RUSHIL - Rushil Decor Limited Share Price

Management's outlook for Rushil Decor Limited indicates a commitment to recovery following the operational disruption caused by the fire incident at the Andhra Pradesh MDF facility. Despite a challenging quarter, the company anticipates improved performance moving into Q2 FY'26 as operations normalize, aiming for capacity utilization levels between 80% to 85%.

Key forward-looking points include:

1. Revenue and Volume Targets: The company projects a revenue of approximately Rs. 1,000 crores for FY'26, with a subsequent target of Rs. 1,150 to Rs. 1,200 crores for the following fiscal year, FY'27.

2. EBITDA Margins: Management expects EBITDA margins for FY'26 to be around 11% to 12%, with potential improvement to 13% or 14% in FY'27, contingent on operational stability and increased capacity utilization from new projects.

3. Production Recovery: The MDF production, after being disrupted for 43 days, is now reportedly running close to optimal levels. Management indicated that ongoing operations would see improved capacity utilization through value-added products, aiming for a target of 50% of MDF volumes coming from these offerings.

4. New Facilities: The Jumbo Laminate facility's Phase-I has begun commercial production, with dispatch operations expected to start in Q2 FY'26. The Phase-II expansion is on track for completion by October 2025.

5. Value-Added Focus: The company achieved 41% of MDF volumes in value-added products this quarter and is focused on reaching 50% going forward.

6. Sustainability Initiatives: Rushil Decor continues its commitment to environmental sustainability, having planted over 24 million saplings, which supports their long-term responsible sourcing strategy.

Overall, management is optimistic about regaining growth momentum and improving profitability in the near term.

Question 1: "With MDF capacity utilization at 58% this quarter, how quickly do you expect to ramp up back to pre-incident level?"

Answer: I'd like to note that during the incident, our Chikmagalur plant reported a capacity utilization of approximately 99%. As for the Andhra Pradesh plant, we experienced about 43% capacity utilization due to the fire incident. In the previous quarter, we utilized capacity at 80% to 85%. We aim to achieve similar levels in this quarter, which will help us ramp up quickly to pre-incident levels.

Question 2: "What proportion of MDF volumes was achieved from value-added products in the quarter, and what new SKUs are being introduced?"

Answer: This quarter, we achieved nearly 41% in value-added products in terms of quantity, slightly below our usual target of around 44-45%. The limitations were due to the issues with the Andhra Pradesh plant, but we are focused on reaching our objective of 50% moving forward. We are introducing new SKUs, which will enhance our product mix and realization.

Question 3: "What are your margin expectations for this year and next year given the recent disappointments?"

Answer: Starting this financial year, we had anticipated an overall EBITDA margin of around 12-13%. Due to the incident, we now project an EBITDA margin of about 11-12% for this financial year. For next year, we aim to improve that figure to 13-14%, driven by initiatives such as the Jumbo project which is expected to yield higher margins.

Question 4: "Are you passing on the reduction in timber prices to customers?"

Answer: Currently, raw material pricing remains steady. However, we anticipate a possible decline in the upcoming quarters based on demand-supply dynamics. If we see price advantages, we may consider passing these on to our customers to remain competitive.

Question 5: "What revenue growth do you expect for this year and the next fiscal year?"

Answer: For this financial year, we are targeting a turnover of around Rs. 1,000 crores. Looking ahead to the next fiscal year, with the new Jumbo plant's capacity realization expected to exceed 70%, we aim for a turnover of approximately Rs. 1,150 to Rs. 1,200 crores, while maintaining our EBITDA guidance of 11-12% for this year.