GREENPANEL - Greenpanel Industries Limited Share Price

Management's outlook includes expectations of improved performance in FY26, driven by the new MDF plant commencing production by end-Q4 FY25, targeting 40-50% utilization. They anticipate 8-10% volume growth on existing capacity and margin expansion from higher utilization of the new facility. Implementation of BIS norms (effective Feb 11, 2025) is expected to reduce import pressure, particularly in the OEM segment, potentially enabling price hikes. Timber prices (up 25% YoY) are near peak levels but may see minor increases until new crops arrive in July 2025. Plywood volumes, down 17% YoY, are projected to recover with 15-20% growth from Q1 FY26 post-distribution restructuring. MDF margins (5.1% in Q3) are expected to improve as raw material costs stabilize and the new plant scales. Export focus remains on profitable orders (low single-digit margins). Industry-wide oversupply (4.5M CBM capacity vs. 2.7"“2.8M CBM demand) may persist but is expected to balance in 2 years. Net debt stands at Rs.104 crore (includes Rs.219 crore for expansion). Key risks: volatile timber prices, competitive pricing in retail segments, and demand recovery post-BIS implementation.

Question 1: "What was the timber procurement cost both in North and South for the quarter and how do we see it going ahead?"
Answer: Timber procurement costs were Rs.7.15/kg (North) and Rs.6.23/kg (South), with a blended rate of Rs.6.66/kg. Costs may see minor increases in upcoming quarters but are likely nearing the peak of the cycle.

Question 2: "What is the volume guidance for H2 and FY26, and will new capacity drive growth?"
Answer: FY25 domestic volume targets aim to match FY24 levels due to demand challenges. For FY26, 8"“10% volume growth is projected on existing capacity, with the new plant targeting 40"“50% utilization, contributing to growth.

Question 3: "What is the industry demand-supply scenario and update on BIS norms?"
Answer: Industry capacity is 4.5M cubic meters, while demand is 2.7"“2.8M cubic meters, creating oversupply. BIS norms are expected to take effect from February 11, 2025, potentially curbing imports.

Question 4: "Will rupee depreciation support price hikes in an oversupplied market?"
Answer: A weaker rupee may raise import costs for OEMs, but domestic retail pricing remains competitive. No price hikes are planned for the retail segment due to local competition.

Question 5: "Why did MDF margins drop sharply, and when will plywood volumes recover?"
Answer: Margins fell due to 25% YoY wood price inflation, reduced realizations from a 4% August price-cut scheme, higher fuel costs, and lower other income. Plywood volumes are expected to improve by 15"“20% in FY26 after distribution restructuring.

Question 6: "Why did exports realizations decline, and what is the profitability of exports?"
Answer: Lower export realizations stemmed from 80% FOB-based shipments (freight paid by customers). Export margins were low single-digit, prioritizing contribution to fixed costs over profitability.

Question 7: "How will the new MDF plant impact FY26 margins?"
Answer: The new plant's breakeven is expected at ~40% utilization, with minimal incremental fixed costs. Higher utilization will improve margins through operational leverage.

Question 8: "What caused the surge in MDF imports, and will plywood margins stabilize?"
Answer: Imports rose to 20K"“22K cubic meters/month (vs. 10K earlier) as OEMs stocked up pre-BIS. Plywood margins benefited from cost cuts and stable wood prices, with volume recovery expected in FY26.