Hello Sir,

Hope you are doing well.

Did you know? - In wood panels industry in India, MDFs contribution is only around 20-30% and plywood accounts for 70%; however, worldwide 45-50% is MDF, 45-50% particle board and minuscule contribution from plywood.


The usage of MDF is expanding rapidly in India and being a capital intensive industry, there are a handful of major players.

Below, we have shared notes from Q2 FY 23 concall of Rushil Decor which is a major player in the MDF and the laminate segment. Sometime back, the company completed a major expansion in the MDF space and is now gradually improving the capacity utilization. Hope you find the details useful in your search of investment opportunities.


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Rushi Decor - Notes from Q2 FY 23 concall

- For the quarter, we have reported operating revenues of Rs 203.4 crores, that is a growth of about 18% YOY compared to Rs 171.3 crores

- MDF business revenue grew by 23% on year-on-year basis, contributing Rs 149 crores in Q2 FY'23

- Laminates contributed Rs 52.8 crores in Q2 FY'23 compared to Rs 50.8 crores in Q2 FY'22

- We continue to see the strong traction for our products in the domestic market. However, export has seen some pressure during the quarter gone by

Laminates -

  • The Laminates segment has contributed about 50%-60% of our revenues from export market
  • One of the reasons for higher realization in exports is, we are selling some of the premium products in far east market, and secondly, we are selling some of the expensive products in Gulf market, which have a different thickness
  • With the goal to provide customers a wider range of high quality products and improve our margin profile in the laminates segment, we have announced the setting up of a new Greenfield manufacturing unit in Gujarat
  • The unit will manufacture larger size laminates, which is a product we currently don't have in our portfolio
  • As we see in our current portfolio, we don't have this jumbo size because of which we are missing the niche markets like America, Europe, Australia. So, the plan is to establish such facility and improve our margins through value added products
  • We have estimated a CAPEX amount of Rs 60 crores for the new unit with a capacity of 1.2 million sheets per annum


  • In Q2, we were almost 73.77% in terms of production, and we have achieved almost 68.71% in AP plant and 87% plus in Chikmagalur plant
  • In Chikmagalur, the realization is around Rs 33,937 and in AP plant, total realization including export is around Rs 24,336
  • Value added products - HDF, exterior grade. So, that comes in Chikmagalur around 38,363 for the value added products, and from AP plant it comes around 35,000. The plain MDF is around 23,300 from AP plant and 24,745 from Chikmagalur plant
  • From Chikmagalur plant, we are selling more than 50%-60% value added products. If I talk about in terms of volume, almost out of 17,000 CBM, we have sold 12,000 CBM in value added products, and 5,700 around plain MDF
  • 34.38% was EBITDA from Chikmagalur plant. For AP, it was 25.74%
  • In AP plant, our R&D is going on for the value added products
  • We don't see much of the changes in timber price as well as if we talk about chemical pricing, we see very stable or rather I would say downside. So, we really don't see any raw material price pressure as on date
  • Margins - we want to increase our value added business. At present, we are just 28% and our target is to reach 40% in this financial year and maybe we can go up to 60% or 70%. Number two, we are working very hard on improving our plant capacity. We are also targeting to achieve 80%-85% in this Financial Year and the third thing, we are working on certain cost control approach, wherein like we can save costs on resin or some other parts

MDF import threat -

  • There is some 12,000 to 13,000 CBM import in the month of September, out of which 5,340 CBM from Vietnam and balance from Thailand and Malaysia. There is a price gap of around 7% to 10%
  • Imports are mainly of interior grade laminates, the basic category, and it is mainly imported by converters. So, we really don't see much impact. However, we are very concerned about increasing our value added business, that's very important for us

MDF capacity addition by others - In the last quarter of 2024, I believe the capacity expansion maybe around 3 million plus and that capacity for us maybe if we talk about the CAGR 15%-20% it will take two to three years to set up. So, time being there will be some issues, but we don't see much of a problem

Debt -

  • As of now, if you consider the yearly repayment of term loan, it will be in the range of Rs 45 crores per annum
  • Out of total loan, we have three things. One is the loan from German financier which has very low interest rates, it is in the range of 1% to 2%, second loan is the foreign currency loan where the rate is linked with LIBOR, which will be in the range of 3% to 4% as of now, and the third loan is the Indian currency loan. So, all put together, average cost including working capital facility, last quarter it was in the range of 5% to 5.5%, now because of increase in RBI rate, it has gone to around 6%


  • April to September, major CAPEX was in the second quarter only - around Rs 50 crore. This is mainly comprising MDF plant
  • The MDF plant CAPEX is completed now, there is no further CAPEX so far as the AP plant is concerned
  • No major CAPEX planned besides the 60 crore for new laminates unit. The expected time for this plant to be operational would be first quarter of financial year '25 that is June 2024

Guidance -

  • For us, we want to achieve 80%, 85% capacity utilization. We want to achieve value added mix to 40%
  • we will definitely maintain the margin in spite of a couple of issues like import pressure or any other pressure, but then considering a couple of steps which we are taking, I think we will not only maintain, but maybe we'll try to increase the margin marginally




Disclaimer: This is not a recommendation to buy/sell Rushil Decor. These notes are as announced by the companies on exchanges and only for the purpose of information and education.


Best Regards,

Ekansh Mittal
Research Analyst
Web: https://www.katalystwealth.com/


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