Greenply Industries Ltd Q3 FY22 Earnings Conference Call Insights

Key highlights from Greenply Industries Ltd (GREENPLY) Q3 FY22 Earnings Concall

 Q&A Highlights:

• Achal Lohade from JM Financial asked about industry volume growth. Manoj Tulsian CEO replied that it’s hard to say, but as the company is looking at it, there is too much opportunity for organized players when there is support in terms of housing sector doing well and market share moving from unorganized to organized. Therefore, GREENPLY is looking at growth within the industry.

• Achal Lohade from JM Financial also asked about the growth outlook for the next three years. Manoj Tulsian CEO answered that from a industry perspective the company is very bullish. However, as an organization, GREENPLY is targeting at least 5-7% volume growth going forward. Though the company is not assuming the industry to grow, it’s assuming GREENPLY will be able to grow within the industry.

• Achal Lohade from JM Financial asked that the company took 2.5% price hike in 4Q22, and if the increase covers the company’s entire RM cost inflation. Manoj Tulsian CEO replied that recent price increase was to cover the cost differences, which GREENPLY could see up to December. But prices are still no stable, so the company might have to look at another price increase in 1Q23 again. It’s an extremely volatile situation.

• Achal Lohade from JM Financial asked if the company is standing by its margin guidance of 13-14% for the next couple of years given earlier. Manoj Tulsian CEO answered that with the unprecedented raw material and supply chain volatility, GREENPLY has been changing the raw material cost increases. Therefore, due to this some of the margins, which GREENPLY could have achieved has not been achieved.

• Sneha Talreja from Edelweiss Securities asked about any clarity on the container availability and freight rate issues at Gabon. Manoj Tulsian CEO said that it’s a difficult environment and still able to do a level of business where the company is still in profits. GRERENPLY still believes that even in the next 2-3 quarters things on the supply chain side will remain similar to what it is right now.

• Venkat Samala of Tata Asset Management asked about ESOP cost, if one needs to look at it as an absolute number or as a percentage of revenue. Manoj Tulsian CEO replied that ESOP cost is a non-cash cost. Also the ESOP cost would be higher for the next two years, and then it will taper down. So one can assume around 1-1.2% of sales for the next two years and then it tapers down quite a bit.

• Abhishek Ghosh from DSP MF asked about ad spend coming down as a percentage of sales. Manoj Tulsian CEO answered that the company’s ad spend in 4Q22 is high and has another TVC going on. Therefore, by year-end GREENPLY will be back to the 3-3.5% numbers. Therefore that increase in cost could be seen in 4Q22 that will get booked. As a company, GREENPLY is not bringing down ad spend below 3%.

• Abhishek Ghosh from DSP MF also enquired about the benefits of dealer addition in the rural and semi-urban which has almost doubled in last one year. Manoj Tulsian CEO said that GREENPLY has got some benefits from this increasing dealer base. But at the same time, GREENPLY is working on the depth and distribution and is also working on demand recognition.

• Abhishek Ghosh from DSP MF asked about the peak consolidated debt when the MDF plant gets commissioned next year. Manoj Tulsian CEO replied that on a debt equity basis, GREENPLY should be slightly less that 1 and on an absolute number it can go up to around INR600-620 crores.

• Abhishek Ghosh from DSP MF enquired about the plywood capex of INR133 crores and its revenue potential of INR250 crore per annum, when GREENPLY expects to realize this revenue. Manoj Tulsian CEO said that by 2H23, the company would be almost at around 90% capacity utilization. In H1, the company would reach only around 50-60%. And in FY24 INR250 crores would be realized.

• Sanjay Awatramani of Envision Capital asked about any plant expansion capex for next year. Manoj Tulsian CEO answered that of the total capex for Sandila, most of it will happen within March. For FY23, the company will have close to INR450-500 crore getting invested in the MDF facility. Other than that, GREENPLY will have the normal routine capex of around INR15-20 crores.

• Sanjay Awatramani of Envision Capital enquired about any revenue guidance for overall FY23. Manoj Tulsian CEO replied that the company is doing its budgeting process but anything less than 15% is not at all acceptable.