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

Ladies and gentlemen, good day, and welcome to the Q2 FY '23 Earnings Conference Call of Century Ply (sic) [ Century Plyboards ] hosted by DAM Capital Advisors Limited. Before the call, I would like to give a disclaimer that this call is just to discuss the company's historical numbers and future perspectives, and in no way this should be construed as an invitation to invest in the shares of the company. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Aasim Bharde from DAM Capital Advisors Limited. Thank you, and over to you, sir.

Thanks, Vivian, and good evening, everyone. On behalf of DAM Capital Advisors, I welcome you all to Century Plyboards Q2 FY '23 earnings call. We have the senior management of the company with us on the line. I will now hand over the floor to Mr. Keshav Bhajanka, Executive Director. Thank you, and over to you, Keshav.

Thank you, everyone, for taking your valuable time out for attending the Q2 FY '23 Century Plyboards Investor Conference Call. I am Keshav Bhajanka, Executive Director of Century Plyboards. I have alongside me, Ms. Nikita Bansal, Executive Director; [ Mr. Arun Julasaria, CFO; ] and Mr. Nehal Shah, CSO. I presume that every one of you would have gone through our numbers in detail. Let me still brief you on the key highlights of -- at the onset, we immense pleasure to share that we have done very strong cash flow generation of INR 223 crores for the first half of the fiscal, despite huge inflationary pressure that the industry has seen in the recent past. After delivering record sales in Q2, Q3 and Q4 of last year, we have achieved another record sales of over INR 900 crores revenue in the second quarter. Our plywood and Lonmin segment revenue recorded 9% and 8% growth Y-o-Y, while MBS and particular segment revenue grew 23% and 24% Y-o-Y for the quarter. With the sustained input cost pressure in most of the panel segment, our overall gross margins were impacted by 90 basis points on a sequential basis to 23.15%. The company, however, was able to improve its overall adjusted EBITDA margin marginally by 20 basis points to 17.3% on a sequential basis. While our plywood and land make EBITDA margin improved, we saw a considerable drop in EBITDA margin on a sequential basis in our MDF and particle board segment. This has been driven by steadily rising timber and select chemical prices and operating delevers. Where reported margins in these segments were, however, are still higher than our guided EBITDA margins of 25% from both the success. It may be noted that the input cost inflation has softened a bit post Q2, while core wine prices have come off slightly over the past few days, chemical prices, particularly in or Melamine have softened a bit in Q2 and are likely to further soften in the next couple of months. For MDS, in particular, the timo prices, however, continue to remain slightly emulated. We have taken no price increases in any of our segments over the course of this quarter. Our India brownfield expansion at Rosas as per se and you expect it to come on stream by November 2022. Our South and BS CapEx has received all the acquisitive approvals and the machinery has been honored. We expect the 3 to come on stream in H2 FY '24. Our greenfield unit manufacturing unit in AP will come up in 2 phases. The first phase was expected to become operational in Q2 FY '21. Our greenfield particle board project intima, the Board has approved investing in a large article mode project with a capacity of 1,200 celimeters with an investment outlay of INR 550 crores. We expect the plan to commission in Q4 FY '25. Our working capital stands reduced by 3 more days to 55 days in Q2 -- we remain a net cash positive company with net cash position of INR 176 crores as of 30th of September. Our Q2 ROCE stood at 22.32%, but adjusted for one-offs, the impairment loss in Myanmar and the entry tax reversal, the ROCE for the quarter stand at 29% plus. We have taken an impairment on our investments in my mark subsidiary to the extent of INR 47 crores in Q2. This would reduce losses to the extent of INR 5 crores to INR 6 crores per annum on the consolidated books year-on-year as it has become nearly impossible to conduct business in Myanmar due to the Canute. We are writing back our earlier providing entry tax was INR 14.5 crores relating to prior year after favorable verdict from the appellate -- despite the challenging business environment, we continue to maintain our FY '23 revenue growth guidance of 20% plus for the company. The segment-wise growth rising is plywood 15% volume and 20% value growth, 11% volume and value growth, NBH, 20% volume and value growth, partial about 10% volume and 20% value growth. We also maintained our margin guidance for our business segments, plywood 13% to 15%, Lanit % to 16%; and MDS and Partmo 25% plant. Thank you.

So would you like to begin the question-and-answer session. Thank you.

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

Keshav, 3 questions. Firstly, companies getting into a very high CapEx mode. It's obviously positive as you see sustained demand and opportunities there, but the execution risks are increasing in terms of land acquisition delay cost overrun labor requirement deployment, stuff like that. Any thoughts in terms of how do you basically manage this risk going into next 3 years because we're going to be into high CapEx mode for almost 2 years from now. That's my first question.

So preview are going to grow high tenor. And you see we're taking a number of initiatives, for instance, the particle board plant that you have just heard. We already have acquired the land. We've got the land from Sukkot and Kamalani. And that is a big release because, as you know, acquisitional land becomes a substantial challenge. As for delays and cost overruns, you're completely threat there is a cost overrun environment kidding because of the high steel prices and Iceman pricing and so on and so forth. But I think we're able to provision for that to whatever extent possible, the ROCs on the unit even considering the higher CapEx costs are still fairly holding. And one that we are managing to this because taking a very strong execution fee. I think this has helped us in the past and even today, it is helping that in state most economical and viable.

So in terms of manpower deployment, both at senior leadership plus middle management because you have so many plants coming up, how is that really going on right now?

That is actually our first top most parity, and we have expanded it being substantially over the course of the past few months. And this is the first test thought that in domain is going to execute. But thankfully, we give you able to onboard senior management and there is good resources out there. This has given us a lot of confidence that we'll be able to deliver on our CapEx projects on time.

Got that. Secondly, you mentioned MDF particle board margins 25% plus. That is for the current year. But if you could just share what is really happening from an industry perspective going into next 12 months? And what do you think about margins going into '24 and fiscal '25, -- like sustainable? I know the range is 2025, but if you could give any indication, please? That's my second question.

It is the reason we say 25%, even though the previous quarter may have been 30% plus something that other because there will be ups and downs. Right now, there is pressure because import prices have come down due to shipping rate is reducing. But despite that, we are able to maintain a decent margin. Going forward, again, there is going to be a scenario in the industry, say, 12 or 18 months down the line, where there's going to be overcapacity. And at that point in time, margin mine as to controlled. But going forward long term, I think sustainable margins for us would be 25% or thereabout. This is -- I believe that with our brand with our supply chain excellence, we'll be able to generate substantially higher margins compared to the rest of the industry. And I think 20% is somewhat requirement somewhat of a requirement if you want to set up a very high CapEx plan led these 2 products.

25 was applicant both to MDF and particle board going into like long term, right? Sustainable.

Yes. They could see favor where margins were slightly lower, and they will be chasing the margins are definitely higher. But long-term sustainable margins are looking at 10%.

I understand that. And lastly, if I may, just on the overall EBITDA margin, obviously, there's a lot of moving parts now given your new capacity largely coming out in fiscal '24. And a lot of that are also value added. Next 3 years, I would imagine purely because assuming that MDA would also normalize between this 25% band, the company should make about 15% to 16% at a company level. Is that fair to assume? I know there is no perfect answer to this. But just as a range in next 3 years, is that okay?

Very good question we are making in we have always taken our objective is that we will return for 13% to 15% EBITDA margin imply 14% to 15% at laminate and we temper 25% starts in both Manparticle boat. That is good to be our endeavor. That is what we are targeting. -- we achieved following these, then definitely, we should have 16%, 17% margin for the company.

The next question is from the line of Venkatesh Balasubramaniam from Axis Capital.

One simple bookkeeping question. The Myanmar subsidiary write-off of INR 47 crores, that is very clear in the stand-alone numbers, right? It's put out an exceptional or an extraordinary item. Now where does -- is the adjustment -- where is the adjustment in the consolidated numbers for this onetime write-off. Is it actually, first of all, is the write-off for INR 47 crores in the consolidated numbers? Or it is INR 29.8 crores -- if you could clarify. And where has this actually been booked in the consolidated numbers?

No. In case of consolidation of accounts, we have to add line by line items. So in case of consolidation, our investment value is adjusted with the loss on in that subsidiary. So it will not appear in write-off or impairment account in consolidation because loss has already been factored in line -- line by line consolidation.

Okay. So line by line consolidation. So you're basically saying it is in all items... Raw material and...

Because the net worth of that company is now reduced to INR 12 crore only -- so INR 47 crores plus INR 12 crores, INR 59 crores is the total capital invested. So in line-by-line consolidation, I have taken care of the INR 40 crore loss...

So there is INR 47 crores of loss across various line items right from raw metical cost, employee or other expenses between everything.

Yes, yes. Okay, that line by level consolidation. So there theorist impairment close.

Okay, fine. Understood. Now is it possible for you to repeat your FY '23 guidance in terms of value volume and margins for each of those segments? And also request you to repeat it a little slowly, so that we can take it down.

the guidance, yes... 15% volume and 20% value growth for plywood, 15% volume and value growth for long let 20% volume and value growth for MDS, 10% volume and 2% value growth for part of book. The margin guidance in plywood, we will attend for EBITDA margin, 13% to 15% for an between 14% and 16%. And NDS, in particular, got 25%.

Okay. Now I guess, for the first time, I heard a 20% number for India. I guess, during the last number last quarter, what was being communicated was you will definitely do 25% or more longer term, that is a sustainable margin. But I don't know on the previous participant's question, it said that short term, it could go to 20% to 25%. Have you communicated anything like that?

I don't think we have communicated anything like that. I was talking about 20% volume on a growth in terms of margin guidance still was 25%...

So you believe even if there is overcapacity in, let's say, FY '24, you can still do 25%.

In the short term -- the comp impact, but we did not say doing 25% in Q1 either. So long-term items is 25%.

Okay. And where does -- see, this is the reason I am again delayering on this point is this is a question which keeps coming up when we discuss essentially Plyboards with the Bursari. Where do you get this confidence that it will not go below because the imports have already reached the ports and import city MDF prices for imports around 8% to 10% below the prices of that of the domestic market. So why 25%? What is the -- what is so sacrosanct about 25%? Why can't it go to 20% or 18% if there is an oversupply is something which we are, and we don't really know how to answer it. So if you could claw some light on it, it will be very helpful.

Definitely. So you see today, our capacity right now is based in the north capacity in the south is going to come on more only in the next year. In the north, the freight cost we as a major advantage because from the south of the North transporting from a port location to see Delhi is not a very cheap offer. And in the case of MDF, now that is not a very high cost, for transportation and food cost to a large loan. So that is one. Secondly, the capacity that we are commissioning right now in the lot is being commissioned, taking into account a lot of synergies that we will get from our existing unit. A lot of synergies in case in marketing, and we will benefit from operating levels. And you've seen in the past, then operating whether this coming to play, margins are cemeteries. So this is for the math. As far as South is concerned, we are setting up our capacity in the half of timber. We are setting up in a market where the similar price to be INR 2.15 as compared to INR 5.5 crores to INR 6 in the north. This is going to be a substantial benefit that we have. And would this we believe that we'll be able to do good EBITDA margins in the South of on.

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

Congratulations for great numbers. My first question was, if you could just clarify on this MDF margin. Q-o-Q, they are down almost 10 percentage points. I see the realizations are fairly same. If you can give clarity as to what has driven this margin impact in terms of each of the items in terms of raw material or chemicals, et cetera?

Thank you, Achal. So those 2 factors are coming to for India. First, gross margins are down because of raw material cost question. And secondly, we have had operating delivery in this quarter because of a breakdown in the plant, it was a schedule at respective longer than expected and it was a breakdown. But in the current quarter, we are expecting both the benefit of operating leverage as well as a slight easing out of raw material countries. And I think that our EBITDA margin should improve from this quarter on.

But if I see your 25% margin guidance, actually, opiate that it will be less than that in the second half. How do we explain that then...

So we have given 25% guiding you in prior to the beginning of the year. So we did 35% in Q1 with 25% item. 25% is the long-term margin guidance -- the reason that we don't want to comment on short term is we a lot of fluctuations that can take care of the year already at...

And Achal, even if you look at the current Q2 margins and MDF, if you adjust for ForEx loss, which is around INR 2.45 crores, which is relating to CapEx for buyers credit with respect to MDF? Your margins adjusted for it comes to around 26.7%. So that is one. And secondly, on the operating let side, our capacity utilization was 80% for Q2 compared to 89% in the first quarter. So these 2 things will help us at least maintain our 25% plus margins. That is what we are seeing.

Understood. Understood. Can you help us understand what is -- how are the current prices of MDF in South? And what is the import parity price? And also, in terms of import quantum, if you could -- if you can give some clarity as to how the imports have been in terms of quantity in the last 2, 3 months?

And so imports have increased. The reason being that is lower cost of rate, exact numbers, we will can get back to you. I don't have the back numbers only right now. But definitely, there has been an increase in imports beta lower shipping and food costs. This is affected South Indian to a certain extent. But as of now, it is not put meaningful pressure on the domestic market.

Understood. Understood. And in terms of the particle board, can you help us understand what is the market size? How much is organized? How much is imports, what is the import parity there? I know you have given a bottom line in terms of the margin expectation, but if you can give some color on the industry dynamics as well?

Definitely. In particular, the total capacity will be 1.5 billion cubic meters plus. Most of the market is unorganized. There are virtually no organization and perhaps an associated recover. Most of the lines that are operating today are multi delight line. So even our line is a multi-day -- now the number of disadvantages that a multi-die. For instance, firstly, we have higher blue consumption. We have a higher density than we could operate our multi-life contra. And we have higher funding cost. So taking all of these into account, there are various advantages that having a 20 premobility and the vision to go for a 1,200-meter continuous strapline. Particle mode is a far lower priced product compared to even MDF. So trade becomes a major issue. South India is the largest hub because South India has the largest OEM in the country, and these OEMs have accepted partite book. If you look at the acceptance of NDS in tired, whereas the acceptance of particle mode is higher than South -- so as such, we believe that the market is going to do very well long term. We have over 2.5 years that we will set up a new capacity. And actually, by the time the capacity update, considering all the advantages that we will be having, it is going to be a highly looked project for.

If I recall earlier, you were talking about flexi capacity in terms of MDF and particle board. So this particle board capacity, there is no such flexibility. Is that understanding right?

Absolutely correct. This is a pure particular capacity. One point that I forgot to mention for you was that now in this capacity, because today, we are limited by virtue being a multi light, you can only manufacture either 9 or by 6, and that's to wholly manufacture 99% and above. Once we have a continuous spread, we will have a much wider range. So that is going to be another media advantage to be forward...

Understood. And in terms of the cost -- the A&P spend in this quarter and the PCG cost, if any?

Yes, we have BCG costs. So BCG has started working or they were working on mandates and their patent working or particle goods. In particular, to, we have already identified substantial savings, which could lead to a 2%, 2.5% bump in EBITDA going forward. A&P spends have come down because in quarter 1, we had the IPL and that is a substantial part of our overall marketing budget. So that kind of front-loaded.

So would you be able to quantify how much is the A&P in the second quarter?

Yes. It's 2% lower than what it was in Q1.

So if you look at the overall company, it's 1% lower as far as company as a whole is concerned. And for plywood division, it's almost like 2% as it.

As a percentage of revenue you're talking about, right? Okay. Understood. And one more question I had. In terms of the plywood segment, obviously, given the high base, the Y-o-Y numbers appear muted, but can you help us understand how is the demand scenario out there for the plywood segment? And can we expect a similar run rate in terms of volumes in coming...

Would you like to take that?

Yes, yes. So... In terms of expectation, we expect a single-digit growth in H2 over last 2. See, demand has definitely the demand that you were seeing during Ovid, definitely, the growth run rate is not the same as that this year. But we've been able to set same numbers, and we are growing. We had a high base, like you said. So because of that Q2 number growth is seeming a little low. But overall, I think we are quite happy with our performance, and we expect to grow over in HD as well. And Q3 definitely being effect this quarter will be lesser growth and Q4 will be where we will have a higher growth.

So when you're talking about growth, are you meaning from a Y-o-Y perspective because you will have festivals even in the base quarter, right?

Yes. Y-o-Y perspective, we will definitely have single-digit growth, as I mentioned, in H2. Right.

And can you also give some sense about how the premium segment is going, how nonpremium is doing in terms of the growth and the outlook. So no, I think...

We don't specifically give numbers like you can say this. Yes. So yes, I don't want to...

Yes, as Keshav mentioned, we don't give specific numbers between tenant entry brand. But just to give an idea, overall fee tariff operates in a much more larger base because majority of the market today in plywood live at that INR 18,200, that is where a clinic operate because Nis supposed to convert local into branded. So definitely, the growth rate of Fenix is going to be higher because it started from a very low base. We started the product only 3 to 4 years that. So then the growth rate will always be higher in Fenix for the next few years. And having said that, we do have growth even in our premium segment, and that is purely because of the innovation that we are doing and the brand awareness and the brand campaigns that we are doing is really helping us grow in our medium segment as that.

[Operator Instructions] The next question is from the line of Sneha Talreja from Edelweiss.

Just a couple of questions from mine. Firstly, relating to demand actually. What has semi led to this kind of a slow movement in demand in your sense? And extending to that question, is that the reason we are not able to take any increase in MDF, although the raw material prices are on an increasing trend? Or is it the figure of imports due to which the entire industry is unable to take any price hike?

Thank you. So you see regarding MDS, definitely, we have taken substantial price in pesos in the past 1.5 years. And another is not just with your import, but if you increase prices disproportionately, you would come closer to the lower center flood. There open the entire equation of ply or MBS will move a little bit too, even though that plywood is of lower quality. So that was one point. And your first question was?

It was just regarding the in-general slowdown in demand that we are right now in across the very material? What's your – there -- and where do you get the optimism that that's going to increase. I mean, that's going to get better.

So I think that in the last quarter, you saw the impact of all the inflation pressure that was created in the system -- because prices of a lot of commodities have tired of. And I think this had an impact on the homebuilding space as well. Going forward, I think you're all very bullish, especially considering the registration number and the property sales numbers that are coming in that the market is going to do well there could be minus deep in the short term -- what does remain very optimistic and very bullish. And I'm expecting a good company in H2, sir? Add on this -- a couple of things here.

So if you look at the base also based for entire be metal industry, going into Q2 and Q3 was very, very significantly higher because post-COVID, the numbers were very, very strong. So that's again a reason why people are looking -- or realizing this as a very, very muted moderate growth. So I think that is one. And second is the inflationary environment, which is also related to the situation. And now if you look at the inflationary environment, that's been almost likely to probably move down a bit. So this will again help regain the growth momentum going forward?

One more thing I would like to add. The reason we are so optimistic because as a brand, we are continuously investing in building our brand. I think we are amongst the aniline continuously throughout the year spend money on branding as well as on improvement in terms of technological increases. So I think on innovation. So because of that, I think we are extremely positive that we will see -- even if the market is muted, we will grow the way we are expecting to grow. And having said that, I think we are also working continuously on improving our cost structure and improving our market et cetera. So I think that is where our optimism comes from.

That was pretty helpful, Sam. The last question was actually related to your margins. We've seen a good amount of improvement in your plywood and laminate margins and this laminates despite the BCG expenses coming in. And in fact, both these places, you are higher than your guidance. So what has led to this higher margins? Is there any exceptional item here? Or these are like now sustainable levels. Although I understand that -- in this 13% to 15% and a -- Victor, would you like to...

Yes. So I think on the plywood part. So actually, we are within the 13% to 15%. Q1, we bind actually our EBITDA margin is below because of the ICL sort of the begin, IT cost was taken in Q1. And because of that, the loading came in Q1 and that floating wasn't there in Q3, number one. Number two, we take a lot of price increases in petty in Q1. So there is a price increase in April, there was a price increase in May end. There's some part increase even in June. So Q2 was up to quarter where all the price increases have come into some effect because that our EBITDA is actually come back to what we expected, which is 14%.

With regards to Lane, I think -- the current EBITDA margin, yes, we have worked very hard to ensure our product mix in domestic as well as export improves. And going forward, like have we will attempt to do 14% to 15%. But yes, we may be doing slightly better.

The next question is from the line of Shubham Agarwal from Axis Capital.

To ask this question. Just on following on the comment of NBFC, which you would have already emphasized much on. I just wanted to understand what is the realization for truckload for Ply and MDF, how different is it? And let's say, what is the freight cost if you apply the vehicle from, say, Hoshatoni. Ago a hand...

Would not be a very needed cost. I think the feed cost would be to say, maybe INR 1,000. So I don't have data with me. Maybe we can give you a detail. Why we in general all would be at least 2 at the cost of RMBS. So I think that is the combine that you follow, but again on a win that number.

So just okay. Okay. I'll get that separately. Second, what is the price difference in imports and domestic realizations right now, price [indiscernible] and domestic India...

Yes. It actually depends on the location because if you look in the norm, the landed cost of imports goes up substantially. In the South, I think that MBS is currently being exported at about $220 per CBM. But on top of that, you need to add the cost of take you need to add because it varies from location to location. Yes. Sorry, I was actually asking -- it all.

Imports price of imports and domestic in South. How different is the...

$200 is FOB after that could do a lot of loading, et cetera. I think the difference between domestic and aborted prices, ballpark because South is not really our focus area, but it would be sales of 10%, 15%...

The next question is from the line of [ Hitesh Agarwal from India inside Value Fund. ]

In Particle board, I wanted to ask what is the asset turnover for a CapEx of INR 550 crores for the new plant?

And the turnover for the new capacity will be in excess of INR 600 crores.

Excess of INR 600 crores. And what will be the kind of time gap between the commencement of the plant and its full utilization?

I think will take about 2.5 to 3 years to utilize the plant...

Okay. Okay. One question like in the particle goods segment. Could you tell me of the industry assets, what will be the percentage of imports as such? And how is the price difference between the imports and the domestic prices?

Again, it's a very good scenario right now. Today, import FOB would be at about $120. I think oat about 150 probes. And domestic pricing that is long then you need to take into account all the other costs. But I would say that we would be at least 10% to 15% higher the domestic prices will be 10% to 15% higher by inputs. Like selective OEMs was a lot more facility from us because they can pursue material virtually overnight. Whereas if you look at the more imported competition, the lease time is substantially higher. Also for Unidos not have a plan facility. -- for then the relying on import performance next to impossible because you cannot really select a design for. It is a very difficult proposition. So the next of manufacture give them that flexibility.

Okay. Coming to the MDF segment as such, could you give color on the rise in the timber and the chemical prices sequentially [indiscernible]

Yes. So if you look at the rate price movement in MDF segment, timber per se has gone up by almost, say, 10%, 12% since the start of the year. So that is one which has impacted the gross margin? And secondly, chemical, again, has gone up substantially, particularly on the -- so one of the chemicals that we use has gone up almost by 20%, 25%. So that is what has led to almost 650, 700 bps gross margin deterioration?

Okay. And like should we consider kind of softening of the chemical prices going forward as such?

So timber prices are still elevated, but as far as chemical prices are concerned, which had actually seen a very drastic move they have started coming off of it. So that is what will help us give a question to.

The next question is from the line of Parth Bhavsar, Investec India.

I can we proceed? Sir, I had this question. So you are setting up a laminate plant in West Bengal. And then there's an upcoming cannot. So what is the downfield optionality at both these cases, like over and above the capacity that are setting up, is there any option to increase your capacity handers.

increases in calcitonin be different because we are now a space constraint. And existing premise, I don't think we'll be secure. In -- and increase 1, we are coming up with 2 hostesses in Phase 2 will be coming up with a further to. And we creating no provision to come up with 4 units in day 3. But that's as of now is something that we have not thought too much about. Right now, it is about CHiPhase II. But definitely, we can set up up to 8 lines in comfort. Okay. So on Page I'll be adding 4... Yes.

Okay. And sir, one other thing is that what is the rationale to go after particle or and not plywood. Could you just elaborate a little bit on that?

If you always go out to plywood. We are definitely looking to grow in climate. And since we have taken up a lot of balancing investment in balancing equipment across flatwoods to increase our capacity. So it is not that particular boat is coming at the expense out.

And I'll add to that, that we had announced that we will set up a unit in Harsha for plywood. So we are now search for land right now. So we have some land options. So I think hopefully, soon we will be to close one thing.

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

Sir, I wanted to know like what is the per tonne timber consumption for on CVM production of particle bond?

It would be close to 1,100. Level 100 kgs. Yes, 1.1.

Okay. And sir, comment on MDF segment, I missed the -- what you said about -- to the earlier participant's call, the rise in timber, what was the right sequential rise in sango costs and chemical price...

Indents gone up by 10% to 12% core for the current year for MBS in particular, in the North of India, and elite prices had increased by in excess of 25%, but now they have shown times of correction.

This is in 2022 or in this fiscal...

In this fiscal.

Okay. And sir, about your brand, do you think the expansion for MDS, you said that it will commence production from H2 FY '24? Okay. So that means that has been a delay of about 2 quarters.

We have always valued for H2 FY 24, there's a delay in the project, what the...

Okay. We must do something -- that's it from me.

The next question is from the line of Udit from [indiscernible] Securities.

Yes. Just 2 parts. One is that when we mentioned about 15% overall growth for '23. So just basic what we have done in H1 and the balance in H2, what would be expected. So are we looking at a decline year-on-year for H2?

No, we are definitely not looking at any decline. But having said time, we are not getting overly excited by good performance in H1.

Understood. And sir, just fundamentally on the product side, like you mentioned that and how the OEMs have accepted the particle board. So do you see any threat to MDF, like we are coming up with CapEx in both is understandable in South, we are coming up with NDFs well. So what explains that part like particle board can take market share of MDF structurally just wanting to know on the category.

You see, I think you need to look at it from a rating more holistic point of view. If you look at particulate usability in OEMs is excellent, it highly malting product. And for office connector, it is a product that is durable because it is not as any usage as domestic furniture would be for domestic furniture, MDF use, which is still very strong. In the south testing on possible world has been there for quite some time now, whereas in the North particle board has really not been accepted a very strong or very good product because MD as penetrated much earlier. So I think both are going to grow substantially. As we have mentioned earlier, the partition capacity in India would be about 1.5 million cubic meters, whereas the Parto capacity in China is INR 50 million cut. So you're still 15 somewhere side, there is a lot of room for growth. And in MBS as well, our capacity will be 2 million, whereas China, I think, could be around INR 55 million to EUR 60 million. So again, there is substantial room for growth in both. I don't think growth in rate category will come on the cost of the other. But definitely, both are going to be high-growth categories going forward.

Got it, sir. And just lastly, following up on particle boards, what kind of industry growth are you expecting? And like you mentioned, it is a highly fragmented unorganized industry. Will we be able to get any pricing power or maybe this investor dynamics on this one? I think more than pricing power, we will be able to give a range of products that in the limited number of players will be able to offer. So the unorganized lower would actually not be able to compete and finding certain products, they cannot manufacture. So constant less than 99 should not be manufactured in any multi-like test today, even we in our manufacture less than 90. But going forward, only 3 or I think 4 players, we are continuous testing, we'll be able to offer these programs. So that gives us a substantial advantage in the market. And once these products come into play once they're accepted, then we'll have pricing power, which is the threat of competition is going to be far lower... Andes, Banknote. Thank you.

The next question is from the line of Pranav from Equirus Securities.

Sir, I wanted to understand on -- if you can throw some light on how the MDF prices are moving globally. That was my first question. And the second question was, how long do you think the timber availability issue is going to be a major problem for the industry? Because just for my understanding, at least for next 2 years, things are going to impact in the real issue in India.

I'll another second part first. Definitely, there is consumer, and that is something that we are facing. But the result of this is a much higher sendo price, which is like the tremendous amount of plantation. Now if you drive from sending to sharpen to Kushal, you oversee the quantum of Azop that is taking place. So you're right that for a couple of years, we might be under pressure. But after that, the quantum of timber already are yielding in emanate will be a net reflective. And I'm sure that this is happening in practically all of the parts also because with this higher single pricing for farmer, it becomes a very liquidate proposition, especially considering that even they don't need to give as much time to or you could is as we need to get to a toric and the cycle will be higher prices rolling moving the case, particularly for lands that are not very adapalene that are not before, this becomes a very option. Secondly, internationally, yes, prices have softened for NPS. But what has also happened is that the rupee has depreciated from 70 to 73 level 8. So that is take a 10% increase in cost, right? So overall, the softness has been cushioned by this impact of the rupee depreciating.

Okay, sir. And sir, how the laminate expense for us are shaping up? Because the industry seems to be doing quite well on the export ban. So are we aggressively targeting exports as a growth opportunity for us because we have also a lot of room to catch up in the domestic market? Or you're going to focus on domestic quality...

No, we are going to be focusing on seeing exports, higher prices are required still down on is we only operate at a 4 for exports. We have requirement for 10x and 15x. -- in Andhra, we are coming up with 1 content and 110 by trope. Foster, a lot of international markets, a lot of export markets will be open to us, but still now has not been. So definitely, we are an expense you're absolutely right. There's a lot of headroom there, and we are focusing on the...

The next question is from the line of Ashish Kumar from Infinity Alternatives.

And congratulations for a good steady set of numbers. So a couple of questions. One, a near-term kind of question and the second is a longer term. On the near term, from the way we stand in terms of the EBITDA margins and the revenues, do you see any sequential pressure point over the next 2, 3, 4 quarters? Or should we assume this to be a base number with the new revenues being added from new capacity expansion. Is that a fair way to look at it?

So yes, so basically, if you look at the raw material costs, as I said earlier, some of the raw material prices are definitely on the way down, at least over the next couple of months, which you can see at the moment. So to that extent, the pressure would be easing out, particularly with respect to those chemicals. Even as far as plywood is concerned, our core media prices have dropped a bit, possibly around 2.5% to 3%. So finally, there's a respite of that because those were the prices which were consistently increasing gradually over the last 4 to 6 quarters. So to that extent, yes, we should get benefited to that extent. And yes, so -- and as far as growth is concerned, obviously, with the new capacity is coming up on steel, we should be able to take advantage of those coming on time. Sure.

And second one was from a slightly longer term. We've announced massive CapEx in businesses which are a 25% EBITDA margin, let's say, based on longer-term guidance. So from a company perspective, today, if you look at it, particular broad plus MDF is roughly around 21%, 22% of revenues. But let's say, 3 years out, would it be fair to assume that, that number proportion could be more like 40%. And if I assume, let's say, 15% for your Privatslaminate business and 25% for this business, would that mean that from a company perspective, we could be starting to hit margins, which are closer to the 20% mark rather than the 15% mark?

I think you cited the nail on the head. Definitely, that is the reason we investing so substantially in these areas. Having said that, because of the fact that MBS in particle would have part of our industry, we have the opportunity to reinvest our tax flows in high ROCE businesses. So this is a very, very, I would say, good time and a good opportunity for us. Going forward, yes, we are looking at a higher percentage of the mix coming from NBF particular despite a good growth in Savlani. So this should push the margins will One on you need to understand the working capital requirements in both particulate and MBS are substantially lower. So again, those are cash for higher ROCs.

Sure. Only one thing, Keshav, that, if you're guiding for a 25% EBITDA margin and that's your revenue to CapEx of 1.3x, then you could be -- one could be looking at, let's say, mid-20s kind of an ROC as compared to, let's say, significantly higher applied business. Is that a fair way to look at it?

At this point in time, what we have seen is that the asset turnover ratio has actually been far better than the numbers that you suggested. So I think what we are targeting is 20% plus ROC that has been the objective from Day 1. And who these businesses should be able to give us that? But yes, I am hopeful that the number should be slightly better than that.

Sure. Okay. Given the fact that you're closer to currently, the 30% mark, that's a huge wind down.

And today, we are very lucky that we have been able to deliver on a sustained basis. But going forward, you see you need avenues for growth. And these 2 products represent avenues for growth. So ultimate that long-term margins will be good long term, they will generate good ROCE, maybe not as high as plywood alarm yes, you could be.

The next question is from the line of [ Shane Machava from LIC. ]

So my first question is I wanted to understand that we are in planning a CapEx per part bolder and also Winland Marina planning a similar CapEx. So as all 3 players are increasing the capacities in particle board, just pricing, how is the pricing scenario for us? Like are the organized players selling at a premium that you novelize or at the same pricing?

Thank you come on the premium over the unorganized even. And going forward, like I mentioned in a comment that there are a lot of advantages that you will get. So definitely, product quality will improve, which should get you further pricing premium. But beyond the same, you would also get benefit of substantially lower operating costs. So going forward, I think the online players will have a substantial benefit over the unorganized sector, particularly in the particular godsend a factor and how much of the savings due to the Sorry, could you repeat -- so the majority in is B2B. So particularly to the materials...

Okay. And sir, I understand that the policy the solar Internet. Normally, we say that MDS rationale for MDS is the growth in the ready-made financial market, but most of the online funds that is being sold is not a particle boda going through the online upset. So what is your take? -- like? What is the proportion of MDF periarticular the online furniture that is sold?

It is very difficult to plug online point one category because there are some options. But see also IC uses more than 80% of partial growth and a very small interesting part of NBS. But in India for residential furniture, MDS is the preferred third-generation opine product, whereas office collection, partly our the preferred product -- on price, particle board would be once the price of plywood, whereas -- and would be half the price. So particularly to has a distinct advantage. And when you look at lower price per action, you will know and not see particular good. Right... For retention on action, most of the railway residential furniture is showing a trend of leaning towards MBS rather than particle...

Got it. And just last question. I wanted to understand that, as we highlighted that the second half of this year, we'll see single-digit growth in plywood. So what gives you the confidence for FY '20 to deliver 15% volume growth and 20% revenue growth.

I think we have done a lot of things, as Pipa has mentioned, we have implemented our sales for automation to, which I think is the first the industry to do. We have changed the entire GPM. We have invested substantially in timing -- so I think all of these initiatives put together have put us in a very good space. Now slowly, we will see the benefits of these in is coming because it does not happen overlap. Hence, we are confident that going forward, we will be able to deliver good sustained number.

So 15% volume growth in plywood or telone sustaining this meeting the low.

Sorry, could you speak.

Volume would be sustainable for 3, 4 years, is it?

That is what we would want to achieve.

So what I'm not the investor is far lower than that, right? So this already in an and well know everything. So can we deliver so much as industry growth rate in an...

So I tell you that... San... Just wanting -- what we also must factor in. In fact, there is a change from the unorganized to the online portfolio taking place? And that is really leading our core. You must realize that in plywood, only 30% of the market is one. Now if this changes, say, even by 1% or 2%, that gives a substantial most to aversion organized and a market leader is fully intend to cash in on the same...

So just to add to that, we are currently 56% of the entire siloed industry. So the reason why we have launched Mican the amount of money we are spending behind PEMEX because we see the opportunity lies in converting this unbranded to branded. So even if the industry is growing at a certain pace, we want to grow more than the industry because we want to capture more market share. So hence, that is where the 15% on from.

The next question is from the line of Rajesh Kumar from HDFC Securities.

My question is, first, on this capital build project. Is it the existing location or a greenfield one nearby -- it is a greenfield location, okay. And this CapEx, which we are incurring, does it have an optionality of increasing the capacity to the 3 years sale? We got to finish the back 2. Sorry, I missed it. testing capacity, which you are in putting up 3.6 lakh -- can it be increased further? Or is the land and other multi?

Yes, land is there, but the current line and the current share, et cetera, everything that has been designed, has been designed for this 3.6 lakh. Going forward... Of course, in the same location, we can set up a being...

Okay. And sir, you don't have a lane facility nearby. So will that have an impact on your prelam sales from this plant?

No, we didn't have a name in Sinai earlier Plan, the paper inventory management is not a difficult to value. Because single -- that is not a challenge any , whether it's shark, whether it is genetics, any other location this particular processing will be coming up with a plan.

Okay. And second, in the MDS, you mentioned that the import and domestic price differences -- so historically, maybe coat has been the sustainable pricing difference between imports and rest...

I don't at this point. I will get back to you on the second...

Okay. I just wanting to assess that when you're looking at from 30% to 25%, what more pressure can on a sustainable basis, it led to because the capacity...

Okay. All right. Not disturb that you end -- can you repeat the question... Okay. No, the part...

Is it okay now? [indiscernible] I'll get back on this later. What was the question.

Ladies and gentlemen, that was the last question. I now hand the conference over to the management for closing comments.

So thank you so much to all of you for taking out your valuable time to attend this call. The one point I'd like to make is, as always, your management is going to try to the 11 best to deliver as good a performance as we can. And hopefully, with all your support, we'll be in the achievement On behalf of DAM Capital Advisors Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.