GREENPANEL - Greenpanel Industries Limited Share Price

Management at Greenpanel Industries Limited provided an optimistic yet cautious outlook for FY '27, emphasizing the ongoing geopolitical situation in the Middle East as a key variable affecting their business.

Key highlights from management include:

• Volume Growth Expectation: The MDF industry is projected to grow at a healthy pace of early double digits to mid-teens. Greenpanel aims to grow at or better than market levels, with domestic MDF volume growth of 29.5% in Q4 FY '26 and 16.9% year-on-year for the full fiscal year.
• Sales Performance: Total MDF volumes for Q4 FY '26 grew by 27.8% year-on-year, with full-year growth at 12.9%. Combined revenues for the quarter increased to INR 391 crore (up 15.5%) and reached INR 1502 crore for the year (up 7.8%).
• Capacity Utilization: During Q4 FY '26, the company operated at 60% capacity utilization, indicating significant potential for organic growth without additional capital investments.
• Price Increases: The company implemented a price hike of 15% to mitigate rising costs from chemicals (which constitute 40-45% of raw material costs). Management indicated this increase has just about absorbed the current inflationary pressures, but more may be needed if costs rise further.
• Margins: While the operational EBITDA was reported at INR 132.7 crore for the full year (8.8% of revenues), reported EBITDA was INR 94.2 crore (6.3% of revenues), primarily impacted by adverse foreign exchange movements and introduction of a new manufacturing line. Management aims to maintain or slightly improve margins in the coming year but refrained from providing specific guidance due to uncertainties.

Overall, Greenpanel is strategically positioned to focus on volume growth while managing costs amid fluctuating market conditions.

1. Question: What is the FY '27 guidance for MDF volume growth and margin? Answer: We expect the MDF industry to grow at a pace of early double digits to mid-teens. Given the current variables, it's difficult to provide specific growth numbers. Our strategy will be to pursue volume growth while aiming to retain or improve our margins, though providing a formal figure right now is challenging given the uncertainties.

2. Question: The 15% price hike taken in MDF, has it absorbed the entire cost inflation or is more needed? Answer: The 15% price increase has just about absorbed our current cost inflation. However, due to muted demand and competitive pressures, we're observing discounting in the market. Thus, the complete effect of the price increase isn't fully realized yet, though if implemented effectively, it should cover the rises in costs to date.

3. Question: What was the response to the demand after the price increase? Answer: In March, there was a lot of stocking before the price increase. April was somewhat muted as demand adjusted to the new costs. Only critical and priority projects are moving forward, while others are holding back. Overall, the demand hasn't returned fully to normal yet.

4. Question: Why was domestic sales growth flat in Q4 despite stocking in March? Answer: Yes, domestic volumes were flat sequentially. We had high levels of pre-March stocking. Additionally, there was a significant drop in export volumes. Our aim was to strategically manage profitability rather than pursuing immediate high volumes, which affected the domestic numbers.

5. Question: How did the overall MDF industry perform in FY '26? Answer: The industry generally grew in the mid-teens to high-teens percentage range. Companies with smaller bases achieved higher growth rates, while some reduced realizations to capture market share through discounting.

6. Question: Can you quantify the new capacities expected to come online in FY '27? Answer: Two new capacities are anticipated in the second half of FY '27, one in Madhya Pradesh and another in Andhra Pradesh. The total expected capacity addition is around 400,000 cubic meters, but it will ramp up gradually, not all at once.

7. Question: How will timber prices move in FY '27, considering stability? Answer: We expect timber prices to remain stable as many players have shifted to different species besides Eucalyptus, alleviating pressure on that specific raw material. Hence, we do not foresee significant price changes this year.

8. Question: Can you provide insights on the margin outlook amidst margin pressure? Answer: We're cautious about margin guidance due to fluctuating chemical costs and ongoing uncertainties. Though we'd like to maintain or improve margins, industry discounting practices create a complex situation. We prefer to assess conditions more thoroughly in the first quarter before committing to a specific guidance.

9. Question: Will the remaining EPCG benefit be received in FY '27? Answer: The remaining EPCG benefit is tied to our export volumes. If geopolitical conditions stabilize, we anticipate accessing this benefit in FY '27. If export activity remains stymied, parts of it may roll into the next fiscal year.

10. Question: What are the future capex plans for Greenpanel? Answer: For FY '27, we focus on optimizing our current capacities over new capital expenditures. However, there will be basic sustenance capex around INR 20-30 crore, rather than any significant new investments. Our primary aim is to fully utilize existing capacity while reducing debt.