price increase. We were very disciplined in implementing the price increase from the very first point where we had decided to.

However, the others had accumulated large orders on old prices and continued to supply in the market, which also resulted in us losing some volume, but that was also result of that. Yeah.

No, Shobhan ji, from now on, I'm trying to understand, I appreciate what has happened, because of doing. Incrementally, can we expect us from Q2 onwards at Greenpanel to have the industry leading growth in the domestic market?

Can we expect that?

Yeah. Arun, you see, do keep in mind that there is a, let's say, a play of a smaller base and a larger base also.

That will also come into play. Will the

market share Will the market share wise

No, no. We we yeah, the idea is that we'll maintain our market share or try to take away market share, and that's why we are now, pricing ourselves so aggressively to the market that we don't want to lose any any, option for volumes.

Okay. Thank you, Shobhan ji.

Thank you.

Yeah. Hi, sir.

Good afternoon. Sir, my first question is regarding the channel inventory.

You have mentioned that because of the price rollback, we have seen destocking of channel inventory. Wanted to know whether the inventory level has now come down to the normal level at the end of June, or we are likely to see a further destocking of inventory in September quarter?

I would say during the quarter, I think people have already come to sort of a minimal inventory point. At the same time, the market sentiment continues to remain that

Yeah. I'll continue with the last question.

The market sentiment continues to remain that prices will remain volatile and there could be further reductions. Hence, the channel partners are wary of holding inventory.

Orders are on a sort of hand-to-mouth situation with the channel partners not willing to hold inventory at this point of time. We still have that effect in play.

Okay. Sir, on the margin side, if we see for the MDF segment, our margin in the last 4 quarters has been relatively stable at around 8.5% to 9%.

Historically, we have delivered around 18%, 20% margin. You have also mentioned that it would be difficult to give any guidance how the margin trajectory would be going forward.

Directionally, some sense, do you see the margin going at least to more than double-digit level over the next couple of quarter period, or you see challenges because of the competition in the market, that the margin may not go back to the double-digit level even over the next couple of quarters? I

see, again, it is all a matter of volumes and operating levels coming into play. Even with slightest of the improvements in volume and capacity utilizations, margins would go up substantially.

A double-digit margins are not, let's say, a very tough ask, to be honest with you. The only thing that we need to focus on at this point of time are capacity utilizations, even at 50 to I would say as a company with 50% to 60% utilizations, with the kind of product mix or the customer mix that we have, which is OEMs, exports, and retail put together as opposed to others who don't have these mixes and much higher utilizations, I would say our margins are comparably much better, I would say.

If we simply bring up our volume utilizations, I think we should be at much better margin points than our competition.

Okay. Sir, lastly, do we have any growth capex plan over the next, say, 18 to 24 months period?

You mean to say capex plans?

Yes, sir. No.

At this point of time, on the MDF side, for the next 18 to 24 months, we don't need to do any capital expenditure barring some maintenance expenditure. On the plywood side, our plan is to focus on utilizing our current capacities completely, and at that point of time, we do want to see if we can do some addition of machinery in our existing facility with a very minimal investment to enhance our production volume by 30% to 40%.

That again would be a small investment, not anything substantial. In the near term, that's our plan.

Okay. Thanks a lot, sir.

Okay.

Thank you, everyone, for your time, and we look forward to speaking to everyone after the next quarter. If anyone has any further questions, please feel free to reach out to us.

Thank you, and have a good day.