Rushil Decor Limited Q4 FY24 Earnings Conference Call Insights

Key highlights from Rushil Decor Limited (RUSHIL) Q4 FY24 Earnings Concall

• Operational Performance
  • MDF and laminate volumes grew 13% and 6% year-on-year, respectively, due to operational efficiency.
  • Average capacity utilization for Q4 FY24 stood at 89%, with MDF segment utilization reaching 96% in March 2024.
  • Chikkamagaluru plant sold 116% of its production capacity during Q4.
• Financial Performance
  • Quarterly revenue increased by 9% year-over-year to INR 233.42 crore.
  • EBITDA for Q4 stood at INR 29.23 crore, slightly higher than the previous year.
  • PAT for Q4 was INR 9 crore, but after adjusting for short provision of income tax, it would be INR 11.57 crore.
  • Annual revenue was INR 844 crore, a marginal increase of 0.66% year-over-year.
  • Annual EBITDA stood at INR 119.91 crore, with a margin of 14.21%.
  • Annual PAT was INR 43.10 crore, but after adjusting for short provision, it would be INR 45.67 crore.
• Expansion
  • Substantial stride made in increasing MDF production capabilities and expanding footprints to meet nationwide demand.
  • Positioned to sell MDF products at better pricing after fulfilling export obligations.
  • Increased MDF export volumes by 61% year-on-year to 61,716 CBM.
  • Greenfield project for laminate segment nearing completion, with machinery received at the facility.
  • Strategic entry into the plywood segment, broadening product portfolio.
  • Plywood production capacity planned to increase from 300 boards per day to 3,000 boards per day by September 2025.
• Product Portfolio
  • Focus on enhancing value-added offerings within the MDF segment, with value-added products contributing 42% in terms of quantity.
  • Laminate segment witnessed significant progress, with volumes increasing by 6% year-on-year and utilization levels rising to 90% in Q4.
  • Entry into the plywood segment, providing a comprehensive range of options to distributors.
• Brand Presence
  • Successful retail branding efforts, covering an extensive area of approximately 45,000 square feet plus.
  • Allocated 1-2% of total revenues to support brand visibility and market penetration initiatives.
  • Continued investment in strategic marketing initiatives to further enhance market presence and drive business growth.
• Future Outlook
  • Projected EBITDA margin range of 14-16% for FY25.
  • Laminate segment EBITDA margins projected in the range of 12-15%.
  • Targeting healthy utilization levels of 90-95% for MDF plants in FY25.
  • Positioned for dynamic expansion, leveraging robust market presence and operational excellence.
  • Well-equipped to navigate evolving market landscape, maximizing growth and profitability potential.
• Debt and Inventory Management
  • Net debt profile reduced from INR 400 crore in FY23 to INR 286 crore.
  • Debt-to-equity ratio stands at 0.53 times, with active focus on further reducing it.
  • Committed to reducing inventory levels by 10% annually.
  • Implementing robust systems to monitor and optimize resource utilization for operational efficiency and supply chain management.
• Volume Growth Guidance
  • For MDF, targeting 96% capacity utilization, and increasing value-added products contribution to 50% from the current 42%.
  • For laminates, aiming for 20-25% value growth, driven by new capacity addition in the jumbo laminate segment.
  • Exact volume growth projection for laminates is difficult due to different product mixes in the new plant.
• Segment Margin Guidance
  • Laminate segment margins expected to improve from the current 10% level.
  • New jumbo laminate project margins projected at 12-15%.
  • Overall laminate segment margins expected to increase by 1-2%.
  • MDF segment targeting EBITDA margin of 14-16%.
  • Overall company EBITDA margin guidance for FY25 is 14-16%.
• MDF Pricing and Imports
  • No significant price cuts observed in MDF compared to Q4 FY24.
  • Imports of around 25,000 CBM per month, but not posing a major challenge due to strong domestic demand and service offerings.
  • Ability to balance sales between OEM and retail network allows flexibility in managing realizations.
• Timber Cost
  • Witnessed a 10% increase in timber prices from Q3 to Q4 FY24.
  • No further price hike observed in the current quarter.
  • Blended timber cost in Q4 FY24 was INR 4,222 per ton.
  • Aiming to maintain the current timber cost levels.
• MDF Export Pricing
  • Took a 7% price hike for MDF exports in Q4 FY24.
  • Reason was the completion of export obligations, allowing them to target better realizations and focus on value-added products over commodities.
  • Already exporting value-added MDF products, with 4,817 cubic meters of value-added exports in Q4.
  • Targeting to increase value-added contribution in exports, similar to the domestic strategy of 50% value-added products.
• Capacity Utilization and Realizations
  • Targeting 95%+ utilization for MDF plants, compared to 78% average in FY24.
  • Reached 96% utilization in March 2024, aiming to sustain similar levels.
  • Blended MDF realizations expected to remain stable at around INR 23,500 per CBM.
  • Increasing value-added MDF contribution from 42% to 50% to support better realizations.
• Revenue and Margin Guidance
  • Targeting to cross INR 1,000 crore revenue in FY25.
  • Contributions expected from new jumbo laminate project and plywood business.
  • Aiming for overall EBITDA margin of 14-16% in FY25.
  • Demand expected to pick up in May.
• Industry Capacity Expansion
  • Industry MDF capacity in FY24 was around 2.8-2.9 million CBM, with average utilization of 78-80%.
  • Estimated capacity addition of 800,000 CBM in FY25, taking industry capacity to around 3.5-3.6 million CBM.
  • New capacities may not operate at 100% utilization initially, with gradual ramp-up expected.
  • No major capacity expansion plans disclosed beyond FY25, apart from the confirmed 800,000 CBM addition.