Hope you are doing well.
I have always been fascinated with stocks from building products industry. In the past, have covered several stocks from this space like Cera Sanitaryware, Carysil, Century ply, Greenply, Greenpanel, etc. and mostly they have delivered huge returns over longer periods of holding.
Recently I was again looking at Greenpanel Industries to understand the scenario in the MDF space.
Greenpanel is the largest player in India in the MDF (medium density fibre board) space with 6,60,000 CBM capacity and is expanding further by 2,31,000 CBM which is likely to commence operations in FY 25.
Below, we have shared interesting insights from the Q2 FY 24 con-call of the company. Hope you find the details useful for your own investments or to add the stock to your watch list.
Info: We have released 2 new stock recommendations in the last few days:
- 1 Special situation opportunity – Change in ownership along with already strong profitability and growth might result in re-rating of the company to higher valuations. Further, the stock is consolidating in a tight range and the open offer price caps the downside – Details @ click HERE
- 1 medium-long term investment recommendation – It’s a sub 3,000 crore market cap company wherein the company might double its profit in the next 3-4 years. Details @ click HERE
Greenpanel Industries – Insights from Q2 FY 24 con-call of the company
– MDF business
- MDF export volumes grew by 24% at 33,208 cubic meters. Domestic volumes were lower by 9% at 90,407 cubic meters and overall MDF volumes were down by 2% at 1,23,615 cubic meters
- MDF Domestic realizations were lower by 2% year-on-year at INR 32,771 cubic meters while export realizations were lower by 23% at INR 17,538 per cubic meter. Blended MDF realizations were lower by 8% at INR 28,679 per cubic meter
- We have maintained our market share in the retail segment even with the increase in domestic competition
- The de-growth in domestic volumes is primarily due to reduction of sales in OEM segment which we had consciously chosen not to service due to the drastic fall in import prices
- We have resumed servicing the OEM segment with a new product offering. Sales to OEMs – It was 12,000 cubic meters in quarter 2 and we are looking at approximately 46,000 to 48,000 cubic meters over the next six months
- MDF EBITDA margins at 21.2% were impacted by steep increase in raw material cost, higher import volumes and increase in domestic competition
- Uttarakhand MDF operated at 78% and AP plant operated at 69% with blended capacity utilization at 72% on a capacity of 6,60,000 cubic meters
- Plywood sales volumes were lower by 19.6% at 1.64 million square meters and the unit operated at 50% during the quarter
- Operating margins at 1.65% were impacted by lower volumes and increase in raw material cost
- The raw material cost especially has gone up drastically and we are foreseeing this across all product categories, whether it’s MDF or plywood
- If we look at north of India, there has been roughly a 10% increase in timber prices over the past one year. And if we look at south of India, I would say the price increase has been around 30%
– MDF industry scenario
- If you look at Q1, imports were on an average between 25,000 to 30,000 cubic meters per month, whereas in this quarter, they have been close to 50,000 per month
- The majority of the imports are coming from Vietnam and Thailand
- MDF capacity in India – Currently, we are about 2.7 million cubic meters, and we estimate that we will move to about 3.5 million cubic meters by the end of next year i.e., FY25
- Basically, from February 2024, BIS on any MDF sold in India would become mandatory
- We can foresee that the market is growing at double-digit 15% to 18%. At this point of time, it’s a very peculiar situation because there have been drastic increases in capacities. So, there is like a gap between the supply and the demand at this point of time. But as the demand catches up, this pressure is going to ease off on all producer
- We paid INR 27 crore towards MDF expansion project during Q2 aggregating to INR 93 crores till date
- Work is progressing on the expansion project, and we estimate commercial production to be in Q3 FY25
– Balance sheet
- Net debt has reduced by INR 14 crore during the quarter and stands at negative INR 179 crore as on 30th September 2023
- We foresee that at the end of the year, we should be about 3% to 5% growth (MDF volume) over last year
- We had guided for MDF margins in the range of 23% to 25%. Possibly now we are looking at the lower end of the guidance around 22% to 23%
Disclaimer: This is not a recommendation to buy/sell Greenpanel Industries. The securities quoted are for illustration only and are not recommendatory
SEBI Research Analyst Registration No. INH100001690
Research Analyst Details
Name: Ekansh Mittal Email Id: [email protected] Ph: +91 727 5050062
Details of Associate: Not Applicable
Analyst Certification: The Analyst certify (ies) that the views expressed herein accurately reflect his (their) personal view(s) about the subject security (ies) and issuer(s) and that no part of his (their) compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report.
Address – 7, Panch Ratan, 7/128, Swaroop Nagar, Kanpur – 208002, Contact No. – +91-7275050062
Compliance Officer – Mr. Ekansh Mittal, +91-9818866676, ekansh@
Grievance Redressal – Mittal Consulting, grievances@
“Registration granted by SEBI and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors”.
“Investment in securities market are subject to market risks. Read all the related documents carefully before investing.”
The views expressed are based solely on information available publicly and believed to be true. Investors are advised to independently evaluate the market conditions/risks involved before making any investment decision
This report is for the personal information of the authorized recipient and does not construe to be any investment, legal or taxation advice to you. Ekansh Mittal/Mittal Consulting/Katalyst Wealth is not soliciting any action based upon it. This report is not for public distribution and has been furnished to you solely for your information and should not be reproduced or redistributed to any other person in any form. This document is provided for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. Ekansh Mittal or any of its affiliates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Neither Ekansh Mittal, nor its employees, agents nor representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information. Ekansh Mittal/Mittal Consulting or any of its affiliates or employees do not provide, at any time, any express or implied warranty of any kind, regarding any matter pertaining to this report, including without limitation the implied warranties of merchantability, fitness for a particular purpose, and non-infringement.
The recipients of this report should rely on their own investigations. Ekansh Mittal/Mittal Consulting and/or its affiliates and/or employees may have interests/ positions, financial or otherwise in the securities mentioned in this report. Mittal Consulting has incorporated adequate disclosures in this document. This should, however, not be treated as endorsement of the views expressed in the report.
We submit that no material disciplinary action has been taken on Ekansh Mittal by any regulatory authority impacting Equity Research Analysis.
Disclaimer: You can access it here – LINK
Whether the research analyst or research entity or his associate or his relative has any financial interest in the subject company/companies and the nature of such financial interest – Yes, in Carysil
Whether the research analyst or research entity or his associates or his relatives have actual/beneficial ownership of 1% or more securities of the subject company (at the end of the month immediately preceding the date of publication of the research report or date of the public appearance) – No
Whether the research analyst or research entity or his associate or his relative has any other material conflict of interest at the time of publication of the research report or at the time of public appearance – No
Whether it or its associates have received any compensation from the subject company in the past twelve months – No
Whether it or its associates have managed or co-managed public offering of securities for the subject company in the past 12 months – No
Whether it or its associates have received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past 12 months – No
Whether it or its associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past 12 months – No
Whether the subject company is or was a client during twelve months preceding the date of distribution of the research report and the types of services provided – No
Whether the research analyst has served as an officer, director or employee of the subject company – No
Whether the research analyst or research entity has been engaged in market making activity for the subject company – No