Ladies and gentlemen, good day, and welcome to Greenlam Industries Limited Q2 and H1 FY twenty-five earnings conference call. This call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Saurabh Mittal, Managing Director and Chief Executive Officer, Greenlam Industries Limited. Thank you, and over to you, Mr. Mittal.
Thank you. Good evening, friends, and welcome to the Greenlam Industries call once again. I'm joined by Ashok, our CFO, Samar from the finance team, and SGA, our investor relations advisor. I'm sure you all have had a look at the results, which was uploaded onto the website and to the exchanges early in the day. So I'll just give a quick brief about how business has gone, and then Ashok will take you through the numbers. Of course, we shall be happy to respond to your queries to the best extent we can. So on the business side, in Q2, you know, you've seen we've done about 680 crores of revenue. I think considering the onground situation in both domestic markets and international markets, we've done reasonably well in both quantity and value.
If you go category-wise, if you look at laminates business, this quarter, we've done our highest production and highest sales in quantity. The new plant in Andhra Pradesh, in Naidupeta, is also well stabilized. We have grown in both domestic and international market in quantity and value, and we believe with the information we have from ground, we have won more market share in both domestic and the international markets. In certain geographies in international markets we've done better than the other, and likewise in domestic, some markets we've done better than the others. But by and large, our focus on, you know, domestic markets across the country, several international markets. Several international markets we've opened, we are seeding in markets to build business in a more meaningful way.
So across categories of products and geographies, we are pushing and we are looking at winning more business and more market share. You know, on the margin front, too, if you look at the Q2, you know, we have additional costs versus what we had last year in Q2, and because the new plant was operationalized in end of September of 2023 . So there is a bit of a higher cost at both the post-EBITDA in the interest and depreciation and in the cost in terms of people, resources, et cetera, right? On the realization front, also, we've been able to improve realization by a few percentage.
And we've been focused on both driving more volumes and consistently working towards driving a better value mix in both domestic and the export market. In the domestic market, we took a small price increase towards middle of September, and we have raised domestic prices about 2.5%-3%. In the exports, we've not had any, no price increases as yet. Then coming to veneer and allied segment, there too the performance has improved. We've become a bit positive in the veneer and allied category. The flooring and door segment we see decent action now, and with the several real estate projects, you know, coming for closure or for fit outs, we think the door and floor business will continue to do better as we move ahead.
On the plywood business, the factory side is quite well settled. The feedback from the markets we're operating in, in terms of quality, delivery, is also quite strong. We have expanded, as we said earlier, into Maharashtra, in the month of April. So we are now in the markets all the five southern states and Maharashtra. So certain channel network is yet to be completed in Maharashtra, which we think should be done over the next three to six months. We did a price increase in plywood, too, towards in July, actually, and that was about 3.5%-4%. We've also, you know, improved. That also helped us improve our realization in the plywood business.
We're still away from achieving, you know, the desired results in plywood, but I think at the run rate we are going now, we think we'll keep improving as we proceed in the plywood business. On the particleboard side, you know, as we've been communicating, so within this quarter, we will be able to commence commercial production at the Andhra Pradesh plant. And the readiness in terms of teams at the factory, teams in sales, marketing, you know, dialogues with channel partners, OEMs, is also going at a pretty good pace. So the teams are, by and large, well prepared to start the plant and also start selling and start marketing the products. So the preparedness to launch, you know, looks to be under control.
And so that's on the particleboard side. Yeah. So that's broadly, you know, from our side. We're not going too much macro data, you know, of housing and, you know, commercial leases and construction happening. We believe all that, you know, by and large, looks quite positive, and most of the, you know, construction activities will need interior fit outs and spur demand for our categories and products in India. Globally, despite the challenges of slowdown, recession, et cetera, which we feel, we think we're still in a good position to take more market share, considering our strength in terms of production capacities, capabilities, quicker turnaround time, slightly more cost competitive than the, you know, international players, backed up with a local team which works with customers, you know, at OEM market X, Y, Z.
So I think from a strategic point, not much has changed, you know. I think we continue to move in a certain direction. So I think broadly, that's it from my side. I will have Ashu take you through the, you know, through the numbers and growth and percentages, et cetera. Ashu, over to you.
Thank you, sir. Revenue trend and financial performance for the quarter and for the half year. Consolidated net revenue for the quarter grew by 12.8% on year-on-year basis, and grew by 12.6% on a sequential basis, to INR 680 crores in this quarter, as compared to INR 603 crores in Quarter Two last year. Gross margin grew by 20 basis points to 51.6% in this quarter, from 51.4% in Quarter Two last year. However, on a sequential basis, gross margin de-grew by 40 basis points. Gross margin in absolute terms grew by 13% to INR 351.5 crores in this quarter, as compared to INR 310 crores in Quarter Two last year.
EBITDA margin was down by 50 basis points and stood at 12% in this quarter, as compared to 12.5% in Q2 last year. On a sequential basis, EBITDA margin grew by 140 basis points. EBITDA margin was impacted in this quarter on account of new operational cost of new plant, which was not there in Q2 of last year. EBITDA in absolute terms grew by 7.7% to INR 81.4 crores in this quarter, as compared to INR 75.6 crores in Q2 last year. Net profit for the quarter stood at INR 34.4 crores, as against INR 39 crores in Quarter Two of last year. This is on account of increased depreciation and interest cost on the melamine laminate unit and plywood unit.
Now, I'll move on to half yearly. Consolidated net revenue in this H1 grew by 14.9% from twelve point 1,285 crores last year. Sorry, it grew to INR 1,285 crores as compared to INR 1,119 crores in last year. Gross margin was flat at 51.8%. Gross margin in absolute terms grew by 14.9% to INR 666 crores in this H1, as compared to INR 580 crores in last year. EBITDA margin was down by 120 basis points, and stood at 11.3% in this H1, as compared to 12.5% in last year. This was on account of operational cost of new plants.
EBITDA in absolute terms grew by 3.9% to INR 145 crores, as compared to INR 140 crores last year. Net profit degrew by 24.5% and stood at INR 54.3 crores in this H1, as compared to INR 72 crores in last year. This was again on account of increased depreciation and interest cost on the new plant. I will now move on to the segmental performance. In the laminate, in this quarter, we had the highest production, highest sales in terms of volume and value. So laminate revenue grew by 12.4% on year-on-year basis, and grew by 11.7% sequentially to INR 597 crores in this quarter, from INR 531 crores in Quarter Two last year. Volume growth stood at 9.4% on year-on-year basis.
Domestic laminate revenue grew by 15.5% year-on-year, and grew by 17.3% on a sequential basis in value terms. Volume growth stood at 13.8% on year-on-year basis. International laminate revenue grew by 9.6% year-on-year, and grew by 6.9% on a sequential basis in value terms. Volume grew by 3.9% year-on-year basis. EBITDA margin of laminate, laminate stood at 14.7%, a de-growth of 117 basis points year-on-year, and a growth of 110 basis points on quarter-on-quarter basis. Production volume were at 5.61 million sheets at a utilization level of 92%.
Sales volume for the quarter stood at 5.39 million sheets, with an average realization of in this quarter at INR 1,070 per sheet. Move on to half yearly basis. Laminate revenue grew by 12.8% on year in comparison to INR 1,131 crores in H1 last year. Domestic laminate revenue grew by 10.5% in value terms on year-on-year basis, and volume growth stood at 12.3%. International laminate revenue grew by 15% in value terms. Volume grew by 8.2%. EBITDA margin stood at 14.2%, a de-growth of 150 basis points in comparison to last year. Production volumes were at 10.7 million sheets, at a utilization level of 87%.
Sales volume for this in this H1 stood at 10.06 million sheets, and average realization in this half year was at 1,086 per sheet. I'll move on to another segment, decorative veneer and allied, which includes decorative veneer, engineered flooring and engineered doors, and revenue of decorative veneer business de-grew by 10.1% on year-on-year basis and but grew by 65% on sequential basis to INR 32.4 crore in this quarter, from INR 36 crore in quarter two last year. Volume de-grew by 11.7% on year-on-year basis. Revenue of decorative veneer business de-grew by 15% to INR 52 crore in this half year, in comparison to INR 61 crore last year. Volume de-grew by 16% in this half year, in comparison to last year.
Sales volume in this quarter stood at 0.35 million square meter, and in this half year, at 0.56 million square meter. Capacity utilization in this quarter is 39%, and for the half year stood at 29%. Average realization for the quarter was INR 929 per square meter, and for the half year stood at INR 927. I'll move on to engineered wood flooring. Revenue for the engineered wood flooring business grew by 6.2% on year-on-year basis and grew by 5.7% on sequential basis, to INR 14.1 crore as against INR 13.3 crore in quarter two last year. For the half year, revenue of engineered wood flooring business grew by 16.7% from INR 27.5 crore last year.
INR 27.5 crore in this half year in comparison to INR 23.6 crore in last year. Capacity utilization stood at 15% in this quarter, and 14% for the half year. Moving on to engineered doors. Revenue of doors business grew by 39% on year-on-year basis, and grew by 15.8% on sequential basis, and stood at INR 11.4 crore in this quarter, as against INR 8.2 crore in quarter two last year. For the half year, revenue of doors business grew by 39.8% and stood at INR 21.2 crore, in comparison to INR 15.2 crore in last year. Capacity utilization for the quarter stood at 23%, and for the half year stood at 22%. Now, I will move on to another segment, plywood segment.
Revenue of plywood business stood at INR 26 crore in this quarter, and INR 53.6 crore in this half year. Sales volume for the quarter two stood at 101.02 million sq meter on notional basis, and 2.16 million sq meter for the half year. Capacity utilization for the quarter and for the half year stood at 23%, and average realization for the quarter is INR 250 per sq meter, and for the half year is INR 244 per sq meter. In the current quarter, our working capital cycle improved by one day to 59 days, as compared to 60 days in the quarter two last year. Net debt stood at INR 992 crore, which includes a debt of approximately INR 477 crore on account of particleboard project, which is in progress.
That's all from my side. Now, I'll open the floor for the question and answer.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Sneha Talreja from Nuvama. Please go ahead.
Good evening, sir, and thanks a lot for the opportunity, and congratulations on great market share in the domestic market, especially. I just wanted to understand, what are the trends that you're seeing in domestic market, and the reason for sharp increase in market share, especially what you are seeing in FY 2025?
The question was about domestic market share, Sneha?
Yes, sir.
So, what do you wish to know? Can you just again please-
What are the reasons, you know, for increase in market share, especially in the domestic market?
There's no one particular reason. I think it's just consistent working, you know, across the market, you know, improved supply chain, better turnaround time, you know, multi-location plants, one south, one west, two in north. The warehousing strategy put across, the teams on ground, and the product portfolio. I think it's a combination of multiple factors. I can't say just one particular thing right now.
What I basically just wanted to see is, you know, we have been seeing strong market share in the domestic market in the laminate side, but we haven't seen
Right.
Same kind of, you know, good performance, I would say, in case of plywood or be it, you know, veneers, where, you know, we used to do much, much better numbers in the earlier times o r be it flooring or doors. Is it because in those segments, you know, you are focusing a lot on the premium end, and laminates you have launched a lot of medium-end products? Or I would say, you know, compared to, you know, your earlier premium end products, you've gone into the lower end?
No, so in laminates too, our price realization, our value mix improvement is constantly going up, and it may not be completely appropriate to say that other segments we're not doing pretty well. Yes, we could do better. So ply, if you see, we're just like what, six months old in the business, and our realization probably will be comparable to the market leaders. We already are at a nearly INR 100 crore run rate, and I think number of dealers we've set up in South India is more or less in place. Maharashtra, we just launched. So I think we are winning, you know, business in plywood also, in the segments we are present, you know, and in the states we are present.
Flooring, doors clearly are, you know, growing well, and we think this will only improve. Veneers, yes, there's a little of a struggle versus H1 to H1, but versus Q1 numbers have come up. So I think every segment represents, you know, different, slightly different challenges, while all go into, you know, interior application or certain interior application. But every segment has different set of, you know, competition, different challenges. Yeah.
Neha, just to add what Saurabh said, in the flooring and doors, even though the business is small, but if you see on a half yearly basis, floors has grown by 16.7, maybe 17%, and doors has grown by nearly 40%, and we hope that they will continue to do well, in the future.
No, that's commendable, but the fact that, you know, I mean, after long, long years, you know, we are yet to meet those kind of EBITDA numbers which we had visualized, and, you know, in terms of laminates, it's coming through. So that was the comparison I was trying to make.
No. So I think it's a fair comparison to an extent, but, but clearly, I think the, the other segments, you know, flooring, door, plywood, you know, veneers, we think will also, you know, do well and, and, and scale up. Especially, we think floor, door will also become a segment. Ply also will keep growing, so, we don't, like, doubt that those segments will not do well. But sometimes it just takes a bit more time with certain interruptions and challenges, because we're also expanding the category. In both flooring and door, you know, we are also creating a market, expanding the category, so there are certain challenges. But, it, it's all moving up. That's our guess. You know, veneer you can say there's a bit of a blip, you know, in H1.
Otherwise, after two, there was a growth in business versus, you know, versus FY 2023. I'm not sure what the number is, but yes, I get where you're coming from.
Understood, sir. So secondly, on the particleboard side, are we on track for Q3 FY25 commissioning? And more importantly, we have been hearing that in MDF there is very lack of, you know, imports coming in, thanks to the container availability and freight issues. How is that tying up in the particleboard side, given, you know, there used to be a lot of demand which used to be earlier met through imports?
I'm so sorry, Sneha, your voice is not coming so clearly. I think first question was, are we on track for Q3 commissioning? The answer is yes. You know, so, so we are on track for Q3 commissioning and commercial production in Q3. And what was your [crosstalk]
And what is the scenario in particleboard at this point of time?
The sense we have that import is not so much right now as board, but maybe boards are coming in as furniture, you know, maybe commercial furniture or other forms of furniture, but not so much. There is some imports coming in, but it's not like an oversupply of chipboard as boards coming in, but as furniture, maybe it's coming in because as you know, particleboard is a large consumption market in the OEMs, and so maybe at times boards don't come in, but it comes in form of a finished good or a semi-finished goods.
Understood. And in terms of realizations, would we have any sense that what are the imported prices currently, and where are we looking at our target segment?
So import prices may not be again because imports which come in are either just plain boards coming in or they are premium pre-laminated boards coming in. So plain boards are pricing will be similar to imports. But you must keep in mind if you are trying to draw a comparison with MDF, particleboards will be a largely pre-laminated particleboard market and not a plain board market, you know, where you'll have probably over 80% of laminated boards and maybe about 20% and lower of plain board eventually. You know, this could change for some time while in MDF, maybe it's a bit different. So particleboards are sold largely as laminated boards for the OEM segment. So I think you just need to keep that in mind. Yeah.
Understood, sir.
May I add to what sir has said? In the particleboard, there are lot more sizes which are in use in comparison to MDF. So there is not an apple-to-apple comparison or there is an advantage over the guy who's procuring it domestically in comparison to imports.
Understood. Understood. That is helpful. Thanks. Thanks a lot, sir, and all the very best to you, and I wish you all a very happy Diwali!
Thank you, and wish you a happy Diwali, too.
Thank you very much. Our next question is from the line of Keshav Lahoti from HDFC Securities. Please go ahead.
Hi. Thank you for the opportunity. So firstly, congratulations on great set of numbers on laminate business side. Just want to know that laminate plant is already operating at high utilization. Don't you feel now the time is right, the company should plan for expansion because if the demand comes up strongly, the company might face capacity constraints?
Yeah. Thank you, sir. So if you see on the half yearly basis, we are at around 87%. And this plant, in the past also, we have run that plant more than 100%. It can go 110%, 115%. So we believe right now we have enough capacity in terms of that, from 87%. Still we have enough capacity as of now. And for the expansion, as we have told in the past also, we have mentioned in the past also, that two of our plants, which is Gujarat plant and the Naidupeta plant, have the space for the brownfield expansion, so which can happen in a much shorter time in comparison to greenfield expansion.
So we are keeping a watch on the situation, and as and when a requirement comes, so we can very quickly, within a span of, let's say, at most three quarters, we can increase the capacity on a brownfield basis.
Understood, but what is stopping the company to have capacity two quarters in advance? Is it the balance sheet or what? Because I understand you can operate at 110% utilization, but possibly you might face, you know, capacity constraints for a few of the product segment.
That's not the case as of now. So if you see the 87% utilization, which means around twenty, twenty-two percent, still we are 25% more than what we are operating as of now. So we don't want a situation unnecessarily put the capital and then, probably wait for one year, two years for the utilization. We are keeping a watch, as I mentioned, that on a regular basis in terms of that, and we'll take the decision at an appropriate time.
Understood. Got it. So now, coming on the ply segment, normally, ply is a new segment, so ideally there is expectation the volume should at least rise sequentially, and this is the first quarter where ply volume have declined sequentially. So the ramp-up is possibly, you know, not as expected. So how should we see an earlier, some sort of, you know, 40% kind of a utilization you are looking for FY25? So how is that number looking like, and when will it break even?
So, it breaks even at 35%-40%. That's what we said. So we stick to that. Yeah, in this year, it is not going on as per the plan, in terms of that. So, due to n number of reason in terms of that, first quarter was the excessive heat and all the issue also was there. So we have opened, we have entered into Maharashtra in the quarter one, and it's only a quarter since we have entered into Maharashtra, and we are hopeful that that should bring the good result in the third and fourth quarter in terms of that. Our overall, on an annual basis, 40% utilization looks to be difficult, and we hope that we will be able to break even in next year.
You said break even in FY 2025 or next year? Sorry.
Yeah. Next year.
Understood. Got it. That is helpful. I'll come back in queue. Thank you.
Thank you.
Thank you very much. Before we take the next question, we would like to remind participants that you may press Star and One to ask a question. The next question is from the line of Udit Gajiwala from Yes Securities. Please go ahead.
Yeah. Thank you for taking my question, sir, and congratulations on great set of numbers. So firstly, on the particleboard, and next year, FY 2026, what kind of utilization rate are we aiming for?
So, hi, Udit. So this, so in this quarter, we are planning to have the commercial production, and the next quarter, Q2, will be first quarter, and next year will be the first full financial year. We hope to have near about around 40%-50% of capacity utilization in next year.
And so 45-50 is what you had earlier mentioned, that we break even at that point. Is that understanding, right?
Yes, depending upon what kind of a product mix, but we hope so that we should break even.
Understood. Understood. And so given the, you know, export demand, et cetera, you know, we have grown fairly, we have also gained market share, but this kind of 15%-17% volume CAGR is something that we should expect that it will continue for coming two years?
The volume CAGR is not 15%. In the value, it is, yes, it has grown, but it's difficult to comment in terms of that, whether the CAGR, we will stick to our overall guidance, which we see in terms of that, but intention is the same, which is to take that business in that direction only.
Got it. And so 20% or 22% or something, an annual overall growth guidance that you are expecting for 2025, is that right?
18%-20%, we have told in the past, and we will stick to that.
Got it. Got it, yeah. And so lastly, just on the debt part, I mean, I understand that the major debt is pertaining to the particleboard, but do you have any debt repayment schedule which would commence, and if so, then by when will it schedule?
It is started in this year, and it is being serviced as per the maturity, and as per the plan, it is getting mature. Major portion of it will start from next year on.
Got it, sir. Thank you. I'll come in the queue.
Thank you.
Thank you very much. The next question is from the line of Bhavin Rupani from Investec. Please go ahead.
Yeah, hi, sir. Thank you so much for the opportunity. My first question is related to particle boards. Sir, we understand that Merino, which commissioned plant one year back, is running at almost 30% utilization. Recently you mentioned that we expect 40%-50% utilization in next year itself. Now, with new capacities from us as well as Century Ply coming up, what gives us confidence to reach 50% in FY 26?
So, I'll take the question. Yeah. Yeah, so, I think CFO mentioned 40%-50% utilization we should expect in FY 2026 for particle boards. And, I'm not sure what numbers is Merino currently running at, but I think, you know, with the alignment of the team, the ability to build a channel, alignment with the Greenlam brand of laminates, the access to OEMs, architects, IDs, and the price point at which this product, you know, is positioned, we think we can ramp up, you know, to that extent in the course of operation. Which is after the Q4 of FY 2026 financial year, but we start commercial production in this quarter, and next quarter becomes the first quarter.
Got it, sir. And sir, second question is related to debt. When do you think we will have a peak debt in FY twenty-five, and what amount?
This quarter our debt was around INR 990 crore. We had some additional, I think, working capital blocked on account of GST, something which is getting resolved. We are hopeful that in next six months, it should get resolved. We believe that our net debt should be in the range of around INR 1,025 crore , within between INR 1,000 crore- INR 1,050 crore. This is in the FY25, and we hope to reduce our debt to come down from next year.
Got it, sir. Thank you so much.
Thank you.
Thank you very much. The next question is from the line of Utkarsh Nopany from BOBCAPS. Please go ahead.
Yeah. Hi, good evening, sir. Sir, my first question is for the plywood segment. Sir, like, we are operating the plywood segment at a pretty low utilization, as we are just catering to the premium segment, whereas our major peers are seeing major growth in the economy range category. So as we are operating at suboptimal rate, then why we are not planning to tap the economy range to quickly ramp up our plant?
I'll take that question first. So on the plywood, while you know what you're saying is logical, and we also kind of understand the story, I think we just are trying to have some patience on and keeping the focus on building the, you know, premium end of the plywood, the branded plywood, self-manufactured plywood model. We think it's too early for us to shift gears on that, and as you probably know that we just covered, you know, South India at the moment, the five states which we started last year, and Maharashtra has just started. We haven't even, like, gone out of five states, and we will gradually keep expanding, you know, and adding certain markets. So we think we still need to wait some more time and build that segment.
The feedback on ground wise, numbers may not, you know, show the picture at the moment of what's happening on ground. The feedback on ground, with the kind of focus our teams have on that category, with the quality of products we are getting out in the market, and the effort in the market of building secondary sales, building secondary demand activity, is quite good. So if we shift gears right now, I think while the volume objectives might be met in the short term, but I think the medium-term objectives of building a solid brand. Because in that space, we think, you know, there is no focused company or brand at this point. People are a bit distracted into multiple things.
And if you go lower, you also, you know, lower the quality, price points also come down. The kind of equipment, product quality we are throwing at, we think we just need to hold on and have some more patience and settle that part of the market. That's our line of thinking right now. Right or wrong, I don't know, but that's really the line of thinking. And we've just gone up to, you know, certain states at the moment. We have the opportunity to go out to more parts of the market before we really come down to the mid-category, you know, pricing, product.
Okay. And sir, with this strategy, like, when can we expect our plant to get ramped up to around, say, 60-70% utilization rate, in your viewpoint? Any timeframe?
Yeah, so from a plant side, like I said earlier in my comment, that plant side is quite well prepared in terms of the product quality, production, operating parameters. You know, with what we're doing, it, it's going pretty good. I think we've turned it around quite quickly. So coming to the break-even point comes at about 40%, approximately, plus/minus utilization. So our sense is hopefully, you know, maybe in about 12 odd months, maybe next year, we should get there. While obviously our efforts are, you know, to drive this as early as possible, maybe another year or so is where we can, you know, kind of expect the plant to come to 40% or 50%.
Okay. So my second question is on the laminate segment. So I was just comparing your margin profile versus our major peers. So we see that our major peers' margin has contracted sharply over the past, say, three years period, where our margin profile has remained relatively stable. So just wanted to know what we have done so different that our margin profile has not got impacted with the sharp contraction in the margin profile of most of our peers?
I guess you're talking to one direct competitor, so I can't say exactly what we've done different. So maybe we've not done too many different things. I think we just kept the focus, and we've always said we've had pricing discipline. We've focused on the value mix as well as the volume mix. I think the two new plants we started. I said that earlier to Sneha, too, you know. Now we have plants in South India, West India, and North India. Two plants have already been there for the past. I think a mix of locations, multiple warehouses, and the person if you talk to a nearest competitor about the nearest competitor. Maybe they have not grown so much in exports. I think international business for us has also grown. The domestic piece also has grown.
So I think I'm not sure, you know, what have they done different or we have done different, but so clearly, I think just we, we've been focused on. And we've been on a certain journey for a long time. So I think, you know, we've started in terms of branding and pricing discipline and products, et cetera. So I think it's a combination of several factors, but I'm not sure exactly, you know, what's happened there, but I can say about ourselves.
Okay, sir. Lastly, like on the balance sheet part, like, our net debt to EBITDA ratio has now gone into a vulnerable range of more than 3x. So do we have any plan to raise equity to improve our balance sheet position in near future?
So, as of now, we don't have any plan of doing so. We believe that FY25 will be the peak debt in terms of that. And as the new project also starts commercial production, which will add into EBITDA, and that will help us in terms of bring down this one. We believe the situation will be better in next nine period.
Okay. Thanks a lot, sir.
Thank you very much. Before we take the next question, we would like to remind participants that you may press star and one to ask a question. The next question is from the line of Divyanshi Mahavar from the Dalal & Broacha Stockbroking Private Limited. Please go ahead.
Thank you for the opportunity. I have just one question, that if you look at the particleboard CapEx cost per unit, previously we were at a quarter higher, around, I think, thirty thousand per cubic meter. And if you see other MDF projects which are, have been recently completed, they say around, it is around twenty-one thousand, range between twenty-one to twenty-five thousand. So given that particleboard fetches significantly have a lower realization compared to MDF products, so can we think of that we can clock a low double-digit ROC on this project if we able to utilize the plant at a full capacity utilization?
So Divyanshi, this in terms of CapEx per unit of particleboard versus MDF. So this will depend upon the apple-to-apple comparison, which means the equipment should be from the same origin or same source. So if you are comparing European origin equipment with other than European, which can be Chinese or anything else, so then there can be a huge difference between the cost per unit CapEx. If you compare on the similar line, then the situation will be different than what you are suggesting.
We believe our equipment are from Germany and Europe, so which has a high CapEx cost at the initial stage, but that the higher life of these equipments are very high in comparison to other equipment, other source of equipment, and this brings in a lot of operational efficiency at the plant level. We believe initial level, so we have taken that call and invested a bit higher in comparison to, let's say, Chinese or any other equipment, which will help us in the longer term.
Okay. So can we assume the ROC will range between 15% to 18%? And what kind of realization and EBITDA you are looking, you are assuming to have from that plant?
So I just want to add here, when you do CapEx comparisons, it also depends on what are you comparing with what. So ours is a greenfield, and we have space after this plant to put one more line in the same plant. And when you do a brownfield, a lot of your incremental costs come down, so I'm not sure what the comparison base is. And I'd also like to add, like I said earlier, in conversation, I think it was clear somebody, that particle boards is largely a laminated program. It's laminated boards, which gets sold, which gets sold more than, you know, every, than the plain boards. So there is a little extra investment in terms of the equipment, presses, plates, the kind of machines you run. So I think, an apple-to-apple comparison may not be completely fair.
We have seen. I must also comment here. We have seen in Europe and certain other markets also, where margins of particleboard on a steady state, if the right pre-lamination mix is done, is equal or at times even higher than the MDF. Obviously, it depends on the RM costs and the mix, et cetera, but you must just keep this in mind. I think you had another follow-up question.
Follow-up question is that, can we assume to have 15%-18% ROC at the end? And what kind of realization EBITDA you are assuming for that plant? What's your assumption for that? That's what, EBITDA realization we can do.
Yeah. So, Bhavin, if you see right now, the timber cost is at elevated level. So in terms of realization costs, this will vary from the plain to prelam, and in the prelam also, what kind of a product which you are selling, this can range from INR 25,000 - INR 28,000 and even INR 30,000 also, depending upon what product, prelam product you are selling. And in terms of EBITDA level, it can, at optimal level, it can range between 20% - 24%. And your next question was in terms of ROC. At this moment, it's because of the timber prices are on the higher side, so this looks lower.
On a stable timber prices, so then the ROC can be in between 16% to 18% to 20%.
Okay, sir. Thank you, sir, and wishing you a very happy Diwali to all the management team.
Thank you.
Yeah, thank you, and wish you the same.
Thank you very much. The next question is from the line of Nitin Shakder from Green Capital Single Family Office. Please go ahead.
Hi, good afternoon. This is Nitin Shakder from the Green Capital Single Family Office. My one question to the management is, in my conversations as an investor with some of the companies, we've seen that there's some increase in raw material costs, like paper and other raw material, which is raising the production of both
Sorry, your voice is not so clear. Sorry, your voice is not so clear. Please, once again.
Hello?
Yeah, please go ahead.
All right. So in my conversations with some of the companies as an investor, there's been an increase in raw material costs for, let's say, paper and other materials to go into production.
Your voice is still not audible. Please, can you use your handset and be clearer when you ask the question?
Okay. Hello, am I clear now?
Yes, sir.
Much better.
You go ahead.
Thank you, better.
Yeah. Hi, good afternoon. In some of my conversations as an investor with a couple of companies, there's been an indication that there's been an increase in raw material costs, like paper, and obviously we're aware of international export high freight costs. So if that were to be correct, is there anything that the company is doing to offset the higher raw material costs? And when do you expect the situation to sort of normalize towards more lesser costs? Thanks.
We are assuming this question is related to the laminates business, where we buy and consume a lot of paper. We said that earlier, that in September. Firstly, yes, you know, certain grade of kraft paper, certain costs have gone up. You know, there has been a small increase in certain deco paper costs, some chemicals. But by and large, you know, there's been some increase, some decrease, you know, in the costs, you know, nothing of very major significance, as can be seen in our gross margins. While having said that, we have taken a small increase in the domestic market in September, about 2.5%-3%, we mentioned that too.
On the freight part, on the export freight, you know, I think we said that earlier in the conversations. We have a minimum, you know, cost on the FOB of the sea freight which we bear, beyond which the surcharge, you know, is passed on to the customers for the incremental freight. That incremental freight surcharge has softened a bit, which we also mentioned earlier, you know, from September onwards. So this is the sense we have. If Ashok wants to add something else.
Okay. So just as a follow-up, so what I've given to understanding is that on the laminates business, you're saying that the cost increase is not that high to have a significant impact on the margins. Would that be correct?
You could say that. Like, we said domestic, we already did the increase of the cost. Yes, there is some increase, but with increased production, better value mix, you know, you can kind of offset that to some extent. We could say that, yes.
Oh, okay. Thank you, and Happy Diwali to the Greenlam family.
Thank you so much.
Thank you very much. We would like to remind the participants they may press star and one at this time to ask a question. Participants who wish to ask a question may press star and one at this time. As there are no further questions, I would now like to hand the conference over to the management for closing comments.
Thank you everyone for taking out the time and joining the call today. For any, in case you have any further query, you can get in touch with us or the SGA, our investor relations manager. Thank you, and wish you a Happy Diwali to all of you.
Thank you, everyone. Wishing everyone a very Happy Diwali.
Thank you, everyone. Wish you all a very Happy Diwali.
Thank you so much. On behalf of Greenlam Industries Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.