Greenply Industries, amongst the country’s largest plywood makers, is expecting an improvement in margins — by 100-150 basis points — over the next 12 -18 months on the back of favourable demand from real estate sector, market share gains, and improved price realisations.

The EBITDA margins, which were at 12 per cent in Q2FY22 (quarter ending September 30, 2021) — a y-o-y improvement of 64 basis points — is expected to be in the 13-14 per cent range over the next four-to-six quarters.

Half yearly EBITDA stood at 9.7 per cent, an improvement of 248 basis points, y-o-y.

According to Manoj Tulsian, Joint MD and CEO, Greenply Industries, despite the cost pressure on raw materials over the last 12 -15 months, price hikes have been “accepted across the market”. Demand conditions have improved, with recoveries witnessed across the real estate sector. Market share gains have happened at the cost of unorganised players, who have found the going tough because of working capital constraints.

“If the current trend of recoveries continues, then the margin guidance (EBITDA) is around 13-14 per cent over the next 12-18 month period; that would be around 100-150-odd basis point improvement over what we had in Q2FY22,” he told BusinessLine .

Elaborating on the demand recoveries, Tulsian said, the working capital cycle has seen a reduction — from 42 days to 38 — indicating faster churn in the market. Supply disruptions are not an issue either in recent times.

For H1FY22 (April to September) the company reported consolidated gross revenues of ₹691 crore with a net profit of ₹36 crore. The EBITDA for the period stood at ₹67 crore.

Margins to improve

Margins are expected to witness a further improvement with the proposed MDF (medium density fibre) boards unit at Vadodara coming on-stream around Q4FY23.

The greenfield manufacturing plant, with a capacity of 800 CBM per day, will come-up at Vadodara in Gujarat at a likely cost of ₹550 crore. Land has been acquired, plant and machinery ordered and construction activities have already begun at Vadodara. Discussions are on with banks to raise a debt of around 70 per cent of the proposed cap-ex (around ₹450-480 crore).

“Blended margins (plywood plus MDF businesses put together) will be higher. MDF is not just a capex intensive business, but has higher margins too,” Tulsian said. The business is expected to add ₹600-650 crore every year to the company’s top-line.

Greenply is also investing nearly ₹115 crore in a plywood unit at Lucknow. The unit is expected to come on-stream by Q4 of this fiscal. Total capacity, post the unit beginning commercial operations, will be at 48.40 million sq metre per annum, up from 34.90 million square metre per annum. The annual turnover boost is expected to be in the range of ₹200-250-crore.

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