Greenply Industries is targeting revenue growth of 6-7 percent in the plywoods business for the current fiscal year and around 10 percent in Q1FY17, said Shobhan Mittal, Joint MD of the company.
Speaking to CNBC-TV18, Mittal said the company will grow 12-15 percent both in volumes and revenues in medium-density fibreboard (MDF) for FY17. Post capacity expansion, Greenply's new MDF plant will start production by Q2FY19, he added.
Below is the verbatim transcript of Shobhan Mittal's interview with Reema Tendulkar & Mangalam Maloo on CNBC-TV18.
Mangalam: The last time we spoke to you, you did indicate that you are witnessing some green shoots in demand. So has the demand sentiment improved and what kind of revenue growth do you foresee in FY17, both as far as your plywood business is concerned and your medium density fiberboard (MDF) business and also what kind of margins you expect in FY17?
A: In the plywood business the demand continues to remain challenging although we have seen some improvement in the first two months of the quarter although that is quite surprising to us as well but for us to say that the demand is improving, we would like to monitor the next couple of quarters before we can say that there is a change in the demand scenario and it is not just a blip.
On the MDF side, the market is healthy and we should expect about 12-15 percent volume growth and revenue growth this financial year. One a company level, I would say because plywood contributes majorly to the overall revenue, so we should be looking at 6-8 percent revenue growth in the current financial year. Reema: What has been the extent of improvement seen in the plywood business in the first two months of the quarter, April and May? Could you quantify it?
A: On a year-on-year basis it's about 15 percent on the revenue side on year-to-year basis but I cannot commit how the performance in June would be and on quarterly basis it will be hard to commit to that number at this point of time.
Reema: Isn't it fair to say but Q1 will be very good quarter for you because MDF is anyway growing pretty well, you are targeting a double digit industry growth, plywood, which is a chunk of your business has been growing slowly but this quarter at least 2/3rd of the quarter has been good with 15 percent topline growth. So shouldn't Q1 be a much stronger quarter for you?
A: No because on MDF side, what I said was it is an annualised growth. So for Q1, it is safe to say that we should be at 10 percent plus growth on country wide level but it is hard to say how June month would perform, sometimes we have scheme going on and dealers can do stock up in the earlier period and then in the subsequent month the sales are subdued.
Mangalam: You also have some capex coming on in your MDF front. So could you tell us what exactly will take that your total capacity to and at the same time when is it likely to come on board. What kind of utilisation are you foreseeing and therefore what kind of margins can one expect in your MDF business because they have surged to 26 percent in the last fiscal?
A: In the long run we are at 180,000 cubic meter capacity. We are adding another 360,000 cubic meter, which will make our overall capacity to 540,000 cubic meters per annum. The new plant, which is coming up in Andhra Pradesh, will start production around Q2 or Q3 of FY19. In the initial year of course we will have six months of production available. So in the first full years of operation, we are looking at about 50-60 percent capacity utilisation in the plant because it is a big plant and may have some teething troubles. However, in the long run the MDF business, it is fair to say that 22-23 percent operating margin will be sustainable across the business.
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