Greenlam Industries Limited (GREENLAM) Q2 FY23 Earnings Concall Transcript

Greenlam Industries Limited (NSE:GREENLAM) Q2 FY23 Earnings Concall dated Nov. 14, 2022

Corporate Participants:

Saurabh Mittal — Managing Director and Chief Executive Officer

Ashok Sharma — Chief Financial Officer

Analysts:

Harsh Shah — Dalal and Broacha Stock Broking — Analyst

Sneha Talreja — Edelweiss — Analyst

Keshav Lahoti — HDFC Securities — Analyst

Anand Venugopal — BMSPL — Analyst

Pranav Mehta — Equirus Securities — Analyst

Ronald Siyoni — Sharekhan Limited — Analyst

Abhishek Dave — Bright Securities — Analyst

Milind Muchhala — Julius Baer — Analyst

Nikhil Gada — Abakkus Asset Manager LLP — Analyst

Unidentified Participant — — Analyst

Abhishek Getam — Alpha Invesco — Analyst

Manish Mahawar — Antique Stockbroking — Analyst

Hena Vora — DAM Capital — Analyst

Presentation:

Operator

Ladies and gentlemen. Good day, and welcome to Greenlam Industries Limited Q2 and H1 FY23 Earnings Conference Call. This conference call may contain forward-looking statements about the company which are based on the beliefs, opinions and expectations of the company as on the date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Saurabh Mittal, Managing Director and Chief Executive Officer, Greenlam Industries Limited. Thank you and over to you, sir.

Saurabh Mittal — Managing Director and Chief Executive Officer

Thanks. Good afternoon, friends. A very warm welcome to all of you on this call. I’m joined by Ashok, our CFO; Samarth, from the finance team; and SGA, our Investor Relations advisor. The results and presentations have been available on the stock exchanges and the company website. I hope you’ve had a chance to look at them. And I will give you a few key highlights for the quarter gone by and updates on the new projects.

The Gujarat factory at Prantij started in August — started the commercial production in August, and we started the plant in a record time. The refurbishment work of the expanded capacity is going on and it’s going on as per schedule, and this should happen — it should come into production by Q4 of this financial year. We concluded our equity raise in this quarter. We concluded all the debt closures for the projects at Andhra Pradesh and Tamil Nadu. And noteworthy is that IFC has agreed to part fund the debt for our Andhra Pradesh project. The startup of the plywood and laminate expanded capacity Tamil Nadu and Andhra Pradesh respectively will be in Q4 of FY23. The startup of the particle board line will be in Q4 of FY ’24. Most of the important equipments, et cetera have all been placed. And project is moving as per plan with some challenges, due to rains etcetera, in Tamil Nadu and Andhra but by and large it’s moving on schedule.

The team setup for the new cloud business is underway and that’s also progressing fairly well. From here, in the existing business in last quarter, on the export front, we did reasonably well in the markets of US, Europe, Asia, UK. I think those markets did well. We had challenges in few of our emerging markets because of the currency crisis in those countries, and few of them are normalizing as we talk. In the domestic market too there was a little bit of a challenge in terms of demand, but overall we could grow each segment in value terms sequentially and year-on year on the domestic front. So by and large these will be key points from my side.

I will have Ashok take you through the financial performance, post which we will be happy to address your questions and queries, if any. Ashok, over to you.

Ashok Sharma — Chief Financial Officer

Thank you, sir. Good afternoon, friends. I will take you through the financial performance. For Q2 FY23 on a consol basis, our net revenue grew by 14% on a year-on year basis and grew by 10.1% on sequential basis and stood at INR518 crores in this quarter as compared to INR454 crores last year same quarter. Gross margin grew by 810 basis points to 44.6% in Q2 FY23 from 43.5% in Q2 FY22. On a sequential basis gross margin was down by 40 basis points. Gross margin in absolute term grew by 16.8% to INR231 crores in this quarter as compared to a INR198 crores in Q2 last year. EBITDA margin was up by 30 basis points and stood at 10.4% in Q2 FY23 as compared to 10.1% in Q2 FY22. On a sequential basis, EBITDA margin was down by 50 basis point.

EBITA in absolute term, grew by 17% to INR53.7 crores as compared to INR45.9 crores in Q2 FY22. Net profit for the quarter stood at 29.2%, as against 20.7% in the Q2 last year. Consolidated — Moving onto half yearly performance. Consolidated net revenue for this half year grew by 25.1%. On year-on year basis stood at INR989 crores as compared to INR790 crores last year same period. Gross margin was up by 30 basis points to 44.8% in this half year from 44.5% last year. Gross margin in absolute terms grew by 25.8% to INR443 crores as compared to INR352 crores last year same period. EBITDA margin during the half year period remained flat at 10.5%. EBITA in absolute terms grew by 23.7%, INR104 crores as compared to INR84 crore previous year. Net margin grew by 41% to INR53.8 crores. And this half year as against INR38 crore last year.

Now, I’ll move on to the segmental performance. Laminate, which is a major segment, for this quarter our revenue grew by 13.7% on year-on-year basis and 9.5% on a sequential business and stood at INR471 crores as against INR414.6 crores Q2 FY22. However volume de-growth by 10.2% on year-on year basis. Domestic laminate revenue grew by 15.8% on a year-on-year basis and grew by 11.5% sequentially in value terms. Volume degrowth on year-on year basis stood at 8.5%. International laminate revenue grew by 11.5% on year-on year basis and 7.6% on sequential basis in value term. Volume de-grew by 12% on year-on-year basis. EBITDA margin stood at 12.1%, a growth of 60 basis points on a year-on-year basis and a degrowth of 30 basis point on quarter-on-quarter basis. Production volume were at 4.22 million sheets at a utilization of 99%. Sales volume for the quarter stood at 4.26 million sheets and our average realization for the quarter stood at 1,059 per sheet.

Moving on to half yearly performance. Laminate revenue grew by 24.5% to INR901 crore this year as against INR724 crore last year. Volume de-grew by 4.2% on year-on year basis. Domestic laminate revenue grew by 42.4% in value term. Volume growth is stood at 9.6%. International laminate revenue grew by 10.8%, in value terms our volume de-grew by 16.2%. EBITDA margin stood at 12.2%, a degrowth, growth of 10 basis points. Products and volume were at 8.51 million sheets and asset utilization level of 104%. Sales volume for this half year stood at 8.19 million sheets. Our average realization during this period was INR1,049 per sheet.

Now moving onto decorative veneer and allied segment, which consists of decorative veneer, engineered floors and engineered doors. In the decorative veneer segment, revenue grew by 18% on year-on year basis and 17.4% on a sequential basis to INR29.17 crores from INR25.1 crores in Q2 last year. Volume grew by 11.8% on year-on-year basis. Revenue of decorative veneer business grew by 47% on year-on-year basis to INR54.9 crores in this half year from INR37 crore last year. Volume grew by 25% and volume in this quarter stood at 0.39 million square meters and for the half year stood at 0.64 million square meters. Capacity utilization in the quarter stood at 37% and for the half year it was 32%. Average realization for the quarter stood at INR746 and for the half year stood at INR851.

Moving onto engineered wood and flooring. Revenue grew by 47% on year-on-year basis and grew by 3% on a sequential basis. So INR11.8 crores in this quarter from INR8 crore last quarter. Revenue of engineered wood flooring grew by 51% in this half year to INR23 crores as against INR15.4 crores last half year. However, capacity utilization were at 11% in this quarter and 12% for the half year. In the engineered door segment, revenue de-grew by 16.6% on year-on-year basis and grew by 46% on sequential basis to INR5.3 crores in this quarter as against INR6.4 crores Q2 FY22. For the half year, revenue de-grew by 33% to INR8.9 crores as against INR13.3 crores last year.

Capacity utilization in this quarter stood at 17% and for the half year it was 12%. Net debt for the quarter ending stood at INR75.5 crore, as it is INR220 crores, since we have reached and INR195 crore by way of preferential issue of equity shares. Net working capital for this quarter stood at 69 days and for the half year stood at 72 days.

That’s all from my side. I would now like to open the floor for the question-and-answer. Thank you.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Harsh Shah from Dalal and Broacha Stock Broking, please go ahead.

Harsh Shah — Dalal and Broacha Stock Broking — Analyst

Yes. Thanks for the opportunity. So my question is on the export market. So how is the situation right now shaping up in our key geographies and going forward do you believe that the export market would grow faster than the domestic market? Meaning, whether the ratio of exports to domestic would it be 50-50. And what would be the value-added mix currently in the laminate segment?

Saurabh Mittal — Managing Director and Chief Executive Officer

Hi. The export market will continue to grow and the challenges being faced by our competition, which is Russian costs in Europe and some other markets, we see that as an opportunity, so we think the export market will continue to grow. Over a longer period of time, we believe in laminates the mix between domestic and exports will be very similar, considering the Gujarat factory and considering the Andhra Pradesh plant also. So I really think both will grow at a similar percent and the mix between the two will also be 50% each nearly, plus, minus, depending on a quarter here or there, but by and large, that’s what we expect on the exports.

Harsh Shah — Dalal and Broacha Stock Broking — Analyst

Okay, and the margins, would it be better in exports?

Saurabh Mittal — Managing Director and Chief Executive Officer

So, we’ve said this in the past also really, it depends when you say exports because we operate in several geographies and some markets we’re still being in an export market, some we already settled. So it really depends market to market, geography to geography, but very hard to give you answer on this. But we believe more or less, on an average basis, it’ll be very similar. There could be some export markets which are more profitable, there could be, some export markets which are less profitable, but considering the mix of productions, sizes and dimensions, we have to be across geographies, so it’ll be very similar.

Harsh Shah — Dalal and Broacha Stock Broking — Analyst

Okay. And what will be value-added mix for this quarter, the laminates?

Saurabh Mittal — Managing Director and Chief Executive Officer

When you say value-added, what would you mean by that? Are we talking about — because we’ve given out our average realization, which is INR1,059 per sheet, right?

Harsh Shah — Dalal and Broacha Stock Broking — Analyst

Yes.

Saurabh Mittal — Managing Director and Chief Executive Officer

So when you say value-added, very hard because we don’t map that independently.

Harsh Shah — Dalal and Broacha Stock Broking — Analyst

Okay. Yes, no issues. And one last question. Is it that — do you have any exclusive distributors out of a laminate segment [Technical Issues]

Saurabh Mittal — Managing Director and Chief Executive Officer

I’m so sorry, can you come again on this, please?

Harsh Shah — Dalal and Broacha Stock Broking — Analyst

Yes. So in the laminate segment, do we have any exclusive distributors for our product and whether they reflect on our payroll?

Saurabh Mittal — Managing Director and Chief Executive Officer

No. So we have distributors who exclusively work with our brands and products in both domestic and international markets. And what was the question about the payroll, please?

Harsh Shah — Dalal and Broacha Stock Broking — Analyst

So [Technical Issues]

Saurabh Mittal — Managing Director and Chief Executive Officer

Your voice is cracking. I’m so sorry.

Harsh Shah — Dalal and Broacha Stock Broking — Analyst

Yes.

Operator

Harsh, may I request you to come in network area, please. Not very clear.

Harsh Shah — Dalal and Broacha Stock Broking — Analyst

It is clear now?

Saurabh Mittal — Managing Director and Chief Executive Officer

Yes, please go ahead.

Harsh Shah — Dalal and Broacha Stock Broking — Analyst

Yes. So these exclusive distributors, do they come on our payroll that meaning, do we pay them the salary. So is it…

Saurabh Mittal — Managing Director and Chief Executive Officer

No. We don’t — how will they come on our payrolls? These are all third-party distribution, and so they don’t come on our payroll, they’re distributors right.

Harsh Shah — Dalal and Broacha Stock Broking — Analyst

Okay. Yes. Okay, thank you. That’s it from my end.

Saurabh Mittal — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from the line of Sneha Talreja from Edelweiss, please go ahead.

Sneha Talreja — Edelweiss — Analyst

Thank you so much for that.

Operator

Sorry, Sneha?

Sneha Talreja — Edelweiss — Analyst

Are you able to hear me now?

Operator

We are not able to hear you very clear, please be a bit loud.

Sneha Talreja — Edelweiss — Analyst

Is it better?

Operator

Yes, thank you.

Saurabh Mittal — Managing Director and Chief Executive Officer

Yes. It’s better now.

Sneha Talreja — Edelweiss — Analyst

Yes. Firstly, thanks for the opportunity. Just couple of questions from my end. What I wanted to understand was that with this recent diversification that the management is going through in particle board or plywood, any thoughts that you have that you will be reevaluating your investments in dosing flooring business? What I want to understand is although the losses at this point of time are small, but they too must be consuming some amount of management bandwidth here.

Saurabh Mittal — Managing Director and Chief Executive Officer

So flooring and doors, if you see, the business has grown in this quarter by about consolidated all the veneer category by about 17% to 18%. And with reduced our working capital days in this category. And the business doesn’t need any more fixed capital and doesn’t need any further working capital also. So — and I think we’re on a certain trajectory, sometimes it just takes more time to set up a business. So we’re looking at continuing with these businesses.

Sneha Talreja — Edelweiss — Analyst

Understood. Secondly, what I wanted to understand is, this time, if I look at your exports business that has taken a hit, one of the factors that you mentioned is emerging markets, you faced certain currency-related issues. Are those issues sorted out? When do we see that normalizing?

And secondly, to do with realization, we have seen very significant changes in realization. I mean, your export realization have grown up significantly versus domestic. Reasons for the same?

Saurabh Mittal — Managing Director and Chief Executive Officer

Like I said earlier, several markets we’ve had, those markets facing currency problems of dollar’s not being available or banks not able to open LCs on time et-cetera, while we had we have good demand and we have orders in those markets. So few of those markets might get stabilized within this quarter, let’s say. And I guess one or two will move to next quarter, maybe even beyond that. But that doesn’t mean — we are trying to grow the other markets. So we should be okay on that front.

As far as the export realization growth is concerned, because the volumes are down in some of these emerging markets, the denominator has changed and that shows a high realization growth per sheet. If those volumes were there, maybe the realization per sheet — the growth would have been slightly lower. So otherwise, nothing substantial has changed between exports and domestic in terms of realization.

Sneha Talreja — Edelweiss — Analyst

What I wanted to understand is we are taking similar price hikes in both the market to pass on the raw material cost.

Saurabh Mittal — Managing Director and Chief Executive Officer

Yes. Correct. Well, like I said, because volumes are down, so denominator — the markets which — where we are not being able to ship enough, and those probably not high-value markets, and that’s why your realization growth seems to be higher.

Sneha Talreja — Edelweiss — Analyst

Okay. Understood. I think it’s to do with the emerging market was [Speech Overlap] Okay.

Saurabh Mittal — Managing Director and Chief Executive Officer

Yes. And as far as the price hikes are concerned, Q2, we have not taken any price hikes. We took the price hike in Q1.

Sneha Talreja — Edelweiss — Analyst

Okay. But are the raw material costs now completely absorptive because we are yet to see any kind of improvement in trajectory with respect to margins last quarter or before that. We understood that we are sitting with some amount of high cost inventory. So just trying to understand, is that high-cost inventory impact done with and from now on, can we see a gradual impact without any increase in prices?

Saurabh Mittal — Managing Director and Chief Executive Officer

So clearly, we’re not raising any prices. If you see Q2, chemical costs have softened, but deco paper costs, craft costs, costs of veneer, ply haven’t softened, actually they’ve gone up versus Q1 or Q2 of last year. As we talk right now, we believe chemical costs will soften further. And paper costs haven’t really gone down, it also depends on the currencies probably going up a bit. We also had some initial stabilization losses of the Gujarat factory, which has also been factored in the EBITDA, although we started production on 20th of August and we just started two line. The third line is still being ready for production. So there’s two presses while the costs have been a bit — there have been [Indecipherable] costs also, we have some small losses there too. So these are the factors. So Ashok wants to talk a bit more on the raw material.

Ashok Sharma — Chief Financial Officer

Sneha, good afternoon. In terms of base paper, prices are still — in the quarter two also it has slightly gone up and in this quarter also it is looking to be slightly going up. Of course, the benefit of — whatever benefit of freight, ocean freight improvement that is coming, but still the price of this with our design paper is slightly high.

Sneha Talreja — Edelweiss — Analyst

So any plans of taking any further price hike to absorb the same, sir?

Saurabh Mittal — Managing Director and Chief Executive Officer

No. So we are not looking at any further price hikes. I think just better utilization of all the plants and the product mix we have, should — because we are about 12.2% or something in EBITDA margins in laminates, while you see the margins, I think you cannot see the working capital cycle and ROCE in that business. So we are operating at within 15% of sales working capital cycle and about 33%, 34% of ROCEs before taxes, obviously. So margins also have to be seen in tandem with the capital investment and the ROCEs. So we’re not taking any price hikes, but we think with the value mix, et cetera, we should be okay with that.

Sneha Talreja — Edelweiss — Analyst

Understood. And the small loss that you mentioned on the Gujarat plant side, can we have that number also in, please?

Saurabh Mittal — Managing Director and Chief Executive Officer

We cannot have that number right now.

Sneha Talreja — Edelweiss — Analyst

Sure. No worries. I’ll get back in the queue. Thanks a lot sir and all the very best.

Saurabh Mittal — Managing Director and Chief Executive Officer

Thanks.

Operator

Thank you. [Operator Instructions] TThe next question is from the line of Keshav Lahoti from HDFC Securities, please go ahead.

Keshav Lahoti — HDFC Securities — Analyst

Hi. Thank you for the opportunity. So I wanted to get a trend like what’s happening on the particle board. Is the imports taking off?

Saurabh Mittal — Managing Director and Chief Executive Officer

Yes, so Keshav, on the imports, what I know is that not much imports are happening, although some stray production is there. So I don’t have a major update on what is right now the math of how much imports have picked up, if any. But not that I know of, I still believe there’s a shortage of good quality boards in the market. Boards are available but the right quality boards, which are laminated boards with the right physical properties and decorative properties, I still believe there’s a shortage of that.

Keshav Lahoti — HDFC Securities — Analyst

Okay. And for the Gujarat plant, should we expect any stabilization loss to continue in Q3 also?

Saurabh Mittal — Managing Director and Chief Executive Officer

I think, if any, would be very small. So, if any, will be very small because effectively, the capacity — the effective production capacity will be placed in Q4. So if any, would be small.

Keshav Lahoti — HDFC Securities — Analyst

Okay. And what was the capacity utilization for veneer, floor and door segment?

Saurabh Mittal — Managing Director and Chief Executive Officer

Did you ask veneer and door?

Keshav Lahoti — HDFC Securities — Analyst

Yes.

Saurabh Mittal — Managing Director and Chief Executive Officer

Yes. For the veneer, it was around 37%; for the floor, it was 11%; and for the door, it was 17% in this quarter.

Keshav Lahoti — HDFC Securities — Analyst

Okay. Understood. One last question from my side. I might have missed in the opening commentary. What is your growth in Q2, year-on-year, for domestic and export?

Saurabh Mittal — Managing Director and Chief Executive Officer

Sorry, your voice is not clear, Keshav. So sorry.

Keshav Lahoti — HDFC Securities — Analyst

Hello. Yes. My question is…

Saurabh Mittal — Managing Director and Chief Executive Officer

A bit louder.

Keshav Lahoti — HDFC Securities — Analyst

Yes. One last question from my side. What is your revenue growth in Q2 for export and domestic markets separately?

Saurabh Mittal — Managing Director and Chief Executive Officer

Okay. In this quarter?

Keshav Lahoti — HDFC Securities — Analyst

Yes.

Saurabh Mittal — Managing Director and Chief Executive Officer

Yes. It was 17.9% on the domestic market and on quarter-on-quarter basis and 9.8% in exports.

Keshav Lahoti — HDFC Securities — Analyst

Okay. Got it. Thank you.

Saurabh Mittal — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Anand Venugopal from BMSPL, please go ahead.

Anand Venugopal — BMSPL — Analyst

Yes. Thanks for the opportunity. Just I have one question. So how does the unorganized competition in the domestic market affect the demand for organized players like Greenlam et cetera? So — because I would assume these are different products with different type of customer profile.

Saurabh Mittal — Managing Director and Chief Executive Officer

Unorganized market would affect the demand in the sense they will have cheaper products, non-compliant products in terms of product quality, poor quality. So — and, yes, so I think that’ll impact the demand mostly on the price, the prices, the cost to — price to channel partners, dealers, carpenters, lower than organized plants.

Anand Venugopal — BMSPL — Analyst

Okay. All right. Thanks.

Operator

Thank you. The next question is from the line of Pranav from Equirus Securities, please go ahead.

Pranav Mehta — Equirus Securities — Analyst

Yes. Thank you for taking my question. Sir, I wanted to understand on how you are seeing things on the export side, particularly with the major consumers facing kind of inflationary pressure and because of that housing new construction and innovation demand getting impacted. So any thoughts on how market could evolve going forward?

Saurabh Mittal — Managing Director and Chief Executive Officer

So on the export front, we see freights reducing. So the customer’s cost of our products is coming down because we were charging them for the additional freight. So freights have got corrected and that cost reduction is being passed on to the customers because we were charging them in the previous time. And so non-emerging markets, we think, it’s an opportunity to take market share from the international players. Emerging markets have their own problems where demand is there, but there are currency challenges. But overall, give or take, some markets, there could be some challenges, some markets will keep growing. I think we should be pretty okay with the export business. Did I answer your question?

Pranav Mehta — Equirus Securities — Analyst

Yes, sir. It does. And sir, any thoughts on how veneer segment is expected to do going forward, because from my understanding, competition has increased in last two years and the EBITDA margins as of now remain severely impacted so. How will this segment do going forward?

Saurabh Mittal — Managing Director and Chief Executive Officer

The veneer segment alone we had cost pressures in Q2. We have taken some price increases in veneer and the flooring segment. And as we talked I think probably the trajectory of volume value will grow over the next period or so. But competitive pressures still remain especially in the veneer segment. That’s absolutely right.

Pranav Mehta — Equirus Securities — Analyst

Okay, sir. And sir on the debt front, so how are things shaping up? What would be a peak debt? I think it would be reached by FY ’25 and so what would be the peak debt? And how are you planning to deal with the balance sheet after that?

Ashok Sharma — Chief Financial Officer

So we — Pranav the peak debt we are expecting to reach by end of FY ’24 by when the most of the project which we’ve announced as of now will be over. And we expect peak debt — peak net debt in the range that all everything will depend upon the cash flow also, but in the range of around INR800 crores — INR750 crores, INR800 crores in that period in [Indecipherable]. We have already delayed it in terms of we have raised INR200 crores of equity and we think that we will be able to manage with the existing cash flow.

Pranav Mehta — Equirus Securities — Analyst

Okay, sir. Thank you very much.

Operator

Thank you. The next question is from the line of Ronald Siyoni from Sharekhan Limited. Please go ahead.

Ronald Siyoni — Sharekhan Limited — Analyst

Good morning, sir. One question on the demand-side like, how have you seen the demand post-quarter 2 especially when there was a festive season in October? And post October, how has been the demand? Has there been difference in demand uptake, especially in domestic market?

Saurabh Mittal — Managing Director and Chief Executive Officer

Domestic market October, clearly was slow because of all these holidays and festivals. And both the festivals are happening in the same month as it [Indecipherable] on demand. So to that extent, yes, markets were short for good depending on the geography, but five to seven days late. And as we talk right now things are coming back or nearly back to normalcy.

Ronald Siyoni — Sharekhan Limited — Analyst

Okay. And have you, as a company, outlined a strategy over the next three to five years timeline? Does the company want to reach in terms of top line or margins or profitability or anything of that sort over the longer period?

Saurabh Mittal — Managing Director and Chief Executive Officer

Sure. I think with the investments we are doing there is a plan of the investments on the categories of products we are expanding into and capacity expansion happening in the core business so there is a plan of — in the direction you just said in terms of utilization, targets, revenue numbers, margins et cetera.

Ronald Siyoni — Sharekhan Limited — Analyst

But you would want — you would not want to highlight numbers or anything on that side?

Saurabh Mittal — Managing Director and Chief Executive Officer

[Speech Overlap] But we have when we read the strategy out last year, but while we agreed to expand into the particle board space like build a plywood plant. We did give some indication on the what revenues should be. So that’s on the company’s website. And, maybe you can connect with Ashok at later point we can refresh you…

Ronald Siyoni — Sharekhan Limited — Analyst

That would maintained more or less?

Saurabh Mittal — Managing Director and Chief Executive Officer

Yes, yes. Absolutely. The Gujarat acquisition happened post that so to that extent that number will get added on. But again, Ashok can refresh you on those numbers set.

Ronald Siyoni — Sharekhan Limited — Analyst

Sure, sir. And anything organized players capacity additions taking place over the next two years especially — and most people say 15 to 18 months down the line or two years down the line capacities are going to come on-stream in supply of particle mode? So how do you see organized market playing out in terms of capacity additions and supply in the market?

Saurabh Mittal — Managing Director and Chief Executive Officer

So clearly, in the plywood, laminates, veneer space, the capacity is more than the utilization in general. The challenge is not the capacity because the challenge is the product development, sales marketing, demand-generation. I think those are the typical challenges while even today as we talk the overall theoretical installed capacity in the laminates business is very high but besides one or two companies I think most of them can’t replace capacities at any respectable levels. So, it’s not only the capacity which needs to be in-place and not just by adding capacity you can’t go necessarily go sell, right? You also need the right products and the right distribution and sales marketing setup. So I think that’s not unusual in our categories especially in plywood and laminates.

As far as first particle board is concerned, you have capacity right now also in the market. You have lot of these the bagasse based, wood waste based factories which have poor quality of technologies. So the quality of board standard you are seeing in terms of their laminatable quality, screw holding quality. There all are very inferior quality boards. So as far as capacity expansion the right quality boards it is in [Indecipherable] is us and another company which is also on the green capacity addition of this moment. So this is what it is.

As far as the market scenario is concerned, the whole OEM segment of machine monitor fabricators segment is growing, the furniture consumption will probably grow in the country, lot of wood working happening in plants and off the site and installation happening on the site. So we think from the capacity even if one more plant comes in two more plants come in, we really think from a country and capacity perspective we don’t believe it to be a mid to long-term challenge. There could be some short-term challenges if just capacity comes in buckets.

Ronald Siyoni — Sharekhan Limited — Analyst

Okay. Thank you very much, sir. And best of luck.

Saurabh Mittal — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Abhishek Dave from Bright Securities. Please go ahead.

Abhishek Dave — Bright Securities — Analyst

Am I audible?

Operator

Yes, Abhishek. Please go ahead.

Abhishek Dave — Bright Securities — Analyst

Firstly, congratulations on the good set of numbers and thank you for the opportunity. I would like to ask how is the doors and floors business performance this quarter? Also can you — how do we expect the performance in upcoming quarters?

Saurabh Mittal — Managing Director and Chief Executive Officer

In terms of doors and floors, Abhishek, if you see the numbers in this quarter has improved in comparison to previous quarter. And it was impacted in last two years due to pandemic and now we hope to rebuild this business and which is very much visible on our quarterly performance. And we hope that going forward this will further improve.

On the numbers, flooring business debt was INR11.7 crores with us but 50% odd value growth versus Q2 of previous year. And about 3% growth in Q1 as we have mentioned on this communication. And on the realization front to the growth of about 28% odd versus Q2 of last year and about 7.5%, 8% versus Q1 of FY ’23. The door business straight a bit in Q2 versus last year Q2, it’s primarily because we had some exports in the past and exports of doors and floors are virtually stopped right now because of the high sea freight. So all the numbers we see is of the domestic market only, yeah. But versus Q-on-Q versus Q1 the door business also grown in value although base is very small, that was 50% odd. As we talk, efforts are on [Indecipherable] businesses and we should get on with it.

Abhishek Dave — Bright Securities — Analyst

Okay. Thank you for the information. It was helpful.

Operator

Thank you. Next question is from the line of Milind Muchhala from Julius Baer. Please go ahead.

Milind Muchhala — Julius Baer — Analyst

Yeah. Thanks for taking my question and good afternoon Saurabh and Ashok. I had a couple of questions. First, sir, what we’ve seen is the realizations on a sequential basis has moved up well almost 5.5% for laminates, but despite this the gross margins are lower by 40 bps, so what raw material head is kind of getting the profitability?

Ashok Sharma — Chief Financial Officer

Yeah. So in terms of this our realization is going on with the mix of both the price high in comparison to what we have taken in the previous year. But in quarter-on-quarter it will not have much impact because we’ve taken in the beginning of the quarter. So the raw material price hike as we have mentioned in the earlier in the call, the chemical price hike — chemical prices are softening but there is still there was a pricing hike in the cost of raw material in terms of people, both in decorative and the craft paper.

Further, since we have maintained a stock level so the high priced raw material was there at the beginning of the quarter too, which going forward we feel that this will have an softening impact on the overall gross margin.

Saurabh Mittal — Managing Director and Chief Executive Officer

Also to add to Ashok, the production — the sales from the Gujarat plant will have a lower gross margin because that’s focused on the commodity segment of the domestic liner market. So that’s how this — the lot of lower gross margin than the products we produce and what we [Indecipherable].

Milind Muchhala — Julius Baer — Analyst

Okay. But I believe that then would have got reflected in the realizations as well to some extent assuming that [Speech Overlap] realization.

Saurabh Mittal — Managing Director and Chief Executive Officer

Yeah. So if you see realization if you were to dissect this as domestic and exports, the domestic realization is up by only 0.4% on a sequential basis, right, while normally with the growth we do it’s probably is a bit higher. That’s quite a bit — that’s a bit lower. On the export front realizations look better, but we lost out what the volume of some emerging markets that’s why you see a higher realization because the denominator and [Indecipherable] quantities lower. If the denominator was larger, the realizations would also be a bit lower. Rupee also depreciated against the dollar, which also shows in rupee terms realization improvement, while rupee appreciated versus the euro and the pound but net we end up having some realization gain if the rupee depreciate against dollar. I think all these factors have kind of contributed to what you’re saying.

Milind Muchhala — Julius Baer — Analyst

Okay. So for the laminate business per se then what is the sustainable EBITDA margin that we kind of can target? And how soon do we think we can achieve that? So can we go back to that 13%, 14% kind of a trajectory?

Saurabh Mittal — Managing Director and Chief Executive Officer

So we were — right now what 12.2 something like sort and [Indecipherable] So I think gradually we should inch up with better outputs and some softening of RM cost with continued focus on value mix. So it should happen over a period of time.

Milind Muchhala — Julius Baer — Analyst

Okay. And just last one on the veneer business. So here again if I just look at the realization so y-o-y it was good but sequentially again it’s fallen quite a bit. They’re down by like 11.5%. So what is leading to this huge volatility in the realization for veneer?

Saurabh Mittal — Managing Director and Chief Executive Officer

So it’s probably the mix of — because the base is not so large and maybe it’s a species mix. There has been some commodity sales in the volumes of National veneer has gone up 29%, 30% but realizations have come down so it probably will be at the mix of the species of the value mix has got altered between these two quarters. While if you see versus last year it’s about a slight improvement on the realizations and we’ve also taken some price hikes which will be effective in Q3 which is part of Q3. So it’s putting business of value mix was non-value mix orders being serviced at that point.

Milind Muchhala — Julius Baer — Analyst

So for this veneer and allied segment, so can we kind of target an EBITDA breakeven kind of a level sometime in next fiscal year?

Saurabh Mittal — Managing Director and Chief Executive Officer

So, that is the target. But like this quarter, if you see, the revenues went up, but costs also went up of base ply, of veneers and here all the RM is imported in our sales and domestic market. So the currency devaluation to the segment — overall as a Company, we are nearly the same, but in this segment, that was impacted. So gross margins could improve despite value mix improving and volume improving, but, yes, we could target that. We are targeting that.

Milind Muchhala — Julius Baer — Analyst

Okay. Great. Thank you.

Operator

Thank you. The next question is from the line of Nikhil Gada from Abakkus AMC. Please go ahead.

Nikhil Gada — Abakkus Asset Manager LLP — Analyst

Yes. Hi sir, Thanks for the opportunity. Sir, I just have one question. You mentioned about the situation in Europe regarding the exports market and some disruption over there emerges as an opportunity for players like us to get some benefits out of it. So, can you explain the situation in further detail and how we can benefit from this?

Saurabh Mittal — Managing Director and Chief Executive Officer

There’s not much detail to explain here but, typically, the local manufacturing costs have gone up there in Europe in terms of electricity and energy and which kind of expands their — increases their cost of production. And because we are present there with our resources in terms of warehousing, people, distribution, not so much still in the specification market, and they have challenges of servicing — certain manufacturing plants have challenges. So, we believe with our inventory and distribution place, this would help us take some market share over a medium-term period.

Nikhil Gada — Abakkus Asset Manager LLP — Analyst

So there is nothing immediate per se, as in, we are not getting any major shift in inquiries or expect any [Speech Overlap]

Saurabh Mittal — Managing Director and Chief Executive Officer

In laminate business, nothing happens immediately. It just takes time because the whole distribution cycle, because companies would also have inventory on ground, and that also gets consumed, they would have their own specifications, which would not turn tomorrow. But yes, over the medium to long-term, I believe this is a possibility for us to take more market share, which we have been taking over the last several years. So, I think it should only help us further in that direction.

Nikhil Gada — Abakkus Asset Manager LLP — Analyst

Got it, sir. This was really helpful. Thank you.

Saurabh Mittal — Managing Director and Chief Executive Officer

Yes.

Operator

Thank you. The next question is from the line of Hitesh Agrawal [Phonetic] from India Insight Value Fund. Please go ahead.

Unidentified Participant — — Analyst

Yes. Thanks for the opportunity. In the particle board segment, I wanted to know, like, in the next 2 years, what is the revenue growth rate and the EBITDA margins we can see?

Ashok Sharma — Chief Financial Officer

Yes. Hi, Hitesh. The particle board, as of now, we don’t have this business or this Prelam Particle Board is a very small component of the overall business. So, particle board project, which we are as of now under implementation, that will come — the commercial production is expected to start by Q4 of next year, which means FY ’24. So, it will take some time in terms of that — for that business to build in. And what we have told in the previous presentation, at a full utilization, which can take around 3 to 4 years, this can have an EBITDA in the range of around 25%.

Unidentified Participant — — Analyst

25%, okay.

Ashok Sharma — Chief Financial Officer

As and when it reaches the full utilization.

Unidentified Participant — — Analyst

Okay. And just to have a color on the particle board industry as such, like, what will be the percentage share of the organized players and the unorganized players in particle board segment presently?

Saurabh Mittal — Managing Director and Chief Executive Officer

Currently, there’s like so-called two organized players, and the revenues are not very large. So mostly, at the moment, it’s dominated by unorganized players who have smaller plants in various parts of the country. But clearly, new capacities are coming in and we think organized companies will take more market share. So, I think on a value, it’ll be like 15%, 20% organized numbers at the moment I guess, approximately.

Unidentified Participant — — Analyst

Approximately. Okay. And imports would be forming what part in this segment?

Saurabh Mittal — Managing Director and Chief Executive Officer

So, in the last year, 1.5 year, we believe imports have come down, but.

Ashok Sharma — Chief Financial Officer

It will be — probably whatever data available, Hitesh, it will be in that range of around 15%, 20% as of now.

Unidentified Participant — — Analyst

Okay. Thank you, sir. That’s from my side.

Operator

Thank you. Next question is from the line of Abhishek Getam from Alpha Invesco. Please go ahead.

Abhishek Getam — Alpha Invesco — Analyst

Hello? Am I audible?

Operator

Yes, Abhishek. Please go ahead.

Abhishek Getam — Alpha Invesco — Analyst

Yes. So, the question is on particle boards. So, I just wanted to have a flavor on — so what sort of customer base would we be targeting? I mean you did mention like the OEMs. So, would we be targeting the branded furniture players as sort of the customer base? If that’s so, how does the working capital work out apart from our regular business? I mean given it’s B2B, then would it be stretched?

And another second question was, what is — so you did mention most of the current particle board players, unorganized players are poor quality, low quality and we and one more player will be going for a high quality. So what will be the differential in realization, just a ballpark?

Saurabh Mittal — Managing Director and Chief Executive Officer

So I’ll take the question on customer base. The customer base will be OEMs, people ordering office furniture, kitchen furniture, wardrobes, paneling and sales will move through the channel for all the smaller OEMs and maybe directly from the Company to the large OEMs. So this will be the sales pattern. As far as the working capital matter is concerned, as we talk right now, particle board MDF has a shorter working capital cycle than the existing business, one, because most of the RM, not all, but most of the RM is locally-sourced. And the better players in the market are — as far as domestic market, including what we do, are even lower, also because the number of SKUs in particle board is fewer than laminates. So inventory carrying at the market gets reduced. So on the working capital cycle, we budgeted for a lower working capital cycle than our existing business. Ashok can give the exact number.

Ashok Sharma — Chief Financial Officer

Yes. We have taken around — close to around 45 days in terms of the working capital cycle as per our history. And I mean your another question in terms of realization difference between the organized and unorganized, so it will all depend upon the pre-performance percentage of particle board we will be able to sell in the prelam condition and what we believe that with the better quality which is available, we will be able to sell more of a prelam particle board whereas significant difference is there in comparison to plain particle.

Abhishek Getam — Alpha Invesco — Analyst

Okay. But sort of plain particle board and premium particle board, so what will be the different sort of realization?

Ashok Sharma — Chief Financial Officer

So the plain and prelam, the difference normally is in the range of around INR10,000 a cubic meter — around INR9,000 to INR10,000 a cubic meter.

Abhishek Getam — Alpha Invesco — Analyst

Okay. Okay. Understood. And sorry, I missed, so for particle board, we will be having roughly 45 days working capital? Is that right?

Ashok Sharma — Chief Financial Officer

Yes.

Abhishek Getam — Alpha Invesco — Analyst

45 days. And in terms of like working capital to sales, you mentioned laminates is 15%. So basically particle would be lower than that?

Ashok Sharma — Chief Financial Officer

In that range.

Saurabh Mittal — Managing Director and Chief Executive Officer

Yes, in that range, maybe slightly lower.

Abhishek Getam — Alpha Invesco — Analyst

Okay. Okay. Understood. Thank you. That’s it.

Operator

Thank you. The next question is from the line of Manish Mahawar from Antique Stockbroking. Please go ahead.

Manish Mahawar — Antique Stockbroking — Analyst

Yes. Just in terms of export market perspective, are we seeing any slowdown in terms of demand? Because I think earlier in the opening comments, you have mentioned like there is some currency headwinds in terms of emerging market industries facing, so are you facing any demand slowdown?

Saurabh Mittal — Managing Director and Chief Executive Officer

So we said that several emerging markets have had a challenge in the Q2 period of currency availability, dollar availability from the Central Bank and opening up of LCs and paying the advances, etc. So, those challenges have been there. One or two markets have got reasonably streamlined in this quarter, and we believe this could get streamlined over the next maybe 3 to 6 months. As far as the demand is concerned, the emerging markets, which have a challenge, as far as demand for our brand and our products there, but due to the currency challenges and there’s a little bit of working capital which will keep [Indecipherable]. Overall, some markets will be minus, some will be more, so we’ll be fairly okay. But on an overall, we’re looking fine.

Manish Mahawar — Antique Stockbroking — Analyst

Okay. So things are stable, basically. Yes.

Saurabh Mittal — Managing Director and Chief Executive Officer

Things are like — yes, it could be better always.

Manish Mahawar — Antique Stockbroking — Analyst

Okay, sure. And Ashok ji, can it be possible to repeat the number of — I think so you have mentioned a number of domestic and export revenue growth for 2Q. I think you mentioned 17.9% and export is 8.9%, I think for the quarter, right?

Ashok Sharma — Chief Financial Officer

Yes.

Manish Mahawar — Antique Stockbroking — Analyst

So that’s right number and that is on a last Q2 to Q2, you said, right, Y-o-Y?

Ashok Sharma — Chief Financial Officer

Yes.

Manish Mahawar — Antique Stockbroking — Analyst

Okay. And can it be possible to share the number in terms of volume growth in the domestic and export?

Ashok Sharma — Chief Financial Officer

I will share that offline. Yes. Sure, sir. I’ll take it offline. Thank you, sir. Thanks and all the best.

Operator

Thank you. [Operator Instructions] We’ll take the last question from the line of Hemant, as an Individual Investor. Please go ahead.

Unidentified Participant — — Analyst

Another very good set of numbers. And thank you for providing the opportunity. Sir, you have mentioned, I guess, that when particle board capacity can be fully utilized, it can generate 25% of the margins. And it will take around 2 to 3 years for it to get fully utilized?

Ashok Sharma — Chief Financial Officer

3 to 4 years.

Unidentified Participant — — Analyst

3 to 4 years. Okay. And sir, what kind of revenue potential are we targeting in FY ’24, because we have our plywood plant coming, which will be operational I think by Q4 of this year? And the laminate — the enhanced capacity in the Bloom Dekor which we’ve acquired, it will also be contributing. So what kind of revenue potential we are targeting in FY ’24? And if you can throw some light on maybe the margins on the plywood category as well?

Ashok Sharma — Chief Financial Officer

Yes. So in terms of revenue potential or revenue target for that, the entire capacity will be available. It depends upon how much we can be able to sell in the next year or in the very first year. So we believe from this year, there will be a potential of around 20%, 25% in — around 20% in the next year in terms of that. And in terms of margin, that will all depend upon what kind of volume we’re able to reach in this and what kind of utilization level we’re able to reach in the next year for these new [Speech Overlap]

Unidentified Participant — — Analyst

Sorry to cut you short, I was talking about the revenue potential, not from the plywood business, but on the whole, I mean the consol level as a company.

Ashok Sharma — Chief Financial Officer

So that’s what, so apart from the existing businesses, which is there in this year, next year we will have plywood businesses and a plywood business, and the laminate new units and for the Prantij, which we are right now — we are doing the upgradation. All these, put together, have a revenue potential of close to around INR1,100 crore, INR1,200 crore that — around full potential is there. That will all depend upon how much we can able to through the volume out of this in next year.

Unidentified Participant — — Analyst

So you mean to say INR1,100 crore, INR1,200 crore kind of incremental revenue, right?

Saurabh Mittal — Managing Director and Chief Executive Officer

Yes, but that’s on full potential, on full capacity of the UR. And we’ll not get to full capacity next year, it’ll probably happen over a period of 2 to 3 years.

Ashok Sharma — Chief Financial Officer

And apart from this, the particle board, that will come in the Q4 of next year. So, that capacity will be available for sale in the FY ’25 only.

Unidentified Participant — — Analyst

Okay. Okay, sir. Okay. Thanks a lot, sir.

Ashok Sharma — Chief Financial Officer

Thank you.

Operator

Thank you. Sir, we have one more question from the line of Hena from DAM Capital. Hena, please go ahead.

Hena Vora — DAM Capital — Analyst

Yes. Thank you so much, sir, for the opportunity. So, I just wanted to know in laminates, on an annual basis, we’ve seen an expansion in the margins. So, anything specific here that has led to this expansion?

Ashok Sharma — Chief Financial Officer

Hena, the expansion of margin in the current scenarios is as we have — we are going through the project phase, so we believe that expansion in the margin will come — will come — first, it will come in the existing business on a gradual basis. And it will be visible once we’re able to complete this project and reach up to a certain level of utilization.

Hena Vora — DAM Capital — Analyst

Sure. No, what I was trying to ask is in Q2 compared to Q2 last year, we’ve seen an expansion in the margins for laminates. So, anything specific here which has led to the expansion?

Saurabh Mittal — Managing Director and Chief Executive Officer

With expansion, like, the cost has come down versus last year and some we’ve taken price hike, so nothing specific.

Hena Vora — DAM Capital — Analyst

Sure. Nothing specific. Okay. Alright. Thank you.

Operator

Thank you. Ladies and gentlemen, that would be the last question for today. I now hand the conference back to the Management for the closing comments. Thank you, and over to you.

Ashok Sharma — Chief Financial Officer

Thank you, everyone, for joining the call today. If you have any other queries, you may get in touch with us or SGA, our Investor Relations advisor. Thank you.

Saurabh Mittal — Managing Director and Chief Executive Officer

Thank you, everyone.

Operator

[Operator Closing Remarks]

Call participants:

Saurabh Mittal — Managing Director and Chief Executive Officer

Ashok Sharma — Chief Financial Officer

Harsh Shah — Dalal and Broacha Stock Broking — Analyst

Sneha Talreja — Edelweiss — Analyst

Keshav Lahoti — HDFC Securities — Analyst

Anand Venugopal — BMSPL — Analyst

Pranav Mehta — Equirus Securities — Analyst

Ronald Siyoni — Sharekhan Limited — Analyst

Abhishek Dave — Bright Securities — Analyst

Milind Muchhala — Julius Baer — Analyst

Nikhil Gada — Abakkus Asset Manager LLP — Analyst

Unidentified Participant — — Analyst

Abhishek Getam — Alpha Invesco — Analyst

Manish Mahawar — Antique Stockbroking — Analyst

Hena Vora — DAM Capital — Analyst