Key highlights

• The Company Net Sales inclined by 15.1% to Rs. 457.85 crore in Q3FY19. Plywood revenues gained by 18.4% to Rs. 332.72 crore, contributing 72.7% of net sales. MDF revenues rose by 7.7% to Rs 123.37 crore, contributing 26.9% to net sales. Unallocated Segment comprising of Wallpaper, Solid Surface etc. contributed Rs 1.76 crore. The Company gross margins fell by 180 bps to 44.7%, due to price reduction and change of domestic: export mix in MDF. EBITDA margins fell down by 290 bps to 13.1%. PAT fell by 1% to Rs. 35.7 crore.

• The Company working capital cycle increased by 11 days YOY to 79 days due to increase in Inventories in Q3FY19.

• The Company net debt to equity at 0.77 as on 31st December, 2018 as compared to 0.69 as on 31st December 2017.

• The Company expects industry to benefit from rising demand from the real estate sector, increasing urbanisation, higher disposable incomes and a growing middle class, and rollout of GST to facilitate faster shift from unorganised to branded products in the plywood space.

• The Company continued to investments in increasing brand visibility pan-India and maintain Ad spends at around 3.5% of Net Sales

• Plywood: (A) Plywood production inclined by 24.6% to 10.4 million square meters (million sqm). (B) Average capacity utilisations increased to 118% as compared 103% corresponding previous quarter. Sales volumes increased by 17.3% to 14.6 million sqm. (C) Average net realisation of Plywood increased to Rs 225 per sqm from Rs 219 per sqm corresponding previous quarter. (D) EBITDA Margin improved to 10.2% from 9.7% corresponding previous quarter.

• MDF: (A) MDF production inclined 33.7% to 58,937 cubic metres. (B) Average capacity utilisations were at 44% as compared 98% corresponding previous quarter. Sales volumes rose 33.9% to 58,648 cubic metres. (C) Average net realisation of MDF fell 19.8% to Rs 20,960 per cubic metres.

• The Company believes that positive shift from unorganised to organised is visible and guides for double digit revenue growth going forward. The company expects growth to be broad-based and hence margins are expected to remain steady. The Company expects 12-15% growth in Plywood segment in FY 2019. Plywood Margin expected to improve by 100 basis points with increased usage of Gabon Face Veneers.

• The company MDF volumes increased on account of the AP plant (started in July'18) while north plant continues to see decline in utilisation due to competitive intensity. The company expects 85-90% utilisation at Uttarakhand plant (72% in 3QFY19) and 60% utilisation in AP (29%) by FY20 with blended margins of 16-18%. The company expects 40%+ growth in MDF in FY 2019.

• Expansion Plans: The Company plans to increase outsourcing proportion to 30% from 22% presently over the next 3 years. For Plywood segment, the Company plans expansion in face veneers operations in Gabon and Bamanbore unit has commenced commercial production of decorative veneers. For MDF, the Company new plant in Andhra Pradesh with capacity of 360000 CBM has commenced commercial production on 1st July 2018.