RUSHIL - Rushil Decor Limited Share Price

Management provided a cautiously optimistic outlook, emphasizing strategic growth initiatives despite short-term challenges. Key points include:

MDF Segment: Volumes dipped due to planned maintenance and Diwali slowdown, but exports surged 38.2% YoY. Value-added products now contribute 54% of MDF revenue. The Andhra facility (91% utilization) and BIS certification (reducing imports) are expected to boost efficiency. Target capacity utilization is 90%+ in FY26.

Laminate Segment: Export volumes grew 13.8% YoY. The Jumbo Laminate expansion (2.8M sheets/year) is on track for Q4 FY25, targeting higher-margin international markets (14"“15% EBITDA margin post-stabilization).

Financials: Q3 FY25 revenue declined marginally (-0.7% YoY) due to seasonal factors, but 9M FY25 revenue grew 9.3% YoY. Net debt/equity remained healthy at 0.44. MDF EBITDA margins improved to 15.2% (Q3) on stable raw material costs and operational efficiency.

Outlook:

• Margins: Aim to sustain EBITDA margins of 12"“14% overall, with MDF at 13"“14% and laminate improving post-expansion.
• Growth Drivers: Focus on scaling exports (especially MDF to Gulf/Africa), expanding retail networks (+50 distributors added in Q3), and premiumizing product mix.
• BIS Certification: Expected to curb low-quality imports, supporting domestic pricing.
• Capacity: New laminate plant (Q4 FY25) to contribute Rs.100"“125 Cr revenue in FY26.

Management remains confident in long-term demand (20% MDF industry CAGR) and disciplined capital allocation (debt/equity <1). Near-term challenges include balancing domestic demand recovery and competitive pressures.

Question 1:
Could you just give a summary of the total capacity for MDF in 2024 calendar year end and what is the expected capacity as you come in 2025? And if you could split that between organized and unorganized.

Answer:
Industry MDF capacity is projected to reach 4.2 million cubic meters (CBM) by FY25, up from 3"“3.4 million CBM in 2024. Of this, 60% (2.2 million CBM) will come from Continuous Press technology (organized) and the remainder from Static Press (unorganized).

Question 2:
Overall the industry is facing operating margin pressure. What is your view on Rushil's margin trajectory in coming quarters?

Answer:
Margins declined 1.5% QoQ in Q3 due to lower MDF volumes (planned shutdown, Diwali slowdown) and reduced laminate capacity utilization. FY25 guidance remains 12"“14% EBITDA margin (MDF: 13"“14%, laminate: 10"“12%). FY26 improvements are expected via higher capacity utilization, value-added products (target: 50% mix), BIS certification benefits, and new laminate plant contributions (margins: 14"“15%).

Question 3:
Why have MDF margins improved QoQ? Are raw material costs stabilizing? Any FY26 revenue guidance?

Answer:
MDF margins rose 1.5"“2% QoQ due to stable raw material prices, operational efficiency, and Andhra plant incentives. Raw materials are expected to remain stable. FY26 revenue growth will be driven by the new laminate plant (target: Rs.100"“125 crore revenue) and MDF value-added focus.

Question 4:
Why is Indian MDF realization lower than peers? How do you plan to counter new capacities in South India?

Answer:
Realization differences stem from Rushil's OEM-retail mix strategy rather than pricing. New industry capacities (e.g., South India) are absorbed by 20% CAGR demand growth. Recent 2"“3% price hikes reflect market stability, with further hikes likely post-BIS implementation.

Question 5:
What explains the sharp decline in domestic MDF and laminate volumes YoY?

Answer:
Q3 volume declines were due to Diwali shutdowns (15 days in Gujarat laminate plant) and a planned MDF maintenance shutdown (loss: 4,000 CBM/~Rs.11 crore). Post-January, demand has improved.

Question 6:
What is the outlook for MDF prices and laminate margins?

Answer:
MDF prices rose 2"“3% recently and are stable. Laminate margins (Q3: 7.7%) will improve with new jumbo laminate production (margins: 14"“15% long-term).

Question 7:
What are the ROE and capex plans for the next 3"“5 years?

Answer:
Current ROE is ~10%, expected to rise with higher capacity utilization. Capex will focus on wood-panel expansions (target: Rs.2,500 crore turnover in 5 years), funded via debt (debt-equity ratio <1), internal accruals, and limited equity dilution.

Question 8:
How will BIS certification impact pricing and imports?

Answer:
BIS implementation (February 2025) will curb imports (currently ~4,000"“5,000 CBM/month of plain MDF) and support domestic price hikes. Export focus (40% value-added) balances excess capacity.

Question 9:
What is the revenue potential for non-MDF/laminates businesses (plywood, WPVC)?

Answer:
Plywood targets Rs.100 crore revenue; WPVC aims for Rs.50"“80 crore. Both could collectively reach 15"“20% of total revenue in 3"“5 years.

Question 10:
Will there be further price hikes in MDF?

Answer:
No immediate hikes, but post-BIS implementation, price increases are likely.