GREENPLY - Greenply Industries Ltd Share Price

In the Q1 FY '26 earnings call, Greenply Industries Management provided an optimistic outlook, emphasizing expectations for improved performance in upcoming quarters. They anticipate that Q2 FY '26 will outperform Q1 FY '26, following a subdued June, which was attributed to liquidity challenges and delayed project commencements. Notably, July showed a recovery trend.

Key financial highlights include:

• Consolidated quarterly revenue of INR 601 crores, a growth of 2.9% YoY.
• Core EBITDA was INR 62 crores, up 6.4% YoY with a core EBITDA margin of 10.3%, an improvement from 9.9% in Q1 FY '25.
• PBT before losses and exceptional items reached INR 50 crores, reflecting a notable 33% YoY growth.

In the Plywood segment, management noted a 3.1% YoY volume decline but reported a realization growth of 4.1% reaching INR 255 per/sqm. EBITDA margins improved slightly to 7.9%. They attributed the volume decline to challenges in June but expect a recovery driven by favorable industry factors such as the implementation of industry standards and softening timber prices.

For the MDF business, Q1 revenue was INR 147.3 crores with a volume of 46,350 CBM and improved realizations of INR 31,763 per CBM, reflecting a 3.1% YoY increase. EBITDA margins increased to 17.4%, up from the previous quarter's 15%. Management aims for double-digit volume growth and margins of over 16% for FY '26.

Future growth plans include expanding capacity, particularly with the Vadodara plant operating at full capacity and the introduction of new flooring products. Management remains cautious yet optimistic about achieving targeted performance by H2 FY '26, with full-year revenue growth targets reflecting industry trends.

1. Question: "I wanted to understand on the Plywood business a bit more. So basically, if you see you have built up inventory"¦"

Answer: We faced some challenges in June, leading to a rise in plywood inventory to INR 400 crores. While I can't promise a return to INR 200-225 crores, we expect a reduction in Q2 FY "˜26. Demand is a crucial factor; if it remains strong, inventory will decrease significantly. However, our changes in the business model might keep some level of inventory up. We're focused on balancing production and demand effectively.

2. Question: "If I may, last question related to the Plywood volume because on the Y-o-Y side, we had seen a degrowth there"¦"

Answer: The Plywood volume saw a decline due to a notably weak June, which is rare for us. Despite challenges in June, July has shown improvement. I'm cautious about projecting double-digit growth for this year, especially after a tough start. We prefer to wait until Q2 ends for a more accurate outlook, but I'm hopeful for a rebound in H2 FY '26.

3. Question: "You mentioned about raw material prices going down. Is it getting passed on in the domestic market?"

Answer: Initially, raw material prices were contained, but recently, reductions have been passed on in the market. That said, companies with higher desperation are discounting prices more aggressively. Despite market pressures, we are confident we will maintain our margin guidance due to our strong brand and distribution network.

4. Question: "What would be our estimated revenue and loss for the furniture hardware business for FY '26?"

Answer: We estimate a potential loss of INR 15-18 crores in the hardware business for FY '26 based on Q1 trends. We expect the pace of revenue growth to increase as our product range expands and we onboard more dealers, aiming for significant growth in the coming quarters.

5. Question: "So, sir, what is the guidance for rest of the year concerning the pricing of timber?"

Answer: Timber prices for plywood have remained stable, while MDF timber prices slightly decreased around 2-3%. As new supplies come in, we anticipate pricing may stabilize or reduce slightly going forward. However, we expect fluctuations with seasonal changes in demand.

6. Question: "Regarding your MDF segment capacity expansion, why are you expanding when you're currently at around 75% utilization?"

Answer: Current utilization may appear lower, but with the existing product mix, we are closer to 90% capacity. The planned expansion will increase output by approximately 25% with minimal capex of INR 10-12 crores, optimizing our existing infrastructure without needing new lines.

7. Question: "Can you elaborate on the impact of your corporate guarantee and any ongoing liabilities?"

Answer: We've reduced our exposure significantly, decreasing guaranteed liabilities from $6.1 million to $3.8 million with our recent stake reduction in GMEL. We are now positioned at 19% equity, which means no further losses will stem from that business, alleviating previous risks.

8. Question: "What can we expect in terms of margins for the MDF business in the coming quarters?"

Answer: We aim for 16% plus margins for the MDF segment. While current market pressures may affect price, we anticipate stabilizing margins as market capacity absorption improves. Our goal remains to achieve a healthy ROI while navigating competitive pressures.

9. Question: "What is your outlook for the market share between retail and B2B moving forward?"

Answer: Our B2B sector is poised for growth, particularly as we expand our hardware offerings. Historically focused on retail, we see OEM partnerships increasing, which may shift more of our sales through this channel. Stability and growth in B2B are strategic priorities for us moving forward.

10. Question: "Can you share insights on the future of your new business, particularly in wooden products?"

Answer: We are entering wooden profiles and doors as a natural extension of our current offerings. Our response to market demands has been positive, and we see significant opportunity in manufacturing these products, enhancing our competitive edge in the core plywood segment.