Century Plyboards (India) Ltd (CENTURYPLY) Q4 FY23 Earnings Concall Transcript

Century Plyboards (India) Ltd (NSE:CENTURYPLY) Q4 FY23 Earnings Concall dated May. 16, 2023.

Corporate Participants:

Sanjay Agarwal — Managing Director and Chief Executive Officer

Nikita Bansal — Executive Director

Keshav Bhajanka — Executive Director

Nehal Shah — Chief Strategy Officer and Head, Investor Relations

Sajjan Bhajanka — Chairman

Analysts:

Deepak Agarwal — PhillipCapital India Private Limited — Analyst

Pranav Mehta — Equirus Securities — Analyst

Rahul Agarwal — InCred Capital — Analyst

Venkatesh Balasubramaniam — Axis Capital — Analyst

Girish Choudhary — Avendus Spark — Analyst

Ritesh Shah — Investec — Analyst

Achal Lohade — JM Financial — Analyst

Kuber Chauhan — Anand Rathi — Analyst

Mohit Agarwal — IIFL Securities — Analyst

Hrishikesh Bhagat — Kotak Mutual Fund — Analyst

Kushagra Bhattar — Old Bridge Capital — Analyst

Aasim Bharde — DAM Capital Advisors — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Q4 FY ’23 earnings conference call of Century Plyboards India Limited, hosted by PhillipCapital India Private Limited. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Deepak Agarwal from PhillipCapital India Private Limited. Thank you and over to you, Mr. Agarwal.

Deepak Agarwal — PhillipCapital India Private Limited — Analyst

Good afternoon, everyone. On behalf of PhillipCapital India Private Limited, I welcome you all to Century Plyboards India Limited of Q4 FY ’23 earning conference call. Today we have with us senior management represented by Mr. Sajjan Bhajanka, Chairman; Mr. Sanjay Agarwal, MD and CEO; Mr. Keshav Bhajanka, Executive Director; Ms. Nikita Bansal, Executive Director; Mr. Arun Julasaria, Chief Financial Officer; and Mr. Nehal Shah, CSO and Head, Investor Relations.

I’ll hand over the floor to the management for their opening remarks, post which we will open the floor for Q&A. Thanks and over to you, sir.

Sanjay Agarwal — Managing Director and Chief Executive Officer

Thank you, Deepak ji. Thank you and thank you for hosting this call also. Gentlemen, thank you, everyone, for taking your valuable time out for attending the Q4 FY ’23 Century Plyboards Investor conference call. I am Sanjay Agarwal, MD of Century Plyboards India Limited. I have alongside me Shri Sajjan Bhajanka, Chairman; Mr. Keshav Bhajanka; and Ms. Nikita Bansal, Executive Director; Mr. Arun Julasaria, CFO; and Mr. Nehal Shah, CSO and Head of Investor Relations. I you presume that everyone of you would have gone through our numbers in detail. Let me still brief you on the key highlights of Q4.

Despite the challenging demand scenario and sustained inflationary environment, CPIL managed to achieve the highest ever quarterly revenue of INR962 crores, EBITDA of INR176 crores, PAT of INR113 crores for Q4 FY ’23. Despite the sustained input cost pressure in timber prices in particular, CPIL’s overall gross margins were higher by 220 bps on quarter-on-quarter basis to 34.2%. The company’s EBITDA margin too were higher by 340 bps quarter-on-quarter to 18.3%. This strong operational performance in Q4 was largely driven by plywood division, which registered strong volume offtake in premium segment along with the semi segment of course, thereby driving superior product mix realization quarter-on-quarter.

Our plywood and laminate segment revenue recorded 17.5% and 1.6% quarter-on-quarter growth, while MDF and particle board segment revenue de-grew 3.5% and 3.3% quarter-on-quarter for the quarter. Despite the surging timber prices, plywood EBITDA margins improved 42 bps quarter-on-quarter, largely driven by superior product mix quarter-on-quarter and operating leverage. Laminate margins excluding BCG costs remains steady at 15.7% in Q4. While MDF margins gained 460 bps in Q4 driven by softening of chemical prices and forex gains, particle board margins were down 230 bps Q-on-Q, driven by higher timber prices and lower realizations. Timber prices continue to remain at elevated level, while chemical prices particularly phenol, melamine, [Indecipherable] have softened a bit in last three, four months and are likely to further soften in near-term.

Price increase taken in Q3 — FY ’23 Q3 and Q4 FY ’23, plywood 2% price increased across all products except Sainik in January ’23, laminate mill, MBF particle board mill. Our MBF brownfield expansion at Hoshiarpur commenced operation in March ’23 and we expect the plant to see substantial ramp-up in production over the next few quarters. Our South MBF capex is running as per schedule and is expected to come on stream in second half of FY ’24. While our first phase of greenfield laminate manufacturing unit is expected to become operational in October, November ’23, the greenfield plywood project is likely to come on stream by Q4 FY ’24.

The upcoming greenfield particle board project in Chennai with a revised capacity of 800 CBM per annum with an investment outlay of INR500 crores is expected to come on stream by Q4 FY ’25. Our working capital stands reduced by two more days to 50 days in Q4 FY ’23 on a sequential basis. FY ’23 working capital days down to 53 days from 63 days in FY ’22. We remain a net debt positive company with net cash position of INR145 crores as on 31 March, ’23. Our Q4 ROCE stood firm at 30.33%.

Despite the challenging business environment, the segment-wise growth guidance is as follows: plywood 13% volume and 15% value growth; laminate, 25% volume and value growth; MDF 30% volume and value growth; particle board flat volume or maybe some de-growth in revenue. We maintain our near-term margin guidance for our business segment as under plywood 12% to 14%, laminate 12% to 14%, MDF 20% to 25%, particle board 20%.

Thank you, ladies and gentlemen. I now open the floor for question and answers.

Questions and Answers:

Operator

[Operator Instructions] The first question is from the line of Pranav from Equirus Securities. Please go ahead.

Pranav Mehta — Equirus Securities — Analyst

Yeah. Thank you, sir, for taking the question and congratulation on very good set of numbers. Sir, I just wanted to understand on the plywood side. So what drove the growth in plywood and are we actually seeing market share gain coming in plywood, let’s say, from the unorganized side? And even on the realization front, you have performed well in the segment. So if you can throw some light on how the premium plywood had performed? That was my first question.

Nikita Bansal — Executive Director

Yeah. Thank you and I’ll answer this question. So see plywood, the growth that has come has come because of the growth that we’ve been driving in Sainik as well as in Century. We said it in the past as well that both products will continue to grow and Sainik, the growth will be faster because that is explained in larger market because it’s — the building is about 40% to 45% per Sainik, which is between INR80 to INR100 rupees ply. That essentially plays in a smaller market. So –but both will continue to grow. We have been doing various strategies over the past few years. And in Q4, definitely, we saw all these strategies finally coming to preparation and we saw good performance. And we hope to continue with this performance even in this year, but definitely not the type of growth that we saw between Q3 to Q4 that was a very big jump because overall Q3 is a lower quarter for us because of festivity, etc, everything.

So yeah, I hope I have answered your question. And in terms of EBITDA, because you too realize that our fixed cost remain the same and because we did exponential sale, we were able to give a very good EBITDA for this quarter, but it is not a sustainable EBITDA because seasonality comes into play and we continue to maintain that we are going to try and deliver 12% to 14% EBITDA. So the — as you know, on the product mix of premium has improved in Q4. We hope that this continues even this year.

Pranav Mehta — Equirus Securities — Analyst

Okay. And then my second question was related to laminate. So what kind of strategic level changes you are making in laminates, let’s say, in order to grab incremental market share? And are you also looking at now going after export opportunity as well?

Keshav Bhajanka — Executive Director

Definitely. In laminate, we had a very tough year and this has enabled us introspect and look at what are the growth levers that we should be activating. So we have already as you correctly mentioned out looked at a huge export market, which we are not catering to due to lack of sizes and we have taken the decision to go for two new sizes 14 by 6 and 10 by 4. These larger size practice will be commissioned along with our amber unit, which is going to add to our overall turnover in exports substantially.

Alongside that in the domestic market, we have seen the strength of our Sainik brand has got to plywood and the fact that it has catered to the value of the market. Similarly, in laminates, we are now launching or we have earlier in this month launched Sainik laminates and we are sure this will be a growth lever for us going forward. Alongside the same, we are also launching our new catalog next month, which is going to be industry first and has a number of innovations. So all of these put together, we are confident of robust growth for the current year.

Pranav Mehta — Equirus Securities — Analyst

Sure, sir. And sir, my last question was related to MDF. So what gives you the confidence that you’ll be able to grow at 30% on volume and value in FY ’24? So basically, some import challenges are impacting the industry though the overall consumption continues to remain good, but this 30% kind of volume growth implies that you are expecting some market share gain. So if you can throw some light on how this volume will…

Keshav Bhajanka — Executive Director

So we see — you have seen that in last six months, our international prices have come down and the particle board industry has been badly affected. The particle board prices have gone down. So you have seen the impact in the results also. But there has not been any change as far as MDF industry is concerned. The prices have gone down, but the MDF industry in India has not buzzed even 1%. The only change I believe is actually in times to come. Our product has already come into the market, our expanded capacity. Green plywoods, new capacity has come into production. I think by July or by August, I think excellent [Phonetic] plant will come into production and there may be one more so I think some of the small plant also will come into production.

So all these are going to throw a challenge, but because we have the capacity and the market is growing by 25% per annum. So that is where actually because we have the capacity, everybody else does not have the capacity available to them. So that is what I believe that we will be able to grow by 30%. And I expect that by the end of this year, financial year, we will be able to utilize the full expanded capacity. But the average capacity utilization I think will be giving us the growth of around say 30%. We are quite confident. Otherwise, you see we are a person, you have seen that we are really not very [Indecipherable] person. We are quite conservative in our efforts usually. But I believe that yes, we will be able to maybe in some quarter here or there that might happen, but yes we will.

Pranav Mehta — Equirus Securities — Analyst

Sure, sir. That’s it from my side. Thank you.

Sanjay Agarwal — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from the line of Rahul Agarwal from InCred Capital. Please go ahead.

Rahul Agarwal — InCred Capital — Analyst

Hi, good evening. Thank you so much for the opportunity and congratulations for a good set. I think wood panels was going through a bad phase. The plywood performance actually gives lot of motivation.

Sanjay Agarwal — Managing Director and Chief Executive Officer

Thank you.

Rahul Agarwal — InCred Capital — Analyst

Firstly, one clarification on plywood. So there is no capacity increase done in fourth quarter, right?

Sanjay Agarwal — Managing Director and Chief Executive Officer

You see, we have been continuously improving our processes and few that machines in our existing plants. And that’s how we still have capacities available in our existing plants. But yes, now a big expansion in Hoshiarpur has been taken and presently also, we have full capacity. Even for this year, we are absolutely ready. Whatever growth is coming, we are ready with that capacity within our existing plants. This is continuous. Plywood is not a very capital intensive project. So this is continuously going on projects in our company. This investments probably we — at times we do not even plan in a big way and some small machine or some compensating machine installed in plants and we get that benefit.

Rahul Agarwal — InCred Capital — Analyst

So what I wanted to understand is the explanation given for plywood performance was more because of the sales mix was more from a demand perspective, was more because you were pretty strategic in terms of balancing out Century and Sainik both put together. So I’m assuming that the capacity what you had at the start of January was not higher than what you had in 3Q, right? And so the entire volume growth whatever we have seen is come from organic and there is no debottlenecking capacity addition has happened in plywood. Is that correct?

Nikita Bansal — Executive Director

Yeah. So even if you see in Q3, we were not at a 100% capacity utilization. So we have capacity that is already installed, which we are utilizing. We also have a very strong SCM [Phonetic], which enables us to be able to cater to such spikes in demand. So because of that, we do not have a issue with respect to capacity. We are definitely taking expansion within our existing plants right now. We are taking sanctions, for example, our Chennai plant is going through a massive expansion, which will be probably ready by the end of this year. Hoshiarpur is a complete new set up. So yeah, I don’t think — you can say capacity remains the same, utilization has improved.

Rahul Agarwal — InCred Capital — Analyst

Got it. And on the price hike, you mentioned 2% from January except Sainik and I think in January…

Nikita Bansal — Executive Director

No. Actually that was a mistake. Sainik also went through a price increase. Sainik went through equal increase price increase as Century.

Rahul Agarwal — InCred Capital — Analyst

I thought last quarter, you guys mentioned 4% in January for Sainik MR that was only in South India. Isn’t that correct?

Nikita Bansal — Executive Director

South India, there was a — sorry, there’s a echo. Yeah. South India there was — so there are two products in Sainik. One is any Sainik 710, which is the water product and then there is Samik MR, which we outsource. The Sainik waterproof is in-house. So in January, we took a price increase in all our product range. In. South, especially in the Q3, we had to take one because of raw material pressure that we faced particularly in South. And in South, we have not taken a price increase since a very long time because South never came under a price pressure. North had come in a price pressure last year massively. So we were able to balance out the pricing there.

Sanjay Agarwal — Managing Director and Chief Executive Officer

It was my mistake actually. What retained here is very clear plywood 2% price increase across all products except Sainik MR. That was my mistake that I did not read out the word MR. So that is how it got you confused.

Rahul Agarwal — InCred Capital — Analyst

No problem, sir. Thank you for that. And lastly, on laminate, again a clarification. So the Andhra first phase is going to be larger sizes more for export. You mentioned about how you want to grow the volumes for next year, but just a clarification on the margin. Sir, you mentioned 12% to 14% is the band you look for fiscal ’24, is that correct?

Keshav Bhajanka — Executive Director

Yes, that is correct. You see, we are launching a second brand and initially it can be ramp-up to say 1 lakh sheet plus per month. There will be a lower margin in the Sainik brand. So for this year, our guidance is slightly lower, but this is short-term. I think from next year onwards, we’ll again be back to the same 14% to 15% trajectory.

Rahul Agarwal — InCred Capital — Analyst

Perfect. Got it. And lastly on the capex, there is some revision. So just to get this right, particle board was earlier 1,200 CBM, now it is 800, but pretty much the capex remains the same at INR500 crores. Is that correct?

Keshav Bhajanka — Executive Director

Yes. The capex was — you see in these plant just by reducing the price slightly, increasing the price slightly, you will not get too much a saving in capex. But after lot of discussion after the current inflationary environment, after studying what the market requires, we have fixed the size of the 800 cubic meters. We feel that this is going to be the best for us in the long-term.

Rahul Agarwal — InCred Capital — Analyst

Thank you, Keshav, and thank you, everybody. All the best for fiscal 24. I’ll come back in the queue.

Keshav Bhajanka — Executive Director

Thank you.

Operator

[Operator Instructions] The next question is from the line of Venkatesh Balasubramaniam from Axis Capital. Please go ahead.

Venkatesh Balasubramaniam — Axis Capital — Analyst

Yeah. Thank you for the opportunity. Can I request you to repeat your guidance once again? I seem to have missed a few numbers. That is the first question. The second question is, can you give segment-wise what was your capacity at the end of FY ’23?

Sanjay Agarwal — Managing Director and Chief Executive Officer

Yeah. So for the guidance plywood we are saying 13% volume growth and 15% value growth for the year, laminate 25% volume as well as value growth, MDF 30% volume and value growth, particle board flat volumes and a little bit of decline in revenue. And in terms of margins, we are guiding for 12% to 14% in plywood and laminate division, MDF 20% to 25% and particle board 20%.

Venkatesh Balasubramaniam — Axis Capital — Analyst

Okay. Thanks. The second thing was on the capacity, which you have, if you could just say what is the capacity at the end of FY ’23 and what is the capacity increase you are expecting in FY ’24 and ’25 in each of the segment?

Sanjay Agarwal — Managing Director and Chief Executive Officer

So FY ’23 plywood capacity would be close to around INR3 lakh CBM. Laminate is 8.8 million sheets. MDF is like 313,500 CBM and particle board is 72,000 CBM.

Venkatesh Balasubramaniam — Axis Capital — Analyst

MDF, can you repeat, please?

Sanjay Agarwal — Managing Director and Chief Executive Officer

MDF is 313,500 CBM.

Venkatesh Balasubramaniam — Axis Capital — Analyst

Okay. And particle board, you mentioned…

Sanjay Agarwal — Managing Director and Chief Executive Officer

72,000 CBM.

Venkatesh Balasubramaniam — Axis Capital — Analyst

What is the increase which is happening in each of these segments over ’24 and ’25? That is the last question.

Sanjay Agarwal — Managing Director and Chief Executive Officer

Yeah. So ’24, we’ll have as Nikita also said, we are having capacity enhancements in few of our existing factories. So that will add up another close to 15,000, 20,000 CBM for the year. Then apart from that, we’ll have the Hoshiarpur capacity which will come in, which will throw up 60,000 CBM for the year which will come in by the end of this year. Laminate, the new press — the new export presses which will come in which will add another close to 855,000 sheets per annum. And MDF, as you know, the greenfield capacity will add another — in South will add another 313,500 CBM in South of India.

Venkatesh Balasubramaniam — Axis Capital — Analyst

Okay. Thanks a lot.

Sanjay Agarwal — Managing Director and Chief Executive Officer

Yeah.

Operator

Thank you. The next question is from the line of Girish Choudhary from stock. Please go ahead.

Girish Choudhary — Avendus Spark — Analyst

Yeah, hi. Thanks for taking my question. Firstly, on the MBF, if you can give some color on the imports currently and in terms of price discount for those imports? If one compared with organized play, where are we? That is the first part of the question. Second part of the question is again on MBF, if I look at your guidance, the pricing assumption is essentially flattish for FY ’24, but in light of the capacities which we have been talking of on imports, how confident are you of maintaining a flat pricing?

Sanjay Agarwal — Managing Director and Chief Executive Officer

Yeah. So MBF, as far as the import is concerned, yes, about 20,000 cubic meter of MBF is getting imported, 20,000 to 30,000 cubic meter is getting imported in India right now. But you will see and whether we are also watching that there has not been any impact as far as the prices are concerned in the country and there is not much of a pressure. So that’s why we’ve maintained that there will not be a price decline or price cut as far as immediate market is concerned. But as and when the new plant will be coming or our plant will come up, which may be the end of this year, Exon’s [Phonetic] will come up. Green’s plant has already come in.

So all these will create some challenges. So we’ll have to see how it goes, but I really don’t see because this market is growing by 25% per annum. I really don’t see these challenges, but yes you are right in a way that yes, there might be some challenges in that and we will decide as and when things come. This year, as far as the MBF as pricing is concerned and I understand very recently the international prices have gone up by 7% again in last about a month’s time. Your second question was?

Girish Choudhary — Avendus Spark — Analyst

So essentially, on the pricing also for me, but what we have already seeing is that while some of the domestic organized still include — including you have been able to maintain prices, but that has also come at the cost of volumes, right? We are seeing a lower volume trajectory for the market. So — but incrementally, like I said, you will have a 20% volume growth guidance likewise and all the other companies also have a strong volume growth guidance. So beyond a point just wanted to understand that at what point that pricing decision will have to commence.

Sanjay Agarwal — Managing Director and Chief Executive Officer

You see, as far as volume is concerned, I really don’t see that will mark there was an effect on volume. April is usually a month the whole year people have worked, so in an appeal somehow they need a psychological thing, all the sales people they relax themselves and they go and enjoy. They do their annual meetings, etc. So all those things happen. So April maybe a little bit of a concern every year you can see in the whole industry, I think the same thing will happen. But March there was no volume. And In coming time, you see I don’t see because the — most of the MBF manufactured in India is totally consumed in India. So I really don’t see much of a problem as far as the volume is concerned, but yes, in a way you are right so much of capacity is coming. Yes,there will be some challenges and challenges would be there, isn’t it?

Girish Choudhary — Avendus Spark — Analyst

Fair enough. Secondly, I also see, just a clarification that your MBF capex for the South plant has seen a increase of around INR100 crores odd. So any reasons to understand?

Keshav Bhajanka — Executive Director

Yes. There are a couple of reasons are the same. First, of course, the overall inflationary environment. The cost of a number of commodities, steel, cement, etc, have gone up substantially. Secondly, if you design the unit, so as to get a lot of economies of scale when the second line comes up. We have taken some costs in case one which will reduce the cost of the second line as and when it comes up. So because of this, this cost isn’t front loaded. But in the long-term, it will save us substantially when line two comes and other.

Girish Choudhary — Avendus Spark — Analyst

Okay. Got it. Fair enough. Thank you.

Operator

Thank you. The next question is from the line of Ritesh Shah from Investec. Please go ahead.

Ritesh Shah — Investec — Analyst

Yeah. Hi, sir. A couple of questions. First is, sir, I just wanted to check on Sainik laminates. I think I believe it has been launched in a few markets. So how should we look at the positioning of this new brand? That’s the first question.

Keshav Bhajanka — Executive Director

Sainik laminate, the thought process behind Sainik laminate shows the tremendous success we have had in Sainik ply. Through Sainik ply, we have been able to enter the belly value of the market so to speak and gained volume traction in a category in which we were never present in plywood earlier. So Sainik laminates is not [Indecipherable] same objective. And I think the response has been fantastic, but we are taking it slow as you correctly mentioned. We have been going market by market. We have not done it in a full launch so to speak. The reason behind this is to gradually scale up and we want to ensure that there are no issues with regards to service, with regards to product, etc, etc. But I think towards the end of the year, you would see Sainik volumes coming up as far as laminates is concerned.

Ritesh Shah — Investec — Analyst

Sure. Would it be possible to provide some color from a pricing differential standpoint? And basically like historically, we have seen Sainik ply do actually wonders for the company. So the thought process is something similar over here as well?

Keshav Bhajanka — Executive Director

We’re launching this in a slightly different module to the current of module of Century laminates. So while that is more of a distribution based module, this will be based more out of a dealer module. And the pricing will be very different because the margin structures are completely different, but I think that do you can assume that there will be 10% to 15% striking difference at the level.

Ritesh Shah — Investec — Analyst

Okay. This is helpful. And my second question is on capex. I think if you could detail a little more, you indicated like the capex has increased for the APM, you have planned from INR600 crores to INR700 crores. Is there some breakup that is possible or is that — are we looking at other optionality like in phase of expansion which is going to be far more? I’m just trying to understand it from a capex intensity on a per CBM basis to the increase in capex?

Keshav Bhajanka — Executive Director

Definitely. So we had planned for a shed that was somewhat smaller, then we went for the layout designing and we went for a reworking. We saw that by increasing the shed area by close to 10%, 12%, we could save on 30% of overall shed area to get in line two. So because of this, it was redesigned. If you look at it, the dispatched structure for all this current shed of line one will take into account line two comfortably as well. So we are looking at cost saving in the long-term. But short-term, for the same capacity that we have, there has been a cost explanation.

Ritesh Shah — Investec — Analyst

Sure. And there has been a little bit of change in the particle board capex as well from 5.5 billion to 5 billion. Any specific thoughts over there? That would be my last question. Thank you so much.

Keshav Bhajanka — Executive Director

Yes. See, on particle board, you see, you need to look at the availability of timber in any particular location. [Indecipherable] and other capacity than this would lead to an issue for us in terms of timber availability and lead to higher overall cost of production. As such, we optimize the capacity to 800 cubic meters. Of course, with this 800 cubic meters, with this capacity, the objective will be to produce in excess of 900 and pass even this 1,000. Regarding the capex, as I’ve already mentioned due to the overall inflationary environment, the capex is higher. If the raw material prices had been lower, as they were for a year and a half ago, the capex could have been limited to slightly lower, but we will be well within the overall approved budget, the INR550 crores.

Ritesh Shah — Investec — Analyst

Sure. This is helpful. Thank you so much.

Keshav Bhajanka — Executive Director

Thank you.

Operator

[Operator Instructions] We have the next question from the line of Achal Lohade from JM Financial. Please go ahead.

Achal Lohade — JM Financial — Analyst

Yeah. Good afternoon, team. Thank you for the opportunity. My question was on the MDF given the brownfield expansion is done 313,500 capacity now for the full year in addition to the new greenfield. The 30% volume growth seems to be conservative. So does it mean that we’re going to operate at 65%, 70% significantly below what we operated in, let’s say, in third quarter or fourth quarter? And second question I had with respect to market. If you could give what was the FY ’23 industry volume when you talk about a 25%, 30% growth? If you could talk about industry volume as well? And apart from that, the 30% volume growth for MDF segment for FY ’24 for us.

Keshav Bhajanka — Executive Director

So I think with regards to the new capacity, you see, any new capacity, it’s not very easy because 100% [Indecipherable] of operation sell. You’re correct, we are looking at 65%, 70% utilization of the expanded capacity of the second line that is coming in. The first line we will be continuing that 100% plus. So overall, we will be consuming close to 50%, 60% of the expanded capacity, plus 100% of the first capacity. And by next year, we should be looking at a far higher overall capacity utilization for both lines put together. Regarding the overall size of the market, I think Nehal can take it up.

Nehal Shah — Chief Strategy Officer and Head, Investor Relations.

Yeah. The size of the MDF market by the time we ended the last year should be near to 2.5 million CBM.

Achal Lohade — JM Financial — Analyst

And what would that be, Nehal, nil in FY ’22?

Nehal Shah — Chief Strategy Officer and Head, Investor Relations.

That would have been close to 1.9 million CBM or so.

Achal Lohade — JM Financial — Analyst

Got it. And this 2.5 million will include the imports or imports are in addition to this?

Nehal Shah — Chief Strategy Officer and Head, Investor Relations.

No, no. That will include imports as well.

Achal Lohade — JM Financial — Analyst

Understood.

Nehal Shah — Chief Strategy Officer and Head, Investor Relations.

Which is not much because the imports came handy only after September onwards.

Achal Lohade — JM Financial — Analyst

Right. Understood. And the second question I had was with respect to Sainik. Can you share some more sense in terms of the mix in terms of volume, value or the growth what you have seen in FY ’23?

Nikita Bansal — Executive Director

So this is a data we don’t like to share. So yeah, thank you for the question.

Achal Lohade — JM Financial — Analyst

All right. I’ll fall back in the queue. Thank you so much.

Operator

Thank you. The next question is from the line of Kuber Chauhan from Anand Rathi. Please go ahead.

Kuber Chauhan — Anand Rathi — Analyst

Yeah. Thank you for taking my questions and congratulations on good set of numbers. A couple of questions though. I mean, on sequential basis, we have seen the MDF revenue has been declined. But on margin — and if we look at margins, it has expanded. So what has led to that expansion? Because if we compare with our competitors, they have de-grown, right? So what has led to that expansion? And second is on the Andhra plant which will be coming in second half of FY ’24, which is year. So what would be the utilization for that plant? And thirdly, what is your outlook on timber prices right now because the competitors are saying that it will increase further. So how we are going to — how we are looking at it and how we are going to mitigate it?

Keshav Bhajanka — Executive Director

Yeah. So if you look at the gross margins in MDF segment, they were up by almost 100 bps and this was largely driven by net savings in raw material cost. So by net savings in raw material cost, what I mean, the chemical costs were down. At the same time, the timber prices were higher. But even despite the fact that timber prices were higher, the savings in the chemical cost was much higher compared to timber and hence, there was savings in gross — there was improvement in gross margins and there was also 100 bps positive impact because of forex, which led to overall 400 bps expansion in gross margins. And if you look at EBITDA margins, they were up 460 bps Q-o-Q at 27%. This was largely driven by certain gross margins.

Kuber Chauhan — Anand Rathi — Analyst

And regarding the…

Sanjay Agarwal — Managing Director and Chief Executive Officer

On the timber prices, I will request — I think our Chairman is online. So Sajjan ji could expand a little bit on that?

Kuber Chauhan — Anand Rathi — Analyst

Okay. And am I audible?

Sanjay Agarwal — Managing Director and Chief Executive Officer

[Foreign Speech]

Sajjan Bhajanka — Chairman

Yes. As requested by Sanjay, actually in Century plywood, from the very beginning, we have supported increase in the timber price, not like other pieces because we feel that farmers would only grow timber when it is giving them better yield in comparison to the cash crop. And as the demand increasing, this should support their like growth chemistry and their [Indecipherable]. So with a real value in short-term, we’ll retain the price of that timber. We are giving more price. We started our Hoshiarpur unit by paying about INR3 kg for the timber. Now we are paying INR6.50 per kg of timber. So I think this should continue and now our other sales in the industry, they have also realized that unless we give repetitive price, there won’t be sanctioned plantation. So that is the thing and it is not only in India. Everywhere is in Vietnam, in China, everywhere price of timber is increasing. So I think there would balance and we realize better price for our products on the market.

Kuber Chauhan — Anand Rathi — Analyst

So how do you look at FY ’24, regarding this prices? Is it going to soften or…

Sajjan Bhajanka — Chairman

Now because there was very average increase in the timber prices for sometime in future to come, this will continue at the levels only. And now there is huge plantation taking place in UP, in Southern India and many other parts of the market in India. So I think for time to come there the one end supply will look quite balanced.

Kuber Chauhan — Anand Rathi — Analyst

Okay. Understood. And thirdly, I wanted to understand regarding the Andhra plant which will be coming in second half. So what would it be the utilization in the second half and going forward in FY ’25, what would be the utilization?

Keshav Bhajanka — Executive Director

And you see when we say second half of the year, we are looking at perhaps late Q3 or maybe Q4. Now in either of these scenarios, we don’t really get much time to run and ramp-up the capacity there. So any meaningful impact from Andhra will only come from FY ’25 onwards.

Kuber Chauhan — Anand Rathi — Analyst

Okay. And the peak utilization in which year we can expect?

Keshav Bhajanka — Executive Director

The peak utilization should come at 80%, 85% in FY ’24 and higher.

Kuber Chauhan — Anand Rathi — Analyst

Okay. Understood. Thank you and all the best.

Operator

Thank you. The next question is from the line of Mohit Agarwal from IIFL Securities. Please go ahead.

Mohit Agarwal — IIFL Securities — Analyst

Yeah. Thanks. Sir, most of my questions have been answered. Just one follow-up on a previous question on plywood industry. So in the light of increased timber prices, could you give some color on how the industry growth has been in FY ’23 and in the past couple of quarters especially? And how has this unorganized segment been dealing with this timber price increase, so have they — how have been their utilization levels? So any color on that if you could give? The bottom-line what I want to understand is that in such situations, does the top players like you have an advantage of gaining accelerated market share?

Sanjay Agarwal — Managing Director and Chief Executive Officer

Good question. You see, even the smaller player, there have been two units work with now, but the transfer from unorganized to organized in our industry is a slow process because the interest of the dealer is very high in the annual segment. We are trying to now — we are coming off the PVC, MDCs, advertisement where we’ll be actually educating the customer also now. So yes, but some transfer since we have gone into the belly of the market through our product known as Sainik, we have been able to take quite a bit of percentage. As on today, you see when we started say about two, four years back, we used to see that Century plywood was about 4.5% of the total plywood market. Today, we are estimating that to be 8% or 8.5% of the total plywood market. So the transfer is — shift is happening, but yes, it’s slow. It’s not to our expectations. So [Foreign Speech] what was your second question?

Mohit Agarwal — IIFL Securities — Analyst

And sir, trying to understand how is the unorganized segment dealing with this like has the realization…

Sanjay Agarwal — Managing Director and Chief Executive Officer

Yes. So you see, I have seen that few of them, really very few of the unorganized segment is trying to become an organized segment in their own local districts, like in local state or local districts. So one brand has like come up in West Bengal. We will find one brand has come up somewhere in Punjab or one brand is coming up in Andhra or Bombay. So that is what we will find. All maybe few five or 10 units will become local brands. But yes, whatever price increases they took because of this timber price increases have fallen flat, they have gone back, but this will have a long-term impact. They will not impact them immediately. They will not have a problem immediately because they have made money earlier. But yes, this will have a long lasting impact on them.

Mohit Agarwal — IIFL Securities — Analyst

Okay. And sir, lastly, any…

Nehal Shah — Chief Strategy Officer and Head, Investor Relations.

[Speech Overlap] And there are totally different districts, price zones, price levels for the MDF and for plywood. So plywood we need bigger like diameters and that price is different. That is now covering around INR11, INR12, a kg. And plywood there are vast unorganized sector. But in MDF, I don’t see a big presence of the unorganized sector. So most of the players they are in the organized sector only. So here is a disparity in the price on the regional basis. At the moment, the relation in North India is better and the price of timber in North India is also matter. Realization for MDF in South India is lower, but the timber price are also much lower, so almost 50% of the North India. In South India still we get timber for INR3.50 or something per kg. So that is the difference because South India the timber like Plantis [Phonetic] and agroforestry was earlier serving to the paper industry. So the volume is big, much larger and still the industry is adjusting along with the paper industry.

Mohit Agarwal — IIFL Securities — Analyst

Sure, sir.

Nehal Shah — Chief Strategy Officer and Head, Investor Relations.

And pricing is lifted.

Mohit Agarwal — IIFL Securities — Analyst

Sorry sir.

Nehal Shah — Chief Strategy Officer and Head, Investor Relations.

Yeah. The raw material from paper industry and the pricing of the raw material is more or less same. Only paper thereby debark timber. So there is a debarking cost and the loss in [Indecipherable] because debark is added with the price.

Mohit Agarwal — IIFL Securities — Analyst

Okay, sir. Sir, understood. This is very, very helpful. And just last bit, sir, are there any estimates on the plywood industry growth for FY ’23?

Nehal Shah — Chief Strategy Officer and Head, Investor Relations.

This is a very, very big area actually on which something we tell that there is no data — authentic data available as far as MBF is concerned because there are very few units. There is authentic data. As far as laminate is concerned still there is some data. Particle board, yes, there is some data, but plywood is totally grey area. But we estimate that yes, it’s growing at about somewhere between 5% to 10%.

Mohit Agarwal — IIFL Securities — Analyst

Okay. Great, sir. Thanks a lot.

Sanjay Agarwal — Managing Director and Chief Executive Officer

[Speech Overlap] Because our — at the moment, the total ply volume is around 10 million cubic meters whereas China is 200 million cubic meter. And in population, we have are almost China and our middle income segment, upper middle class, lower middle class are expanding very fast. So — and the housing is the thrust of the government and the country. So I’m very optimistic about very robust growth and gradually growth will pick up. From now, the growth of the plywood in MDF and particle board all will grow in tandem. And at least I don’t see any reason that present day China at least we shall not reach half of the present day China’s capacity in next 20 years. So if we target 100 million cubic meter in 20 years, then from 10 to 100, growth has to be robust.

Mohit Agarwal — IIFL Securities — Analyst

Sure, sir. Thanks a lot and all the best.

Operator

Thank you. The next question is from the line of Hrishikesh Bhagat from Kotak Mutual Fund. Please go ahead.

Hrishikesh Bhagat — Kotak Mutual Fund — Analyst

Hi. Good evening. Thank you for opportunity and congrats for the great set of numbers. My question is if we look at it, clearly, this year, we have seen worst of the timber price inflation. And if I look at the initial part of your statement on the outlook side, clearly, you indicated probably timber prices could remain stable in and around this level. So against this backdrop, how should we see your plywood EBITDA margin guidance which is at 12% to 15 –14% — if I’m not wrong 13% to 15%, slightly lower than what we reported even in Q4 margins.

Nikita Bansal — Executive Director

So see, we have always said that we will deliver between to 12% to 14% because that’s a conservative figure that we want to take. We will keep striving to do better like we did in Q4, but our guidance will remain 12% to 14%.

Hrishikesh Bhagat — Kotak Mutual Fund — Analyst

Okay. So is there any I think that makes you cautious on this thing in the sense or just want some insight on that.

Nikita Bansal — Executive Director

Sorry, I didn’t understand this.

Hrishikesh Bhagat — Kotak Mutual Fund — Analyst

Is there anything that makes us cautious that we’re guiding at the lower end compared to the exit margins?

Keshav Bhajanka — Executive Director

Hi, Hrishi. Hrishi, if you look at the exit margins, it has been an extremely good quarter with very good robust volume growth. So this is something that will not be repeated quarter-on-quarter, right? Definitely raw material prices are happening. The hope is that they will not increase much far beyond the same as has been indicated by both the Chairman and the MD. But we are taking it with a pinch of salt. So it’s better to air on the side of caution. If it does not happen, then definitely you’re correct margin should be slightly higher. But as of now, there is no clear visibility. If timber prices remain like this, perhaps we’ll do better. But our guidance is 12% to 14%.

Hrishikesh Bhagat — Kotak Mutual Fund — Analyst

Sure. The second question is on the similar aspect, clearly, there will be likely to be increased plantation that was hinted by guidance as for the initial part of the commentary. Now when I look at say 12 to 15 months down the line, a large part of this improved plantation should help us in terms that timber prices should taper down. Now do you feel that considering the ad spend and spending on brand that we had done over the last two years, will you be able to retain part of these savings in the timber cost going forward say 12 to 15 months down the line when timber cost actually corrects?

Keshav Bhajanka — Executive Director

So Hrishi, when we look at the overall growth in the base volume and the economy of scale that brings, definitely there should be an improvement in the bottom line. But the cycle might be a little bit longer. It might not be 12 to 15 months. It could be slightly longer because the plywood cycle is a little longer than the MDF and particle board cycle.

Hrishikesh Bhagat — Kotak Mutual Fund — Analyst

Sorry, I’m — sorry to — I’m not asking on the cycle front. I’m talking from the point of view of the — if timber prices moderate from here on, will you be able to retain those savings?

Keshav Bhajanka — Executive Director

Yeah. But you are taking that on the increased plantation that will come into availability, right?

Hrishikesh Bhagat — Kotak Mutual Fund — Analyst

Yeah.

Keshav Bhajanka — Executive Director

For plywood will take took a little bit longer because the cycle is longer. For MDF and particle board, you’re looking at four years. For plywood, we’re looking at six years plus. I’m saying that once that correction does take place and we are sure that it will in the long-term because tremendous amount of plantation is taking place. I mean, you drive across Punjab, you drive across Andhra and you’ll see the sort of increasing activity. So going onward once the price is correct, definitely, there is a scope for improvement in gross margin and EBITDA margins.

Hrishikesh Bhagat — Kotak Mutual Fund — Analyst

Sure, thanks.

Nikita Bansal — Executive Director

But having said that, I will add that we want to keep growing plywood. And if we want to keep growing plywood, we need to keep investing back into the business. So in order to do that, we need to keep investing into brand building. We need to keep investing into our different influencers that we have. We need to keep investing into our go-to-market. So in order to do that, even if the savings comes down the line through raw materials, we will probably still try to maintain 12% to 14% because we want to invest back and grow our revenue more.

Hrishikesh Bhagat — Kotak Mutual Fund — Analyst

Okay. Thanks a lot.

Operator

[Operator Instructions] The next question is from the line of Kushagra Bhattar from Old Bridge Capital. Please go ahead.

Kushagra Bhattar — Old Bridge Capital — Analyst

Yeah. Hi, thanks for the opportunity. And just two questions both on the MDF. One is with your South plant coming in, how different would be your COGS per CBM for the South plant versus North plant or if you want to give a total cost per CBM for South versus North plant once that plant operates on a reasonable utilization levels broadly?

Keshav Bhajanka — Executive Director

You see, the difference in timber cost is anywhere between INR2,500 rupees to INR3,000 rupees per ton. Now we roughly calculate that 1.7 tons of timber is used per CBM. So that calculates into anywhere between INR4,250 to INR5,000 change in COGS by virtue of North versus South.

Kushagra Bhattar — Old Bridge Capital — Analyst

Interesting. Got it, sure. And second question is more on the market share aspiration in the MDF segment because clearly you have the balance sheet in your favor and a lot depends on where you want to be in the India’s MDD landscape. So are you sort of working on certain number, I’m asking beyond two years because if you look — I mean, if you have any thought process as to where do you want to be in terms of market share, in terms of capacities in the MDF, because capital employed in this business has clearly surpassed plywood segment and it’s almost going to double from here on in next two years. But after that, you still would have a significant balance sheet support and the cash flow support as well. So just getting a little perspective as to how you are thinking about this whole thing?

Keshav Bhajanka — Executive Director

You see, the challenges has always [Indecipherable]. Turnover is vanity, profit is vanity, but cash is reality. So we’re a prudent company and we don’t normally going into massive risk taking, but again, our ambition is always to gain market share. We will attempt to be one of the largest player in the industry, if not the largest player. But having said that, we are not going to take undue risk towards that. I hope that answers the question.

Kushagra Bhattar — Old Bridge Capital — Analyst

And any number you would like to highlight on this?

Keshav Bhajanka — Executive Director

Currently, we will be expanding to close to 1,900 cubic meters per day by the end of this financial year. And in particle board, in the next financial year, we’ll be expanding for a 1,000 cubic meters plus. So we’d already looking at 3,000 cubic meter. After that, we will take some time. We will study how the market goes and then take decisions.

Sanjay Agarwal — Managing Director and Chief Executive Officer

Here, again, I will request Sajjan ji, because he has a thinking about the MDF market in future how it will evolve as far as the whole industry is concerned. [Foreign Speech]. I think that will be better to give them a perspective.

Sajjan Bhajanka — Chairman

Actually, I am always very optimistic and I am feeling that we are at the right place at the right time because next few decades belongs to India. And in all the directions, we have to progress, we have to grow and grow and grow. All the factors are supporting us. Hopefully, the increase in the spend level income of the masses and it is — this is circled. So that whole thing like we are producing more, we are consuming more. We are giving more employment. We are [Indecipherable]. People are saving more. So this — the whole circle is created and then the next thrust would be for the country’s infrastructure and housing because roti and kapda, there are limitations.

In short span of time, these things cannot change much. It’s basically the habit people and the spending pattern. So growth in the food cannot change much. So whatever we’re saving this thing, it would be spent on entertainment, some of their children and to a great extent on the housings. So I’m sure in the next 20 years, each and every Indian would have a house of government, [Indecipherable] bigger and the people presently in some other house would move to the bigger house and bigger bungalow or something. So this will go on and with every change, they will need new furniture and then the whole lot of other things, white goods and other things, car, TV.

And so this will support the Indian economy in a big way. And plywood as soon as the house is constructed, next our role comes. And along with us on, all glass, paint industry, piping, we all come into existence. So I see great future. And remember we maintained 93 when these things still started in China get the material from all over the world was going towards China. From,India we started exporting plywood in a big way to China. I remember around that time, the prices here In India for plywood increased by 50% in less than six months.

So there was so hectic demand and that cycle continued for a very long time. But China could augment their plantation, put their own manufacturing capacity and very soon they started creating their own demand. And not only that, they had become biggest exporter of plantation timber as well as the plantation product, MDF, particle wood, plywood. So — and I think we are also capable of repeating that and cheap labor is in our favor. Because when I first went to China in 2007, their wages and our wages were same, INR3,000 a month.

Now our wages is around INR15,000 a month. China’s wages are INR50,000. So there is huge change and this will continue because it is intentional on the part of Chinese government to make it more repeatable, to give more income to the people. So they are intentionally doing it. Almost they’re increasing the wages above 20% per annum. Whereas here in India estimated demand and supply adding less than 3% year. So this gap would continue widening. So our production now for the low take items, India will become production hub for the whole world like earlier it was China from Japan.

It migrated low take to China and then to Philippines, the Thailand, Malaysia and other countries. And really now the low take items would move towards India and neighboring countries, Bangladesh, Sri Lanka, Nepal. So this will get in development. So I’m sure it showers for next at least two, three decades, we still have very good take.

Kushagra Bhattar — Old Bridge Capital — Analyst

Sure. Thanks a lot and all the best guys.

Operator

Thank you. Ladies and gentlemen, this would be the last question for today, which is from the line of Aasim Bharde from DAM Capital Advisors. Please go ahead.

Aasim Bharde — DAM Capital Advisors — Analyst

Yeah. Hi, thanks. Just two questions. First, I just wanted to understand the 2% higher value growth in plywood versus volume expectation in FY ’24. So basically 15% value, 13% volume is what you said. So my sense was since Sainik was and will grow faster, so that should expect volume, but value growth should ideally be lower. So any sense on the gap here? Is it a base thing or is there anything else that I should even…

Sajjan Bhajanka — Chairman

Like volume and price are two different — by and large, every year,, we increase price. One or two revisions are there in price level. So the growth in the price…

Aasim Bharde — DAM Capital Advisors — Analyst

I’m sorry to interrupt. I’m sorry, sir, Mr. Sajjan Bhajanka’s has been disconnected. May I…

Nikita Bansal — Executive Director

Yeah. I’ll continue and I’ll take up. I think what he was trying to say also is that we end up taking one or two price increases due to the timber cost, etc. So hence the value growth because of the price increase will be higher than volume growth. So it has nothing to do with the Sainik and plus brand issue. It has not do with the price increases that we make.

Aasim Bharde — DAM Capital Advisors — Analyst

So purely, price has increased…

Keshav Bhajanka — Executive Director

Average realization for plywood is up by 5% in FY ’23 as compared to FY ’22. So I think that sort of compensated for the product mix.

Aasim Bharde — DAM Capital Advisors — Analyst

Okay. Got it. And secondly on the capex front, so FY ’24 will be a big year for Century Ply. But on the financing bit, will almost all of it be internal accruals with minimum long-term debt or should there be some like of course in your presentation, you have mentioned long-term debt number of FY 20 — of INR70 odd crores of FY ’24, but that is just buyer’s credit. So just wanted to understand if there is any upside which is the consol debt number if any for Century?

Sajjan Bhajanka — Chairman

[Speech Overlap] Like for MDF or for even particle board, most of the machines are being imported and against the imported machines, we are allowed to enjoy buyer’s credit. So like machine we imported, then we can roll over the buyer’s credit to next three years. And during that at our comfort level, we can repay buyer’s credit at anytime. And usually, what we have seen starting from our Hoshiarpur plant, so whatever buyer’s credit was there, we recognized that out of our generation. So we had not to reshow to the term loan for capex like in the past. And same thing we are expecting like all the machines for MDF and particle board for Andhra and Chennai would be imported. We shall get buyer’s credit and this would liquidate in three years out of our margins.

Keshav Bhajanka — Executive Director

So I think as the Chairman has correctly put it, we had planned zero debt by the next two years. However, after the addition of the particle board expansion in Chennai, I think we could be looking at a net debt figure of close to INR400 crores to 500 crores at the end of FY ’25 considering our strong cash flow generation, our debt wouldn’t be on the books for too long.

Aasim Bharde — DAM Capital Advisors — Analyst

INR400 crores to INR500 crores at the end of FY ’25, net debt, right?

Keshav Bhajanka — Executive Director

Yeah, net debt.

Aasim Bharde — DAM Capital Advisors — Analyst

Got it. Okay. Thanks a lot. Great results, congratulations.

Operator

Thank you, sir. Ladies and gentlemen, as that was the last question for today, I would now like to hand the conference over to the management for closing remarks. Over to you, sir.

Sanjay Agarwal — Managing Director and Chief Executive Officer

Thank you. Thank you, ladies and gentlemen. Thank you for all your wishes and your time. Looking forward to meet you next quarter. Thank you.

Operator

Thank you very much, sir.

Sanjay Agarwal — Managing Director and Chief Executive Officer

Thank you very much.

Operator

[Operator Closing Remarks]