Century Plyboards (India) Limited (532548) Earnings Call Transcript & Summary

Good day, ladies and gentlemen. Welcome to the Century Plyboards India Limited Q3 FY '22 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Navin Agrawal, Head Institutional Equities at SKP Securities Limited. Thank you, and over to you, sir.

Good afternoon, ladies and gentlemen. On behalf of all of us at Century Plywoods and SKP Securities, it is my pleasure to welcome you to this financial results conference of Century Plyboards India Limited. We have with us Mr. Sanjay Agarwal, Managing Director and CEO, along with his colleagues, Mr. Keshav Bhajanka, Executive Director; and Mr. Nehal Shah, CSO and Head of Investor Relations. We'll have the opening remarks from Mr. Sanjay Agarwal, followed by a Q&A session. Thank you, and over to you, Mr. Agarwal.

Hi, everyone. Thank you for taking your valuable time out for attending the Q3 FY '22, Century Plyboards' Investor Conference Call. I am Sanjay Agarwal, Managing Director of Century Plyboards India Limited. I have alongside me, Mr. Keshav Bhajanka; and Mr. Nehal Shah, CSO and Head of Investor Relations. I presume that everyone of you have gone through our numbers in detail. Let me still brief you on the key highlights for Q3. And I also wish and hope that everybody is fine during this COVID pandemic and we hope that this is no more a pandemic, but an endemic now. Let me start with the CFS segment first. Earlier, our commentary was that we would high off our CFS in a wholly-owned subsidiary. We are happy to say, now, we are taking a step further and have decided to demerge this business altogether. That means we are committed to exit out of this business within next 18 to 24 months. The reason for this easier exit is the current bid, which we won, which will transform this division from a slow-going CFS business into an integrated port operation business. After we have won the bid, we have been receiving interest from national and international investors already. And hence, we presume that the exit will be much easier and beneficial. Besides this, we assured you that, as a company, we will stay invested into our earlier commitment, that our focus will stay on the businesses, on the lines we are into. And we assure all of our investors. So for coming at least 3 years. Coming to our key focus area, which is wood panel business. After delivering a record Q2 number, it gives me immense pleasure to share that we have achieved a new record, once again, of achieving INR 845 crores revenue in a single quarter. While October '21 sales were strong, November sales got impacted due to festive holidays and extended marriage season. However, December '21 sales bounced back beyond our expectation. Within bracket, I must say, that it was the best month ever in CPI's history, which gives us enough confidence of good times to continue. This also gives us confidence into all the efforts we have undertaken, that they are resulting positively for the company. Please to share that our December volume in Plywood and MDF segment were double-digit higher compared to the earlier best September month, indicating the buoyancy in demand in both the segments. Our Laminate December volumes were a tad lower compared to September. Particle board volumes were lower by double digits due to floods in Tamil Nadu, which impacted timber availability very badly. The business is now back into its usual glory. Despite the sustained input cost pressure, we have been able to migrate large part of our gross margin pressure by taking corresponding price increases. Now that happens with a little lag across product segments and also, through operating leverage. While our gross margins were down by 230 bps, year-on-year, to 47.6% in Q3 FY '22, our overall EBITDA margin for the quarter stood firm at 17.9%, a contraction of near 70 bps year-on-year. Price increases. We have taken considerable price increases in Q3 across product segments. 3% to 4% in plywood, 4% in laminate, 18% in MDF and 12% in particle board. As some price increases were taken in second half of the quarter, the full impact of those price increases will get reflected only in Q4. Our MDF brownfield expansion at Hoshiarpur is as per schedule and is expected to come on stream in Q2 FY '23. Our South MDF CapEx has received all the needed approvals and the groundbreaking also happened in Q3. We have finalized capacity of 950 CBM per day at a CapEx outlay of INR 600 crores, and we expect the facility to come on stream by H2 FY '24. And here, I must mention that Keshav Bhajanka has been handling this project single-handedly. And he even got the Chief Minister to come for groundbreaking and the negotiation with the machinery supplier sample can has brought down the total CapEx for a 950 CBM project. We are also putting up a greenfield laminate manufacturing unit in Andhra Pradesh in 2 phases, with an installed capacity of 4 million feet and a capital outlay of INR 200 crores. Our working capital stands reduced to 48 days in Q3 versus 68 days in Q2 FY '22. But I must say that we should still not expect this to stay exactly like this, but we will be trying our best to keep it as usual within whatever we had, 50 or 54 days or something, we will try to keep it within that. We remain a net cash positive company, with net cash position of INR 217 crores. Our Q3 FY '22 ROCE stood at a healthy 35.6%. Outlook. While we enter into Q4 with COVID third wave impacting January '21 sales, we expect the lost sales to be covered in February and March as our production has not been hurt at all. We also believe our gross and EBITDA margin are likely to see sequential improvement across the product segment, driven by recent price increases and expected operating leverages. But we still maintain our guidance, as usual, for ply at 13% to 14%, laminate 14% to 15%, MDF 27% to 28%, particle board, 24% to 25%. So ladies and gentlemen, I hope I have been able to touch all the points which concern our investors. And now, I open the question line so that anybody can ask a question he or she wishes.

[Operator Instructions] The first question is from the line of Rahul Agarwal from Incred Capital.

First question was on laminate margin. The way to understand this was, essentially, this is a temporary number 12.8% EBITDA margin for laminates in third quarter and purely because of higher input prices and price hikes, which you highlighted that there was some lag effect. So broadly, we should assume that fourth quarter should come back to the normal 14%, 15% rate? Is that understanding correct?

Yes. The understanding is correct. These margins need to be taken with a pinch of salt because we also have close to INR 5 crores expenditure on Boston Consulting Group who has been taken on as a consultant to grow sales in the London division. This is an expense that will last for another couple of quarters, and post that, which will no longer going to be on the balance sheet. If we remove this expense margin during this quarter, we're also closer to 16%.

This is INR 5 crores per quarter, right?

Yes, per quarter.

Okay. Got it. And sir, second question, then I'll come back in the queue. One on the port development contract. Would you explain as in how -- you mentioned that INR 200 crores total CapEx. I would imagine there will be a debt equity here and plus, obviously, this will be spread out over 3 to 4 years. But as you've highlighted that you want to exit the overall business, including the CFS working in 24 months, could you highlight what is the commitment from Century Ply? And why has this come as a negative surprise to us? Because essentially, I thought we are not willing to [indiscernible] CFS business.

It's a very, very good question. You see, this is something which we are doing with the viewpoint to demerge the business going forward. The objective here is very simple. We will only be focusing on our core businesses. If you look at this business in the -- really, today, it is not performing very well. With this new development, this becomes a very good value proposition. And as such, the business will be demerged and there will be other entities who will be coming into the same. And CPI's involvement in this is going to be minimum. The total CapEx required is INR 200 crores over a few phases. Right now, we are not even discussing Phase 2. If CapEx requirement is only INR 95 crores over the course of the next 3 years. And that is what we are looking at. I think the entire demerger process should be completed in the next 24 months. I -- essentially is, again, I would like to reemphasize, we are focused on our core sectors only. This development was just so that we could -- just want to get this as a strong entity in a fund, and this business will no longer will be a part of Century.

And sir, sorry, just to add what Keshav said. The capital commitment from Century Plyboards would be only limited to INR 35 crores.

That's a pretty competent, right?

Yes.

The next question is from the line of Rajesh Kothari from AlfAccurate Advisors.

First of all, congratulations for a great set of numbers. Sir, in this -- overall, when you look at the outlook of this industry, considering that real estate, overall industry has done really very well, which actually comes for your kind of a product, whether it's tiles or plywood, probably about 2, 3 years after the sales or registration happens. So currently, kind of demand, I mean, what we are seeing, which is really robust. Is it primarily driven by what sector?

You see, you all know that a lot of -- actually, work in progress or there was a lot of real estate, which was actually lined and sold also. And we know that the record number of registrations happening in a city like Mumbai when some special discounts were driven by the local government for registration. So all those things are making a difference. That is number one. The second thing, why has Century Plyboards kind of a company is getting special growth? There are a number of majors we have undertaken over the last 2, 2.5 years. And all those majors are actually resulting. We have involved BCG, we have involved Vector, we have -- our GTM has totally changed the go-to-market or whether it is plywood or whether it is laminate or whether it is MDF also, is not like what it used to be in the olden days. Everything, every person is being monitored, and it is very, very -- only focused on growth, not on the maintenance so much. Maintenance part is only just 30%. 70% focus has shifted to growth. So all those things are now have started giving us the results and high hope going forward. They will prove -- of course, they had a risk because we have changed the way we operate. But now, they are showing the results, we believe that in times to come, they will do. They will give us the better results.

I see. And sir, my second question is on the logistics segment. Currently, I think this business makes about INR 20 crores, INR 25 crores EBITDA, correct me if I'm wrong, on annualized basis. So once this new project starts, I don't know, what is the first year of operation of this new project, how do you see the total logistic business EBITDA?

The new business should have a turnover of close to INR 100 crores plus at 90% capacity utilization. I think that we will be looking at the EBITDA margin of 25% to 30% on the sale. This is conservative estimate, it could even be slightly higher. You're right, the current business does have an EBITDA of close to INR 20 crores annually. And would these businesses book together should have an EBITDA of INR 40 crores to INR 45 crores, for year end.

So basically, in the first year will be which year on the first year. So basically, this project starts from when?

This -- the first year of operation will be year '25.

You mean April 1, '25?

Yes. April 1, '24. So FY '25.

Okay. And in the very first year itself, it can do INR 25 crores EBITDA or it takes time for them?

It will take time. First, is the EBITDA is going to be lower. First, that we are using that EBITDA 60%, 65% capacity utilization. And then we'll move forward from there.

The next question is from the line of Girish Choudhary from Spark Capital Advisors.

A couple of questions from my side. Just -- again, harping on the margins in the laminate segment. This has been pretty volatile over the last year or so. And a couple of quarters, we'll say 20% plus and now back to 13%. So how should one read this? And then, what would be a steady level to expect?

You see, we had given guidance on this last time as well. I do not think 20% plus is sustainable number. We were targeting between 16% to 17% on an annualized basis. And I am very confident we're going to finish along that line of number. This quarter, because melamine price increased drastically. Melamine pricing increased from $800 levels to $3,500 level, which is an increase of 300% plus. So that impact came predominantly in the last quarter, some of it will be self in this quarter. But we have taken price hike against the same. I think this quarter, you'll be looking at better margin closer to 15%, 16%.

Got it. Secondly, just a clarification on the logistics business CapEx. So of the INR 200 crores CapEx, Century will be putting in only INR 35 crores. So what about the rest? Is there a partner coming in? Or it will be funded...

Now, this INR 200 crores is over 2 phases. In phase 1, the commitment, it will be total about INR 90 crores, INR 95 crores not more than that. And we will be invested only INR 30 crores in equity we will be taking on that. But this is going to be in a separate entity altogether. And in the separate demerged entity, we could be looking to take us some partners. As the MD has already mentioned, we have received a lot of interest post-redevelopment, and we are actively exploring at a good valuation to take on a partner on the same.

Got it. And lastly, on the particle board segment, you are being consistently operating in excess of 400%. Despite that, there is no intention or -- I just wanted to know the thought process on the expansion in this category. Margins are pretty good, 26%, 27%. And recently, we also have seen a large capacity addition from green lamps. So what are your thoughts on this business?

We have, I think, I don't really remember, but I think we have a little -- spoken earlier also that we are working. We have yet -- we are actually yet to decide, but we are working on expansion of the capacities, all different kinds of module possible, and we are doing a completely deep dive into the sizes, into the market, into the location of the plant and all those are going on. I think very soon, we will be in a position to take a decision and go ahead with it. We'll be able to announce our decision, actually. But till now, the decision has not been taken, but it is at the final stage. So as and when we take the decision, I'm sure it will be informed. But yes, it is, you are very right, that we need to go into that direction, and we will be going into that direction.

The next question is from the line of Sneha Talreja from Edelweiss Securities.

Just couple of questions from my end. Firstly, going back to logistics business. Is there any such large contract that we have bid for, which could come in as a surprise at the later stage?

No. There is no bid other than that. This is -- there will no bid coming in. And thankfully, we have been -- did the same.

No other bids, where decision is still pending to come?

No other bids, and it is categorically decided that there will be no more bids going forward. This was action done to make sure that this entity becomes viable on its own going forward. And because of one-off decision and we are going to stick to that.

Sure. Got that. And you also mentioned about demand being very strong, again, from December onwards. How is the trend that we are seeing from Jan onwards. Is it the double-digit demand growth, again, back? And you also mentioned that demand is coming back from unsold inventory and already getting sold. Have you done some analysis wherein it has got a direct correlation with the amount of registrations that we are doing? Or is it a pan-India level demand that we are currently seeing?

You see in January first few days the demand was very poor, the outlook was in goods. Because of COVID, we had a number of team members who are unwell, who are quarantine-ing. So the first 15 days, the outlook wasn't better. But the recovery in the past 10 days has been fantastic. And I think we are looking, if this is the case, we're going to be looking at another very strong quarter. With regards to registration data, we tried doing a correlation that we saw that in markets where registrations are good also and in markets where registrations weren't so good. Both those markets are doing well. So we weren't be able to actually take out any sort of correlation. We have been growing pan-India and we are seeing growth in more geographies, both urban and rural. So for us, we have not made it final in the data.

Sure. Got that. And my last question was related to certain new products. You definitely mentioned that you're open to the particle board market, which is now a well-explored market with 2 players like Green lam and Marino announcing entry. But there are a lot of other product categories that we are seeing on ground, which are maybe pretty niche, but where opportunities are high. Are you open to those kind of opportunities in the wood panel space? And are you open to looking at new categories apart from the regular plywood, laminates and MDF and particle board division?

What are the items you are hinting at?

So basically, we actually see a lot of panel work in the market. We see a lot of charcoal work these days in the market. There's a lot of niche wooden flooring -- is a very -- basically is a very big market where you all are not there. Are you open to such kind of niche category also to enhance the growth? Just from the capital allocation perspective and growth opportunity.

I can tell you, wooden flooring is a very small business on India level. There are -- at some time in the past, we had entered into the segment and then we exited. This is number 1 point. As far as the wood panel segment is concerned, particle board, MDF and plywood are the 3 main categories. Apart from that, there is another product known as OSB, oriented strand board, which I still believe, as a company, do not see any possibility at the moment. But just in future, if we see the possibility in the market, we will go for it because that is our line of business, and we'll certainly get into it. There is a product known as PVC board, we are already into it importing and marketing into the market because it competes with our product, and it is being used by all the architects and IDs and contractors. So for that, as and when we see the market expanding in the future, then we may consider. Then in this PVC board, maybe in future, we don't enter into this because that is a business which is exactly competing with our plywood and our MDF. So -- but we are already in the business and pan-India, we have dealers and contacts. There is one thing more, which -- cement board, actually cement wooden board, you can say. We are into it in a small way, we are trading at the moment, but we do not see much of a great business going on or expansion happening in times in near future. This product has been there for last 20, 30 years in India, but has really not done very well. So we do not see a big future for this. So we are not looking into going great lengths, going big time into it at all. And these are all the products which I think I know about. Is there anything else you have, you can certainly...

Sure...

Just to add on, in the plant in the South, the laminate unit that is coming in the South will have a larger turf, which is going to be a 14 [indiscernible] turf. This turf is meant for compact laminate and toilet cubicles. So this is a new line of business, which is -- it is made from the same laminate, but it is not -- it is for a particular segment in a particular usage for toilet cubicles and restrooms. This will be operational from next year.

The next question is from the line of Venkat Samala from Tata AMC.

Just one clarification. If you could throw some more color as to when did you put that bid for the logistics segment? And -- because the backdrop behind asking this question is that when you held a 5-year analyst meet recently, there was no indication given of this, right? So just wanted to understand more on this.

So the bid is put in place more than a year ago. The reason it was not given because, again, the purpose of this, even after winning the bid, the purpose is the same. We are looking to remove this entity into a separate entity. Now, it becomes a more viable proposition. But yes, it was a complete oversight on our part. We should have mentioned that we had put in place a bid in the 5-year roadmap. That was an oversight on the company's behalf.

Understood. Understood. I'm sorry, I'm asking you to sort of reiterate this, but you are categorically stating that there will be no more than that INR 30 crores, INR 35-odd crores equity investment from your end, right, for this particular venture moving forward?

After this, the venture will need to be self-supported. It needs to become an entity on its own, and it will run as per whatever financial that business has. And we will have zero cash infusion into the business.

Okay. Okay. Understood.

And Venkat, just to add furthermore, it's not only that we are not going to infuse in logistics. But again, besides the additional pending which we'll be spending over the next 2, 3 years, it will be only and only within the wood panel space.

The next question is from the line of Akshay Chheda from Canara Robeco.

Two questions from my side. So in the plywood space, sir, how do you see the unorganized player shaping up special [indiscernible] also, because there were thoughts, they were facing challenges due to the working capital pressure, et cetera. So how are they shaping up? I mean, is the -- are they still continuing to face challenges or not? That was my first question. And second question is, sir, that since we have taken a 3% to 4% of price hike in the plywood. So now, what would be the pricing difference between, say, a branded player like us and say, an unbranded player? So basically, I just want to understand that is there some market share that is happening, which is also helping us in posting such robust numbers. So yes, these are the 2 questions from my side.

As far as I have been -- even in all my earlier declarations and discussions, I have been very, very clear that Indian manufacturer, is a small one, are quite good at fighting it out in the market. But yes, I have firm believed that the shift is happening, but happening slowly, very slowly. If it would not have happened, we would not have grown the way we have grown. And I am sure, overall, the market has shrunk. Overall, the market has certainly shrunk, but we have grown. But this will happen at a very slow pace. And in smaller manufacturers, there are -- most of them will survive, few of them may actually may not survive. That is always has been happening, and that will happen in the future also. The second question you asked the price difference. Very frankly, there is a price difference and even if it goes up by 3%, 4% or if it reduces by 3%, 4%, that does not really make much of a difference. If the difference goes up by 10%, 15% of GAAP guidance by that much, then it might make a difference. So I think I've been able to answer your question that the local people have tried to take increase in the prices, they have failed to do so, we have been able to take. So the price gap might have increased by 4% or 5%, but that's okay. That does not really hurt. The only thing which will hurt them is actually the raw material because the imported raw materials were not available to them at different times. The prices are actually much more than -- because we are direct importers. So all those things have happened from time to time. But yes, otherwise, I do not take them as a very weak competition. I never take them as a weak competitor.

Next question is from the line of Hrishikesh Bhagat from Kotak AMC.

Yes. So my first question is, what was the A&P spend that is there probably in FY '22 for 9 months for this year? And how do you see that A&P spend panning out over the next 2 years? The second question is related to CapEx spend for FY '23 and FY '24.

So I think, in terms of A&P, Nehal will give you the exact figure. But as always, we are within the targeted percentage, we will not exceed the same. And going forward, next year, we are looking to continue in the same way. We are looking to have an aggressive campaign, very similar to this year because [indiscernible] is growing our volumes. And I'm very confident that next year, we will have even more robust campaign, perhaps there's not much more additional expenditure. In terms of CapEx, the CapEx plan for the same, as we had guided earlier. We have the new MDF plant that is coming up with the laminate. And that is our primary CapEx. The [indiscernible] unit should become operational within Q2 of this year.

INR 600 crores CapEx. Sorry 600 -- the CapEx for 900 CBM how will it be spread out over '23 and '22?

The majority of the CapEx will be coming over the course of the next 16 months. Now this, timing of it will depend on machinery despite the slowing down, but the majority will be happening over the course of the next 16 to 18 months.

Okay. And you are fairly confident that 2H '24, this capacity should come. That will not be a challenge because with the timeline with machinery and all? This question...

Yes, we're very confident. H2 FY '24, this capacity will definitely come.

The next question is from the line of Achal from JM Financial.

Congratulations for the great numbers, sir. My question is in terms of the plywood business, obviously, third quarter has been extremely good, better than second quarter. But if I were to look at 9 months, the growth in terms of volume on a 2-year CAGR is about 8%. Now, the question is, a, is that largely in terms of the market share gain in the premium segment, economic segment, if you can give some color in terms of the mix for the current quarter or 9 months versus last year?

I think there's a mistake in the data because Q3 was not bigger than Q2. Q2 was actually larger than Q3. So I think perhaps there's something on that data point.

Actually, it has more to do with revenue growth because of realizations being higher, but in terms of volumes, there has been a decline of 2.3% quarter-on-quarter.

Yes, yes. I was more checking from the volume perspective for 9 months. And in terms of specifically for economy and premium segments, how they have done?

Yes. So if you look at our selling segment, yes, I think, MD would touch base on that.

What I think, refining on year-on-year has grown about 11.4%. Maybe, and -- MR has not grown too much. It has grown by only 3.8%, whereas CFS has really grown beyond 50%. So -- and that is -- that are our projections because the prime cannot grow more than about 8% to 10% that is the growth we really plan. And we really plan that the major growth will come from 50% to 40%. That will bring down the average price because actually you are selling a lower price segment more and that quantity is getting more and more. So average price will go down. But that does not mean that the price of all the goods are going down. As far as Prime is concerned, that is our bread and butter and our eyes are all focused on our Prime segment. And that has grown by 11.4% and I don't remember, in last 4 or 5 years, actually, we have done a double-digit growth in our Prime. So I think that's a good thing to happen.

Sure. And in terms of the margin profile between Prime and non-Prime, are they similar? What kind of margin difference is there?

You see Prime certainly hedge a much better profit. We're not talking about it and [indiscernible] will have lesser profit, lesser price. I would not like to really get into the real detail of how much profit you get in the Prime and how much profit we make in [indiscernible]. But overall, you see the company profit is going up, and we have been able to still maintain our EBITDA within the range we have been always discussing. So I think that should be -- even looking forward, even going ahead, I -- sometimes, EBITDA may go up. But then we are -- in my speech also, I told that we are looking forward to maintain it within that percentage. We have always declared, not today, but for last 2 years, pricing, we are in the same segment.

And Achal, just to add, our focus on value addition always remains, which is premiumization, where our focus on [indiscernible] has always been very, very strong, and that's why we've been able to get the double-digit growth. Even in Sainik segment, we have immediately turned back to a value addition where our Sainik PFS started really doing well. So in fact, even on the distribution side, we are seeing lot more [indiscernible] addition in the Sainik segment, particularly for the platinum. So even within the economic segment, our thought process is to continue to increase premiumization by virtue of selling more of PF versus MR.

Understood. Just one more question with respect to the [ PEP ] project. So what I wanted to check is that, this win is more incidental rather than really the thought with respect to demerger. Is that understanding right? Because I mean, I'm just curious to know, on one hand, we have a CFS business. On the other hand, we are talking about port operations, which are somewhat different business than really handling the container or doing -- getting custom cleared in the CFS. So just wanted to understand if this is more incidental than really from a demerger perspective?

As far as the operation of the board is concerned, you see, we are not building the port. Building this port, what we have got will force actually thousands of crores very frankly. And we are getting it for [indiscernible] very frankly. So operations, we are actually already on all the operations, we will be doing the operating trends. We do [indiscernible]. We are doing transportation. We own -- I don't know how many trailers we own exactly, I don't really remember also. All the operations are very, very well known to us and we are doing them on day in and day out basis because of how CFS. We are handling cargo and support. Same thing we will be doing and we have understood it and decided only after understanding it very, very good. Now, why we want to demerge it? That is because basically, we are getting a very big [indiscernible] investor community. That is one of the reasons. That yes, otherwise, I would love to keep it in Century Plyboards, but then it seems that our investors are not happy to provide, we have no problems. Number two, we also believe that by adding this port in the CFS, which is becoming now a business potential opportunity. Because the kind of calls we have received in the last 2, 3 days, is just amazing. So that's why we believe that coming -- going ahead, actually, now, demerging it will bring in better value for all of us.

Understood. And just one clarification on the laminate piece. In the second quarter call, we had talked about the laminate realizations are too high. These are not sustainable. Third quarter, we see that, obviously, this has improved further with the price hike. But just wanted to get color in terms of the laminate realization. How do you see it? What has driven this increase? Is that only price increase? Is that mix? Or is that export driven?

But we have not said that realizations are going to taper off. We have said that profitability in the last quarter. That profitability is unsustainable. Realizations in laminate have gone up and they will go up further in the current quarter. We took our last -- in the month of December. So if you look at the laminate realizations for Q4, they will be even higher than Q3.

Understood. So that means you were more talking about margins than really the realizations?

Yes. We were talking about margins, our 20% margin that in laminate is not sustainable, that is the point we are trying to make.

The next question is from the line of Nikhil Agrawal from VT Capital.

Sir, I wanted to understand, you said that you hiked your realizations in the laminate segment, but your quarter-on-quarter revenue has fallen down. So -- and your sales, of course, have also fallen down. So is this because the market has not -- they're not -- like they've not taken the price costs clearly. I mean, the market has not reacted positively to the pricing?

No, no. This is a trend every year. You will see in the laminate sector, Q3 is typically weaker than Q2. Because in Q3, we have one less month of operation, Diwali, Durga Puja and Chhath Puja all of these come in the same quarter. So Q3 is a weaker quarter. This is -- the price increases have not left to the bit. This is the [indiscernible] phenomenon. And you'll see in Q4, the volumes are going to look far better.

Okay. So -- but sir, we don't see the same pattern in plywood, MDF and particle board. You only see this in laminate.

In plywood also, in terms of volumes, Q2 is normally slightly higher than Q3. The simple reason being that in Q3, we have Diwali, Durga Puja and during this time period, work -- yes, sales do slow down, that is a bit. In MDF and particle board, I think that, that SKU is not as predominant.

Okay. So like, so we can expect better volumes from Q4 is like a...

That is what MD has communicated in his opening speech.

And sir, like what is the maximum capacity utilization across all your segments like MDF, laminate and particle board?

Yes. So laminate, there are current -- so in the quarter, which has just gone by, the capacity utilization has been at 86%. For plywood, the capacity utilization is at 81%. For MDF, the utilization has been hovering around 95%, 96%. And for particle board, it's more than 100%.

Okay. So what is the last one...

103% to be precise.

So like, the debottlenecking, what is the maximum utilization that we can achieve?

So let the debottlenecking happen and add the capacity. So currently, since you're talking about debottlenecking, we have debottlenecking going on in a couple of our factories, particularly in Chennai and in Guwahati. I think you'll soon hear us adding capacities there. It will take time, probably over the next -- over the course of next 2 to 3 quarters. So current capacity remains at INR 3 lakhs. We would increase our capacities through debottlenecking in this financial year. And possibly, over the next 16 to 18 months through the addition of our Hoshiarpur factory.

[Operator Instructions] Next question is from the line of Udit from EF Securities.

Most of the questions have been answered. If you can just help me what will be our domestic and export split into the laminate business?

In laminates our split has been more or less consistent over the course of the past 4, 5 years, we are looking at close to 25% to 30% by volume for export. I think going forward, we are going to be looking to grow exports at a slightly faster pace. This is going to be aided by the new capacity that comes in the South, which are larger size. But I think exports will inch up to 30% plus of our total volumes.

Got it. Got it. And sir, like you mentioned that the price exactly -- will come with a lag impact. So -- but looking at the current situation from your end, are there raw material price is surging and would you take another price hike during the quarter?

Just now, there is no further price increase that is being thought off. There has been a tapering in certain raw materials and we should get the benefit of that going forward. That's a very dynamic scenario. Prices is -- I have not seen commodity markets this volatile in my entire career. So I would not like to comment on it right now. But at this point in time, there is no further price increase that we really thought off in the laminate segment.

The next question is from the line of Rahul Agarwal from Incred Capital.

Just a couple of questions. Firstly, on the MDF realizations, they're been highest ever. And there's might be a function of multiple factors, right? Strong demand, price hike, sales mix. I saw MDF at 22% of total sales. And there might be also an element of lower imports into South India. Is this sustainable at this level? Or should -- that should be built?

Hello? I can't hear.

Hello, am I audible?

Hello? I could not hear the question. Could you just repeat the question?

Sure. Am I audible?

Yes, you are audible.

Sir, I was talking about the MDF realizations. My sense is there are multiple factors driving this. There are price hikes, strong demand, sales mix in terms of higher MDF sales. And also, there might be lower imports in South India. Is this sustainable here at 32,000 or any thoughts, sir, on this?

See, this question, I think, has been raised, I think, earlier also, and I understand that from investor community, which is a very good question. See, it will always, you will see that every industry is cyclical and so will be MDF. So as and when the factors change and the factors, what are the factors, the supply and demand. So demand is growing at a pace of, say, 15% per annum. So that is, you can say sometimes it may be 15% or 12% or 14% or 18%, something like that. But then, the supply will change drastically because suddenly, some new extra plants may come up suddenly imports, they become viable. So all those sectors are there for every industry. So as and when those factors come in, we have seen those times earlier also. Those times may come, but I don't see anything in next 1.5, 2 years. I really don't see much of a challenge, very frankly. There is not much capacity coming up. Only one plant which is at least ours only in North India, which is also 354 million cubic meters per day, which is nothing. So I really don't see much of a challenge in next 2 years' time. Now, what will happen when our new plant will come in at that time whether the imports will be here to make or what, you will understand in times to come. But I can tell you, any investor must always discount that there will be a cycle and there will be bad phases and good phases in every industry.

So if that demand is higher than supply today, is there a situation in the country today?

I won't say it is higher than the demand. We are able to meet whatever the demand is there. And I think all the capacity presently is being utilized. If somebody is unable to utilize, it might be due to his own internal reasons. So I really don't feel that there is too much of a demand. Otherwise, we would have been under pressure to increase the prices again, which we really do not see at this moment.

Got it, sir. And secondly, the tax rates for 9 months has been higher at 30%. Any specific reason for this?

Taxes are high at 30%. We do not actually say we are still utilizing our March credit. Because if it's the same, it shows that 30% of the actual say out in the company is only 17% or 18%, Abhishek will get back to that with details. And from next year, even then, move on to the 25%.

So basically, we are under the old tax regime. Next financial year, we'll move on to the new tax regime with tax rate at 27.1% -- 25.1%.

25.1%.

The next question is from the line of Praveen Sahay from Edelweiss Financial.

Yes. So just a clarification, what is the current capacity of a plywood and MDF right now?

So current capacity of plywood is at INR 3 lakhs, CBM and the current capacity at Hoshiarpur MDF facility is INR 2 lakhs.

Okay. Okay. And can you give, again, reiterate that for the MDF, 2 of the capacity expansion timeline when that's the brownfield and the greenfield...

Yes. So I'll just give you the synopsis of what has been current capacity addition and the timelines as well.

We will be coming up with the expansion, the brownfield expansion in Q2 of the next financial year, and we'll be coming up with the greenfield unit in Andhra by H2 of FY '24.

So by H2 of FY '24, our expanded capacity would stand at 1,900 CBM. So Hoshiarpur will be 600 plus 350, and the greenfield project at Andhra would had another 950. So total will be 1,900 CBM.

As there are no further questions, I now hand the conference over to Mr. Sanjay Agarwal for closing comments. Over to you, sir.

Ladies and gentlemen, thank you. Thank you for your time. We hope that we will be able to deliver another...

Thank you very much. Ladies and gentlemen, on behalf of SKP Securities Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.