Capitaline

Analyst Meet / AGM 25-May-16

Conference Call

Greenply Industries

Expect a 6-8% growth in FY17

The company has conducted a conference call on 24^thMay 2016 to discuss the financial performance for the fourth quarter and FY 2016 and way forward. Mr. Shobhan Mittal, Executive Director, and Mr. V. Venkatramani, CFO, of the Company addressed the conference call.
Key highlights

Greenply Industries has continued to deliver a stable financial and operating performance in Q4FY16, in a sluggish economy. This has been driven by expansion of operating margins and introduction of new products at different price points to cater to customers' requirements. This is a reflection of our proven quality, strong brand portfolio and well developed distribution infrastructure.

The Company expects that MDF business will be a key growth driver going forward due to beginning of necessary steps to setup a new MDF Plant in Andhra Pradesh which will be a key growth driver going forward. Further, reduction in working capital investments during FY 2016 was a significant achievement and it will continue to strive for better cash management in the coming quarters.

The company has registered net sales revenues grew 5.7% to Rs 452.83 crore in Q4FY16. Plywood revenues were up by 4.4% YoY to Rs. 323.82 crores, contributing 72% of net sales. MDF revenues grew by 7.1% YoY to Rs 126.69 crores, contributing 28% to net sales. New product Wallpaper contributed Rs 2.32 crores. Gross margins expand 260 bps YoY to 43.8%, led by improved capacity utilisations and better product mix. EBITDA margins up 240 bps YoY to 14.9% as Ad expenditure to sales at 2.5% in Q4FY16 compared to 1.2% YoY. PBT growth of 8.3% YoY to Rs. 53.84 crores. Adjusted PAT growth of 34% YoY to Rs. 39.88 crores (excluding exceptional items). Adjusted EPS of Rs. 3.30 in Q4FY16 compared to Rs. 2.47 in Q4FY15 (excluding exceptional items and after adjusting Q4 FY15 EPS for stock split in current quarter).

For FY 2016- Net Sales up by 6.1% YoY to Rs. 1656.09 crores. Plywood revenues up by 2% YoY to Rs. 1175.64 crores, contributing 71% of net sales. MDF revenues grew by 16.6% YoY to Rs 476.16 crores, contributing 29% to net sales. New product Wallpaper contributed Rs. 4.29 crores. Gross margins expand 270 bps YoY to 44.4%, led by improved capacity utilisations and better product mix. EBITDA margins up 191 bps YoY to 14.8% as Ad expenditure to sales at 3.2% in Q4FY16 compared to 2.8% yoy. PBT growth of 24.5% YoY to Rs. 172.73 crores. PAT growth of 21.8% YoY to Rs. 129.16 crores (excluding exceptional items). Adjusted EPS of Rs. 10.82 in FY16 compared to Rs. 8.79 in FY15 (excluding exceptional items and after adjusting FY15 EPS for stock split in current year).

The Company working capital cycle decreased by 9 days YOY to 43 days. Net debt to equity at 0.38 as on 31st March, 2016 as compared to 0.69 as on 31st March, 2015

The Company Ad expenditure to sales increased to 2.5% in Q4FY16 vs. 1.2% in Q4FY15. The Company plans to continue investments in increasing brand visibility pan-India, with Ad spends at around 3% of Net Sales.

Plywood: (A) Plywood production inclined by 10.9% to 8.84 million square meters (million sqm). (B) Average capacity utilisations wereat 109% as compared 98% corresponding previous quarter. Sales volumes grew by 6.9% to 13.41 million sqm. (C) Average net realisation of Plywood decreased by 1.7% to Rs 238 per sqm. (D) EBITDA Marginrose to 10.2% from 8.6% corresponding previous quarter.

MDF: (A) MDFproduction declined 7.1% to 45097 cubic metres. (B) Average capacity utilisations were at 100% as compared 108% corresponding previous quarter. Sales volumes fell 3.3% to 47432 cubic metres. (C) Average net realisation of MDFrose 10.8% to Rs 26673 per cubic metres.

PRODUCTION MODEL-Plywood – 70% in-house, moving towards an asset light set-up by increasing proportion of outsourcing. MDF – 100% in-house.

RAW MATERIAL SUSTAINABILITY- Plantation of fast growing and improved species of clonal plantations to improve quality of wood availability and plywood manufactured. Backward integration through 50% JV in Myanmar for production of face veneers.

The company holds largest pan-India player with 26% share of organised plywood market and 30% share of domestic MDF market. The company has 4 state–of-the-art manufacturing facilities for Plywood and 1 facility for MDF –largest in the country. With Plywood industry size of ~ Rs. 180 billion and MDF industry size of ~Rs. 16 billion, the company expects industry likely to benefit from rising residential/ commercial construction, increasing urbanization, high disposable incomes and Government Announcement regarding construction of 100 smart cities.

The Company hopes rising demand from the real estate sector, increasing urbanization, higher disposable incomes and growing middle class will be key industry driver going forward. The Company expects rollout of GST helps the industry to facilitate faster shift from unorganised to organised plywood players.

The company guides to increase the number of distributors and retailers going forward. Presently, the company has around 1200 plywood and 600 MDF distributors/stockist and 6000 plywood and 4000 MDF retailers. Also, serviced by 33 branches for ply and 15 branches for MDF pan-India.

The Company plansto optimise utilisation of plywood plants in existing facilities and increase outsourcing proportion to 30% from 22% presently over the next 3 years. Also, with plans to setting up new MDF plant in Andhra Pradesh over FY16-19 to cater to future demand.

The Company has continued upgrading IT infrastructure – implemented SAP Hana to strengthen overall supply chain and implemented Microsoft CRM Module.

The Company expects a ~6-8% growth in FY17. Margins expected to improve by 50-70 bps in FY17 driven by better product mix and cost control. Tax rate expected to increase to ~28% in FY17 from ~25% in FY16.

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