Ladies and gentlemen, good day and welcome to the Greenpanel Industries Limited Q2 and H1 FY 2026 Earnings Conference Call. 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 call, please signal an operator by pressing star, then zero on your touch-tone phone. I now hand the conference over to Rishab Barar from CDR I ndia. Thank you, and over to you, sir.
Good day, everyone, and thank you for joining us on the Greenpanel Industries Limited Q2 and H1 FY 2026 Earnings Conference Call. With us today, Mr. Shobhan Mittal, Managing Director and CEO,Yeah Mr. V. Venkatramani, Vice President, Finance, and Mr. Himanshu Jindal, CFO. Before we begin, I would like to state that some statements made in today's discussion may be forward-looking in nature and may involve risks and uncertainties. A detailed statement in this regard is available in the results presentation that was sent to you earlier. I would now like to invite Mr. Shobhan Mittal to begin the proceedings of the call. Over to you, sir.
Thank you. Good evening, ladies and gentlemen, and welcome to our Q2 FY 2026 earnings call. While Q1 was a tough quarter, I'm happy to share with you that the change of strategy to drive volume growth and simultaneously improve cost base played well for us, leading to the turnaround of both operational and financial parameters in Q2. The year began with re-energizing our sales team and the channel by rewarding the top performers with a gathering in Bali, Indonesia. This was followed up actively by increasing our outreach through both digital and conventional means, ground activation, and branding amplified across the 7,000+ dealer and sub-dealer outlets, and broadening our trade engagements. Cumulatively, more than 13,000 participants have engaged with us so far during H1.
The revamped Loyalty Program app has now been in play for the last five months and provides the most seamless experience for our partners and the associated carpenter fraternity. New product offerings launched during H1 include HDWR Outdoors, thin MDF, and fire-retardant MDF, and were supported with product-specific campaigns across the country. As a result, our domestic MDF volumes grew by 30.5% YoY and 26.8% sequentially, while export volumes were almost flat during Q2. We did realign the pricing premium in MDF with our relevant peers. This was more of a product-cum-customer level interjection to maximize throughputs instead of a pan-India approach. Overall realization was lower by 4% YoY.
Just to qualify this further, almost half of this was attributable to the change in product-wise salience post-addition of the new plant at AP and also increase in OEM sales, implying a net reduction of only 2% on account of price realignment. On the plywood side, while the volumes were still lower by 5% YoY, we did have 18% growth sequentially. Consolidated revenues for the quarter thus grew to INR 389.4 crores, a growth of 17.1% YoY and 20.7% on a sequential basis versus Q1. Consolidated operating EBITDA, excluding the impact of currency movement on the euro borrowing for the new plant and other one-offs impacting the quarter, was stronger sequentially and almost at par with last year at INR 39.7 crores or 10.2% of revenues, MDF at 10.7% and plywood at 4.6%. On the industry front, the operating environment continues to evolve.
Realizations are stable at the moment, and we don't expect any material change, at least immediately. With improved supplies, timber costs continue to soften sequentially. With every passing quarter, albeit cost of chemicals remain elevated for now. This is expected to moderate from end Q3. The expected green shoots remain intact to support domestic demand growth on MDF. No further meaningful capacity additions in the sector. Stricter implementation of BIS norms is continuing with QC on furniture, with QC on furniture too expected early next year. MDF imports slowed down. Run rate for Q2 was less than 1,000 cubic meters versus 20,000 cubic meters per month average during the second half of the last fiscal year.
On the revised guidance for the year, counting the developments so far in Q1, we now expect domestic MDF volumes to grow in the high teens this year and operating EBITDA, excluding FX and one-offs, of high single-digit to early double-digit average for the full year FY 2026. With this, I request the CFO, Mr. Himanshu Jindal, for the financial and other updates. Over to you, Himanshu. Thank you.
Thank you, Shobhanji. Good evening, all. Q2 was way stronger than the preceding quarter, and this was primarily due to the double-digit volume growth that we've seen in our domestic MDF business. Additionally, there were very clearly concerted efforts on the operational front, which helped improve profitability and cash generation for this quarter. So we revisited our organizational structures. We strengthened our processes and reworked on our procurement and operational strategies. As a result of this, sequentially, we were able to significantly reduce our operating cost of production, the impact of which is 5.5% on our margins in this quarter versus the last Q1. Half of these savings came in from raw material optimization, while the balance was a result of improved consumption efficiencies, largely power and fuel across our three plants. Certain exceptions continued to weigh in on our financial results, though.
The biggest being the adverse exchange rate movement on our outstanding euro-denominated borrowings, the impact of which is INR 12.5 crores during the quarter. On a cumulative basis for the first half, this is roughly INR 40 crores. Most of this is unrealized MTM non-cash loss. Apart from this, there is also an impact of INR 20 crores in the form of the incremental interest and depreciation in the first half results on account of capitalization of the new plant. Counting these in, the reported EBITDA was INR 27.8 crores or 7.1%. The PBT was negative INR 8.9 crores, and the PAT was negative INR 6.1 crores. Apart from the positive cash flow generation from operations, there has been a significant cash release from our working capital as well in this quarter.
So our cash conversion cycle has reduced by 17 days versus 30th June, which is largely on account of lower inventories, both finished goods and raw materials. As a result, the net debt has reduced by INR 60 crores versus where we were on 30th June, to INR 173 crores. If we count out the non-cash FX change, which is largely marked to market at this point in time, the actual net reduction was INR 71 crores during Q2. With a comfortable cash and net debt position, zero utilization of our funded working capital lines, our balance sheet remains healthy to be able to support scale-up going forward. On that positive note, I think we can open the Q&A.
Sure. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask questions may press star and one on the touch-tone 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 questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. First question is from Praveen Sahay from PL Capital. Please go ahead.
Yeah. Hi, sir. Thank you for the opportunity. My first question is related to your guidance related to the MDF volume guidance, which was nearly around 550 K CBM for 2026. So you are maintaining that, and even on the margin front?
As mentioned in my comments, we've revised the guidance to say that our domestic business growth will be in the high teens compared to last year's volumes. Export business, of course, has been quite opportunistic for us, primarily on account of it being a commoditized business in nature and margins, of course, being much slimmer than the domestic business. So as of now, the export business is. We've not satisfied the requirements purely due to pricing pressure and due to the geopolitical disturbances in the Middle East, which is our primary market. And we are still not seeing a complete recovery of that segment. So that is why we are saying that on the domestic side, we'll have a high teens growth.
Also mentioned in my comments was on the margin front, we'll have a high single-digit to a low double-digit margin for the rest of the year on an average basis.
Okay. Secondly, on the new capacity, how is the new capacity in the south ramping up? How is the utilization right now, if you can indicate?
Himanshu, you have the exact utilization percentage, right?
It's around 40 speaking up and I think, Praveen, what we need to understand, today, all the three lines are capable to produce everything that I need for the markets. So we try and optimize wherever we can based on economics. This is the way we should look at. I think 40 is the number where we were in this quarter, and let's see how things shape up now.
I think for everyone's clarification, because this question might come up going forward as well, the thin line is capable of producing thin MDF but also capable of producing thick MDF. What we are now trying to do is to divide our entire production in the most optimum manner, both geographically and technically, among the three lines. It's possible that certain products from the older lines may shift to the new lines as well in that sense to run all three lines efficiently. It's now fungible. The capacity is across the three lines.
Okay. Thank you, sir, for this clarification. The next thing is related to the EPCG benefit for a quarter. If you can indicate how much is that?
So that's INR 6 crores in this quarter. And prior to that, the quarter one, it was INR 5.1.
Yeah. Well, also on the forex loss, apart from the INR 40 crore of the forex loss, do we expect a similar in the quarter also, such kind of numbers to come in?
See, I think what we saw was kind of unprecedented. See, I think we have been hit more on euro, yeah, euro dollar exposure. Dollar- rupee actually works in our favor. So dollar going up is actually helping me do more exports and protects me from my imports, yeah, as a country, right? I think the euro dollar euro appreciating by 15%-16% in six, seven months due to whatever was happening in the US is primarily contributing to all of this. I think at this point in time, for us to take a position on how euro is going to move is going to be very speculative, right? To the best of my understanding, whatever little I have seen over the last 25-odd years, currencies have to follow a basic rule, which is there is an interest rate differential.
So one, there is an interest, yeah, which we know is what it is in euro terms, which is 2%-2.5%, which is something that we absorb in our financials. The other is this FX piece, right? And traditionally, given the way things are, given the way the basic fundamentals work, interest rate differentials, inflation differentials should guide FX movements. Today, this is something which is very unprecedented. At best, both of these factors put together should not be more than 5%-6%, which is better than borrowing onshore.
Okay.
Right? So I think any which way there is a reversal happening right now, if you see, Euro has come off from those levels.
Okay. All right. One clarification, sir, as in the opening statement you had made that whatever the realization correction, there is a two-part to that. One of them is a price impact, and that is a half of that. So do we believe that whatever the rationalization across the market of the prices you are doing, that's over? We will not see the way forward if there is a correction sequentially of around from 29,500 to 28,500 we had seen in domestic. Such kind of a movement will not, at least from the price correction, we will not see way forward.
Yeah, the current market condition, we are not foreseeing any major corrections. As we mentioned, the company's focus now is on volume growth. These corrections are, end of the day, targeted on a customer-to-customer basis. It's not a pan-India or a product pan across the entire product range. Where we see opportunity for some correction, but a much higher contribution, overall contributing to better margins, we may take such calls. As such, there is no plans per se to have any price correction per se in the immediate term.
Can I add to what Shobhan said? I think what we also need to realize, I think the basic fundamentals on price movements are obviously linked to supply demand, your underlying cost, and the competition behavior. So we'll continue to monitor all of this and then take our necessary calls, right, as something that Shobhan has already explained.
Thank you. Before we move to the next question, a request to participants to please limit your questions to two per participant. For follow-up questions, we request you to rejoin the queue. We take the next question from Balaji Vaidyanath from NAFA Asset Managers. Please go ahead.
Good evening. It's nice to see growth return after a few quarters. Congratulations to the team. I was just wondering, Shobhan mentioned about 20,000 cubic meters imports on an average same time last year. I was just wondering how spread out were these imports, or is it like a Pareto rule where three, four guys were contributing to 80% of imports? Because just trying to assess how effective this BIS could be, because if the three, four guys are able to obtain the license, and if you could throw some light on whether they have been able to obtain, that would be useful. And if that is the case, then.
Yeah. Sure. So when you say how spread out, are you referring to the importers or the manufacturers?
Yes. Yes. I'm referring to the, I mean, importers, I would say.
Importers. Yeah. No, so it was definitely spread out across geographies and classification of importers. There were OEMs who were importing, who were consuming the products directly. And then there was also various traders, especially or importers who were trading the material. And when it comes to the current price points with the current foreign currency rates, the dollar rates, the current domestic price points, and BIS implementation, we are not foreseeing this to come back in a very sort of strong manner on an immediate basis. Because the QC has been in place for quite a few months now. A handful of the manufacturers have been able to obtain the BIS certification. And then now the standards are going to become even more stringent when the new BIS standards come in. So it's not a, let's say, an easy barrier to cross.
We foresee the imports to continue to remain muted in the coming quarters. I don't know if that answers your question.
Yes, it does, Shobhanji. When do you expect the new standards to come in?
So the draft is already being prepared by BIS. And I mean, we're just waiting for the official notification of the same. Could be a month, could be a couple of months. But BIS is already in place. It's just a correction of the quality standards that BIS has to issue to us.
So in the current quarter, the kind of reduction that we have seen in imports, have we already seen the full benefit of that in Q2, or do you expect the benefit to come?
The imports are already almost, I mean, as good as negligible. And we don't get any further feedback from importers that there is any competition that we are facing. Our team doesn't give any feedback about competition being faced due to imports. We're already catering to various OEMs who used to import and are now buying domestically produced products. So let's say that imports for the time being is not really a threat and not in the competition scenario.
And the total imports for the quarter were only 3,000 cubic meters, which translates to 1,000 cubic meters. So if you look at last year's average of around 20,000 cubic meters per month, it's only about 5% of what it was last year.
Okay. Great. My one last question is on the raw material side. You mentioned you are expecting benign timber prices but elevated chemical prices. So do you expect these two to kind of offset each other, or how do you see the situation playing out?
I think the chemical prices, again, is sort of a temporary phenomenon. It should correct itself, so this won't, I mean, we don't see this to be a long-term challenge per se, and in timber prices, what we are seeing is that they seem to remain stable going forward. There won't be any major price hikes. Hello? Hello?
Next question. Next question is from Keshav Lahoti from HDFC. Please go ahead.
Hello. Hi. Thank you for the opportunity. So one small clarification. This margin of MDF issue guided, this is including EPCG benefit or excluding?
I'm sorry. What's your question? The EPCG benefit is.
So the EBITDA margin guidance for MDF, which is below single digit to low double digit to high single digit, does it include EPCG benefit also?
It does. It does.
Okay. Got it. And secondly, so what I understand, possibly there is some capacity addition by unorganized also happening. And possibly, so it would be difficult to take MDF price hike at least for next couple of quarters. Is this understanding fair?
Well, it's hard to say, but on an immediate term basis, we don't foresee any price hikes coming in. I think value addition will contribute to better margins, hopefully. And the unorganized segment is, end of the day, our focus is increasing the percentage of the value-added products, which the unorganized segment is not catering to. But it should not result in any additional price correction. But it will also, if you ask me, do we foresee any price increase happening on an immediate basis? I would say no.
Thank you. Next question is from Shivkumar Prajapati from Ambit Investment Managers. Please go ahead.
Yeah. Hi, sir. Thanks for having my question. My first question is, please, I mean, if I've missed it, so if we adjust the provision and the forex, so does the EBITDA margin goes beyond the 10% for the quarter?
Look, we've already given that bridge out in our investor presentation where we've adjusted the, we've shown you with SSAMS, let's say, FX and any other one-offs, how is my operational EBITDA? That's 40 crores, yeah, which is 10.2%.
Sure, sir. I will look at it. And sir, what would be the commercial grade volume in Q2 FY25? I mean, just to eliminate the basis that if there's any.
[crosstalk] . Yeah, yeah. Last year's quarter.
Last quarter was 26,000.
26,000. Okay. Understood, sir. And sir, if you can share the current timber prices, I mean, for the quarter, and how's the price so far in this 40 days of the Q3 as well?
Do you have those numbers, Himanshu?
Perhaps the average purchase price because there's multiple scenarios here.
It's pretty much similar to where we were. But I think what we need to appreciate, I think, Shivkumar, I think today we are the market leaders in a rapidly growing but small, and there's a lot of new players coming into our sector, right? And we have added new capacity. They have added capacities as well. So a lot more granular details that we were sharing in the past, sometimes they become conducive or they are kind of prejudicial to our own business interests. I think figuratively giving a lot of figures out is becoming a little challenging at this point in time. But yeah, I think directionally, Shobhan has already mentioned timber prices are stable to correcting sequentially, and chemicals have gone up, which is only a temporary blip, right? It's not changing so much.
There are seasonal variations on account of things like rain, the rain setting in between, and now the winter setting in is a different thing altogether.
Got it. Got it. And sir, what sort of discounts are we offering right now?
Sorry. What do you mean? What sort of discount?
Discounts like ramp-up of new plant or maybe if we are not taking the price hikes then in order to boost our volumes.
So again, I think that was mentioned in our calls that realizations are down by 4%, which is a mix of price corrections as well as value mix of the product. So we don't have. We've not offered any pan-India standard discount or additional discounts for that matter. They're all opportunistic in nature, depending on the business in front of us and how much you're willing to offer to obtain that business. But this is how that averages out.
Thank you. The next question is from Kaustav Bubna from BMSPL Capital. Please go ahead.
Yeah. Hi. Thanks for taking my question. Just wanted some industry data. In 2025, full year calendar year 2025, what's the expected domestic MDF demand in cubic meters, and what's the expected domestic MDF supply in cubic meters?
Venkatji, I think you have those numbers, right ?
No, I will have them on a calendar year basis.
Okay. Whatever you do have.
For the financial year, I think demand would be somewhere between 2.75 million cubic meters-2.8 million cubic meters, and capacity would be around 4.2 million cubic meters.
What is this capacity expected to go to with all the capacities coming up next financial year? Because demand.
See, we have not heard of any major capacities coming in FY 2026 or 2027.
So this 4.2 million cubic meters, which was in FY 2025, should be around in the 4 million-5 million range only, you're saying, for FY 2026, FY 2027?
Yeah. Probably yes. There could be some capacity additions by unorganized manufacturers. But since those are not in the public domain, we are not updated as of now.
But nothing from the major organized players.
If domestic supply is around 4.2 million cubic meters-4.5 million cubic meters, how much would imports be in addition to that in FY 2025?
Okay. So the monthly average is around 1,000 cubic meters for the.
Is negligible.
It's very possible.
For the first six months.
For the first six months.
Okay. No, understood. Understood, and just one last question, Shobhan. I just wanted to understand till today. We've also discussed earlier because the industry has been so nascent in terms of supply base. Whenever a lot of supplies come in, it's led to a relatively drastic reduction in realizations because supply base has been higher than demand. We've seen demand going at double digits, but 15%-20%, let's say, but supply going much faster. By when can this whole supply demand dynamic change to a more stable basis, to a more stable one where realizations don't get affected so much as supply?
First of all, I think we've already seen probably the worst sort of downturn in the industry. I think it's come to a point where many manufacturers are finding it hard to survive already. So I don't foresee, like I mentioned earlier, also any additional or major price corrections happening going forward because the current cost structures will not permit that for any manufacturer anymore, especially the unorganized guys. And there has been correction in terms of the difference between the organized players' pricing and the unorganized players' pricing as well. So I don't see any further pricing pressure coming in or in terms of it being sustainable for any manufacturer going forward.
Okay. That makes sense. Thank you, Shobhan. Thank you a lot, sir.
Thank you.
Thank you. Next question is from Sneha Talreja from Nuvama. Please go ahead.
Hi, so thanks a lot for the opportunity. Just wanted to understand when could the industry actually see any amount of price improvement? While I understand the raw material prices will be softening, eventually that could lead to margin improvement. But any understanding on the price hike also, which can actually happen?
Sneha, it's very difficult to estimate that, and on an immediate basis, honestly, I don't foresee any price increases coming in in the near term, to be honest with you. I think the focus at the moment is to gain market share, improve volumes, which should contribute to better margins because the moment we talk about increased pricing will allow other manufacturers to take further space in the market, so I mean, I don't foresee a price increase coming in anytime very soon.
Understood. Understood. So the entire idea would be to have that operating efficiency coming up with operating leverage, lower the cost, which will continue till the time we reach what level of margin when we can see normalization of the cost coming up?
I think safely, with the current price points and with improvement in volumes, I think high-teens margins are possible.
Understood. Understood. That was very helpful. Thanks. Thanks a lot, sir, and all the very best.
Thank you.
Thank you. Next question is from Pankaj Parab from Molecule. Please go ahead.
Yeah. Thank you, sir, for the opportunity. My first question is on the working capital. We have seen tremendous improvement in our working capital, especially in the inventory days. So just wanted our strategy, is it for the just quarter only, or we are planning to maintain the same 40 days kind of inventory level going ahead?
I think it should be broadly similar. So wherever we have opportunities to be able to optimize working capital for going forward, we will continue to do so. This time, I think bulk of the reduction is inventory, right? So we wanted the costs have come down. So we wanted to get rid of inventory, which was produced or procured at a higher rate. And this is exactly what we have done, right? So we will continue to see this going forward.
Also, please keep in mind, sorry, to add to that, please keep in mind that working capital for us is affected due to seasons as well. During rainy season, when timber availability is low, we tend to increase our inventories because the harvesting of the trees reduces. So we tend to increase our inventory. So there is a seasonal effect to our working capital as well.
Okay. Understood. And for clarification on the just quantify, if you could, the raw materials reduction in this quarter, and what is your expectation for the next two quarters for the raw material timber price mostly?
See, I think it's again hard to speculate that. And we are foreseeing the timber prices to sort of remain stable or have slight correction, but it's very hard to put a number to that at the moment.
But for this quarter, sir, if you can provide for the quarter two only, quarter-on-quarter comparison just.
For quarter two?
Yes.
I would say they would probably remain stable or at par.
Okay. Understood. Understood. That's it from us. Thank you, sir.
Thank you. Next question is from Arun Baid from ISEC. Please go ahead.
Hi, Shobhanji. Just one clarification. You mentioned that our growth for the full year will be in the teens, right, in the MDF domestic business. Am I correct?
Hi teens, yeah.
Shobhanji, because when I look at numbers, last year, Q3 and Q4 were very tough for us. We decreased by in the fourth quarter, by about 25-odd%. So if you do a backward calculation, roughly if I take 13%, 14% growth, you will do lesser than what you've done in the first half or more less similar to first half numbers you'll do. Is that the right way to look at things because they want to know what's better, right?
No, we're seeing I mean, we're seeing it on an annualized basis.
Yeah. Yeah. So on an annualized basis, so if I assume a 13% growth, you have to do around 214,000 CBM roughly for the second half. That's pretty low because we did the same number in FY 2024 second half, exactly the same number. And obviously, FY 2025 second half, we had the growth, 25% in Q4. So if I look at your Q2 numbers, it's 112,000 CBM, 130,000 CBM. If I double it, it's like 226,000. Am I missing something or?
No. So we should be at about, I would say, about a 420-430 level domestically.
Okay. So you did 2,000. So basically around 218,000, you're saying? Exactly, sir. That's the point, Shobhanji, because the numbers won't add up. It's lower than Q2 numbers. Even if I extrapolate Q2 numbers, double it for the next two quarters, it's 225 without any incremental base up because our strategy is to get more volumes, right?
Right.
Based on that, anyways, I take it offline. Thank you. Yeah.
Arun?
Yeah.
Arun? You here?
Yeah.
Okay. See, we did 116 in Q3, and we did 102, right, in Q4 last year, same time. I don't have the numbers. Himanshu and I'll talk about 24.
I'm saying the overall. I think what Shobhanji was trying to say, I think holistically, high teens is possible right now. And this is what we're doing.
Is that for combined business or domestic, is it combined or domestic?
No, no, no. Combined. Combined. Combined. So going from where we are, see, export is something that we'll keep modulating based on how the markets are, right? If we get more volumes at good margins, we'll take that, right? Because this also ensures that we are running lines more effectively. We are getting the EPCG benefits, etc., etc. But overall, I think high teens is what he's guided, and which seems to be possible.
Just to clarify, Himanshu, it's high teens on a total volume. So last year, we did combined volumes of 438,000 CBM. On that, we are talking of high teens. Is that a right way?
Yes. Yes. Yes.
Yeah. Thanks, sir. Thanks, sir.
Thank you. Next question is from Bhargav from Ambit Asset Management. Please go ahead.
Yeah. Good afternoon, team. And thank you for the opportunity. Is it possible to share what was the contribution of commercial grade in Q3? I believe it would be a very small number.
Last year, it was 17,000.
Q4, it would be fairly miniscule, right?
Zero.
Q4 was nil.
Yes.
Okay. Secondly, sir, you mentioned the chemical prices are going up, but relative to our peers, are we better placed because we are slightly backward integrated as well?
No. Actually, when you say backward integrated, no, I think other players are, for example, Action is more backward integrated than us. They're producing their own laminates behind.
Okay. So at that.
We're purely outsourcing everything.
Okay. Understood. So on the MDF side, we don't benefit if the MDF prices continue to remain elevated relative to peers?
Our cost of chemicals primarily are driven by methanol, formaldehyde, urea, and melamine.
Okay. Understood. And lastly, sir, in terms of capacity utilization, we are at about 50% right now as of today. In terms of exit quarter, do you think we can reach about 60% capacity utilization? Exit quarter, fourth quarter?
Yeah. I think that should be possible.
Okay. In which case, I think your guidance looks a bit conservative as far as low teens growth. Maybe we can take it offline, but thanks for listening.
Sure. Thank you.
Thank you. Next question is from Udit Gajiwala from Yes Securities. Please go ahead.
Yeah. Hi, sir. Thank you for taking my question. So sir, given that you don't see price hikes coming up, and we are going to focus more on volume share, do we see margins to consistently remain under pressure for at least a few quarters from here still? I mean, excluding all the forex impact and everything, just the pure operating margins.
So the way we should look at it, I think we have not when we gave you that guidance out and Shobhanji mentioned high single digit to early double digit. I think we are assuming that things are not changing materially, whether it's on pricing or on cost at the moment, right, barring whatever he explained on chemicals, etc., which in our opinion is a temporary blip. So if things continue to be the way they are with the operating leverage playing out, etc., I think the margins should be where we are, right? If there is something more coming in, that should either add or could come out from our margins. But operationally, the way we are looking at things, it should. See, I think when we spoke in the quarter one earnings call and thereafter during the multiple conversations, bilaterally, I think we were mentioning by quarter four.
So every single quarter should be sequentially better than the previous quarter. And we were targeting that we will try and achieve at least the guided early double digit margins by quarter four. I think what we need to appreciate, we are already there, right, on the operating margins. The core operating EBITDA margins are 10% plus. I think we build it up this way throughout the next two quarters. Does that answer?
Yeah. Yes, sir. Actually, just what will be the total EPCG benefit that we have already taken into account, and how much balance can we still take?
So there's 11, which has already been accounted for in this year, 5 in the first quarter, 6 in the second quarter. We still have 40 more to take.
Gotcha, sir. Thank you.
Thank you. Next question is from Ritesh Shah from Investec. Please go ahead.
Yeah. Hi, sir. A couple of questions. So first is in the presentation slides, we have indicated raw material mix rationalized and improved consumption efficiencies. Sir, can you detail this? Possible to quantify some variables over here?
It's a little challenging specifically in this quarter, Ritesh, and there are multiple reasons you'll appreciate. I think we spoke about inventory changes already. So there is some portion of that cost because of decrease in inventory, which is impacting my overall results. So this was raw material or finished goods that we're digesting in this quarter, which was perhaps purchased or procured at a higher cost. And you know that everything gets valued at weighted average, which means there are distortions on a quarter-to-quarter basis. It doesn't reflect in a particular month or in a particular quarter directly. Now, beyond that, there is raw material timber costing, which is obviously sequentially softer than where it was. And chemicals have gone up slightly, yeah. So all of that put together is what we indicated was roughly 2-2.5%.
And the balance is all on account of operational synergies coming into play in this quarter over quarter one. So that's the way to look at it. Anything more that you wish to ask here?
Yeah. Specifically on raw material mix, I think I was assuming something with respect to the species of wood that we use. Besides the accounting thing, what you mentioned. So are there any changes over there wherein we have optimized based on how the market is behaving, and we need to get due to that?
No. See, you know that we work with very basic raw material, which is timber and chemicals and etc. Now, there are recipes akin to a particular product or a particular requirement, and we keep changing based on what makes more sense. The larger pieces are still the same. It's just that you optimize wherever you can. So yes, there is a role of mixes. There is a role of your own efficiencies. How do you deliver the same product at a better economics is something which is always on our minds. Something that we have been debating about in the last four, five months that I've been here. So I think everything is playing a role. Maybe over a quarter, two quarters, three quarters, you'll get a good understanding of how things are maturing.
Sure. My second question is, I think Venkat ji indicated demand at 2.75, 2.8, and capacity at 4.2 million. I just wanted to understand what is the thickness that we are looking at? Is it normalized to something when we give these numbers? How should one understand that?
Sorry, you mean the capacity?
Yeah.
So capacity, he mentioned 4.2, right? Venkatji, you want to take it up?
Yeah. Normally on the 17 basis, which is the larger thickness.
Sir, I couldn't hear you, sir. You said 17?
Yes, sir. 17
Himanshu-ji, I can't hear him. I'm not sure.
So he's trying to reconfirm what you're saying. Yeah?
17. Okay. So my third question is, when we look at our sales mix, how should we dissect it between the thin and thick, and would one qualify thin as less than 5 and thick higher than that? And how do we dissect the market also when we say demand is 2.75-2.8? Is there a way to look at it? So that was the first question. And a related second question is, when we have our sales mix, is it possible to bifurcate it broadly between commercial, industrial, and everything above that when we look at the density?
So I'll try and answer the second question first. And the first question we can put up to Shobhanji. I think the sales, so when you look at industrial, so there are three segments where we operate on the plain wood side, which is industrial, exterior, largely, or HDWR. Now, industrial is still a lion's share of the entire thing. If I count everything in, including OEMs exports, I think we're still doing something between 60%-65% industrial. On a value mix basis, which is what we think is more relevant because there is pre-lam also being produced out of plain wood. So on a pure value-added basis, the high-value proportion is roughly 44% for us. Ritesh, does that give you an understanding of how things are?
Yes. So that 65% of volume is what you indicate. That would be what value?
So I said, I think rather than looking at industrial or exterior or club or HDWR, I think we look at value additions more. I think we are currently at 44%, which is basically nothing but exterior plus club plus or HDWR plus anything which is high value, right, in the product mix. That's the way to look at it.
Basically, pre-lam, HDWR, exterior, and.
Yes. Yes. You got it, Ritesh?
Venkatramani's voice was breaking. Honestly, I couldn't get what he said.
He said he reconfirmed exterior, HDWR, pre-lam, flooring, anything which is of a high value, which creates more margins for me, both in terms of realizations and margins.
Sure. That helps.
That's 100%. Yes.
Yes. And on the basis of thickness, where is the market? Is it below five and above five? And how is our sales mix positioned over there?
Up to five is thin.
I can hear your voice. Yeah. Yeah. Yeah. You are audible now. Please.
Yeah. Up to 5.5 is thin, and beyond that is thick.
Thank you. We move to the next question. The next question is from Mohammed Patel from Edelweiss Public Alternatives. Please go ahead.
So domestic realization has fallen both YoY and QoQ. You mentioned that there is a contribution of price correction and value mix. So what is the breakup?
It's roughly 50% of this is on account of product mix, and the balance is on account of actual price rationalization or premium rationalization with the super-premium relevant players.
To further understand this better, can you highlight this realization trend for north and south?
Can you repeat that?
Between north and south?
To understand this realization trend better, can you highlight this between North and South?
You mean the correction, is it?
Yes.
So I would say the north is higher than the south. It is across more products in the north than it is in the south.
What is the share of value-added products in new plant?
The new plant? Well, like I said, we're treating the three capacities quite synchronized across the three lines. So at the moment, we are trying to optimize production in a way that wherever it is most efficient to produce a certain product is where we will produce that. So it's hard to give you a different number for a separate production line because, like I said, we are also producing certain products from the older lines on the new line now just to make the plants more efficient, the running more efficient.
Thank you. Next question is from Sonal Gupta from Citibank. Please go ahead.
Yeah. Hi, sir. So my question is, what is the steady-state maintenance CapEx of the existing facility, and what is the change after the?
Sorry. Sorry. Can you speak up a little bit, please?
Can you hear me?
Yeah. Now we can.
Okay. So, sir, I wanted to know what is the steady-state maintenance CapEx of the existing facility which we have, and what is it after the new capacity being put in now? Yearly maintenance CapEx.
Okay. See, Sonal, I think this year, first, let me give you a number for this year. We should be between 35-40. Some bit of it is related to the previous year MDF's CapEx, yeah, because there are still certain things which are being done, right? On a steady-state basis, I count all my lines in. I think we should be doing anything between 20-30. Yeah? That's a steady-state, you can say, replacement sustenance CapEx that we do every year.
It would probably be a bit high, so we can say 10 to 20.
Steady-state is 20-30. For this year, it will be a little higher at around 40, you're saying?
Yes. Overall.
Okay. Okay. Thank you.
Thank you. The next question is from Mahesh from HDFC Securities. Please go ahead.
Hello. Am I audible?
Yes.
Yes. So you have mentioned increasing resin and chemical prices. My question is, the price increase, has it fully factored in Q2, or we may see margin impact in Q3 also?
This is largely factored in already. I don't think there should be anything more. We are already mid of November, and we do think this is more like a temporary thing, like Shobhan ji mentioned. It should ease off in a matter of months.
Okay. So my second question that you have mentioned that due to cost optimization, we have improved margins by 5.5% impact on margins. So is there any further room for improvement?
There's always. You are operating at 52% capacity utilization. So there is always something that we can accrue, right, from the system. We just need to see how does it, how does it come into play with volumes coming up? There is still some more power savings that I can factor in, some more fuel efficiencies that can be driven. So we are doing that. And I think whatever changes we have done, we are doing some more changes, in fact, on our procurement. I think all of that should play out. Hopefully, at least from a purely operational basis, on a quarter-to-quarter basis, you should see some improvement or the other. Now, how much of that will be with us and how much will be passed on to the markets in case we have to, that is something that we need to see.
Yeah. So my last question is, so what will be our tax rate going forward?
We are on the same new tax regime. So we'll be at 25%. But please do remember, we have a depreciation tax shield available this year because of the new plant, which is significant. So that should play. Yeah? So overall, in reality, versus what we accrue in books, there will be a difference. The actual cash outflow is going to be different.
Okay, sir. Thank you.
Thank you. Before we take the next question, we request participants to please limit your questions to one per participant. The next question is from Karan Bhatelia from AMSEC. Please go ahead. Karan Bhatelia, you may go ahead with the question.
Yeah. Hi. Good evening. Am I audible?
Yes, please.
Hello. Yeah. Shobhanji, on the domestic realizations, sir, you mentioned that 2% is because of pricing and 2% because of change in product mix, but sir, if I assume last year we had commercial grade, which is entirely translated into industrial grade in this quarter, so ideally, our realizations should have seen some improvement, so what is it that I'm missing out here?
Shobhanji, should I answer? Should I go ahead?
Yeah. Go ahead, please.
Yeah. It's also.
Yeah.
There are two, three things playing out, Karan. You are right. Absolutely. Commercial grade coming down, and it's getting cannibal—or let me say eaten up by industrial for now. There was a price differential because of which we get an upside there on product mix. But I think simultaneously, please do remember, there is a new plant that we have started, which is producing thin largely, yeah, as what we are seeding. We are doing more and so thin has more interior or industrial grade. Yeah? The second piece that you should appreciate, we are doing much more OEM sales this year, this quarter. Yeah? So with OEM, largely what you sell is when you sell to end consumers, it's largely industrial again, right? So therefore, the full benefit of what should have accrued ideally hasn't come in.
But please do remember, on an absolute basis, all my high-value items in terms of volumes are actually going up in absolute terms, but not as percentages. Correct? So therefore, you are still not seeing that impact in my realizations so far.
Right. Right. And if I could continue on the same question, earlier you mentioned that 70%-80% of the commercial grade is already translated to industrial. So when can we see the 100% replacement?
It's already 100% replaced.
It's already 100%. Yes.
Right. Yeah. Okay. Thank you. Thank you, sir. That's it from my end.
Thank you.
Next question is from Keshav Lahoti from HDFC Securities. Please go ahead.
Hi. Thank you for the follow-up opportunity. My questions are already answered. Thanks.
Thank you.
Thank you.
Next question is from Ritesh Shah from Investec. Please go ahead.
Yeah. Hi, sir. Question. At what utilization levels will they shift our focus to pricing?
You see, Ritesh, at the moment, even though we have a higher even if we are at a certain level of capacity utilization, at the same time, we are still catering to certain segments of the market which are not as profitable, right? So we're catering to OEMs which are catering to the export market. So at the moment, the idea is to focus on margin improvement by bringing in the more lucrative segments and getting more market share compared to, as opposed to price hikes, because that's going to affect us adversely at the moment. So there is still a long way for us to go where we talk about we're reaching capacity and we should start considering price hikes because I think the segment mix is also important for us. OEMs is a much lower margin business. We'd like to convert that to the retail market.
Exports is also a much lower segment business. Barring the EPCG obligation, which is easily dischargeable, of course, the domestic market is much more lucrative. The retail market is much more lucrative. So at the moment, I think even those utilizations have to be converted to the retail segment. So the focus is on that and not, so we've not come to a point where we're deciding at what capacity utilization we'll start thinking about price hikes.
Sure. Can I have a related question?
Sure.
Yeah. So, sir, if I just have to flip the question around, say OEM exports, I presume the density would be lower than 740, 750, and then you-
No, no, no, no, no, no, no. Especially in the compared to industrial, the products are almost identical because now we are for OEMs, the BIS compliance very much applies.
Okay. So then how do we gauge our market share? So there will be some number in your mind, right? So our market share on the high-valued side. So I don't know what the size is over there and what our market share is there. If you could help explain that, that would be the optimum thing, right, that we would target. So how should one understand that?
At the moment, with the new line coming in, there is substantial surplus capacity available with us. As Mr. Venkatramani also mentioned, that the domestic demand is far lower than the domestic supply at the moment. What we foresee on a realistic basis, the growth that we can achieve is what we've already mentioned. On an immediate basis, that's our focus.
Sure. Thank you so much. Thank you.
Thank you.
Thank you. The next question is from Mohammed Patel from Edelweiss Public Alternatives. Please go ahead.
So what is the domestic volume for Q2 FY25 adjusted for non-BIS?
Adjusted for non-BIS, please.
Sorry. Himanshu, do you have?
Q2 last year? Q2 last year, you mean?
Yes. Q2 last year.
Yes. Yes. Q2 last year. Q2 last year, we sold, I think, 86 minus 26. That's the number 16.
Thank you.
Yeah.
Thank you very much. That was the last question. I would now like to hand the conference back to the management team for any closing comments.
We thank everyone for joining this call, and we look forward to speaking to everyone in the next call. Thank you and have a good evening. If anyone has any further follow-up questions, please feel free to reach out to us. Thank you.
Thank you.
Thank you. On behalf of Greenpanel Industries, that concludes the conference. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines.