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Disappointing performance continues

We downward revise our FY25 earnings estimates by 6.9% to account for weak performance in Q2FY25 and rising domestic competition, impacting MDF realization. GREENP has guided for domestic MDF volume growth of 15-18% (YoY) in H2FY25. However, we have considered MDF volume growth at 16% for H2FY25. MDF domestic realization decreased 4.4% YoY in Q2FY25 due to competitive pricing. MDF exports were also impacted by lower availability of containers and increased freight cost. We believe consolidated low EBITDA margin will continue in FY25 at 13.0% with 1) steep increase in timber prices, 2) higher OEM vol in the MDF segment, 3) lower domestic volumes, and 4) lower realization with competition in MDF. Timber prices will continue to impact margins in coming quarters. The management has indicated moderation in timber prices only with new crop arrival from FY26. We estimate revenue/EBITDA/PAT CAGR of 15.9%/21.3%/23.8% over FY24-27E with MDF volume CAGR of 15.2%. We maintain ‘Accumulate’ rating with a TP to Rs450, based on 20x FY27E earnings.

Revenue declines by 15.5%, PAT declines 54.9%: Revenue was down 15.5% YoY to ~Rs3.4bn (PLe: Rs3.5bn). MDF segment declined 15.6% YoY to Rs3.0bn. MDF volume declined by 17.9% YoY to 101kCBM (domestic volume decreased 4.4%, export volume declined 54.5%), blended realization stood at Rs29,120/CBM (+1.5% YoY), and domestic realization was Rs30,404/CBM (-7.2% YoY) due to increased wood prices and lower volumes. Plywood segment reported revenue of Rs368.6mn, down 14.7% YoY. Plywood volume declined by 10.4% YoY and reported realization was Rs250/sqm, down 5.1% YoY due to lower volumes. EBITDA declined by 56.8% YoY to Rs299mn (PLe: Rs428mn). EBITDA margin contracted by ~850bps YoY to 8.9% (PLe: 12.2%). In MDF segment, EBITDA margin contracted to 13.1% as exports were impacted by lower availability of containers and increased freight cost. PBT declined by 75.9% YoY to Rs134mn (PLe: Rs310mn). PAT declined by 54.9% YoY to Rs185mn (PLe: Rs230mn).

Concall highlights: 1) The management has guided for domestic volume growth of 15-18% YoY in H2FY25 and targets exports of 6,000-7,000CBM/month depending on ocean freight rates and wood prices. 2) It is targeting volume growth of more than 35% in MDF domestic volumes for FY26. 3) Compared to Q2, overall margin is likely to expand by 150-200bps in H2. 4) Q2 plywood realization was impacted by the shutdown of decorative veneers business due to lower operating margins and high working capital intensity. 5) VAP contribution stood at 54% in volume terms, and is expected to increase to 65% over the next 1-2 years. 6) The company launched a 4% incentive scheme for dealers to soften the impact of price action by competitors. 7) OEM volume stood at 16% of domestic segment with a decline in a margin of 400bps. 8) In Q2FY25, North timber prices stood at Rs6.6/kg (vs Rs5.7/kg), up 16.7% YoY, and South prices at Rs5.3/kg (vs Rs4.4/kg), up 20.4% YoY. Blended prices stood at Rs5.86/kg. 9) Cost of importing MDF to India, including freight charges, is ~USD195-200/CBM, and freight charges are USD25- 30/CBM. 10) GREENP is likely to spend Rs800mn for capex, over two years: Rs300mn for H2FY25 and remaining for FY26.11) The company is commencing new plant by Q3 end, which will have a capacity of 50%/80% by FY26/27.12) Domestic MDF capacity stands at 4.1mnCBM and demand at 2.7mnCBM.

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