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Greenlam Industries Ltd

| Q3 and 9M FY26 Earnings Conference Call

NEUTRAL SENTIMENT

Report Source

⬤3rd Feb 26

Summary : Greenlam reported mixed Q3 FY26 results with revenue growth but declining net profit, facing demand challenges and higher costs, while optimistic for Q4 and future segment breakeven.

Management Perspective positive : We remain optimistic that things will improve in that segment also. We are pretty hopeful that revenues in Q4 should be decent. Traditionally also, we've done nearly similar numbers in Q4 and Q2 maybe at times slightly higher than Q2 also.

Concall Report Analysis & Insights

Business Overview

  1. Q3 FY26 net revenue grew 17.3% YoY to INR706 crores; 9M FY26 revenue grew 15.9% to INR2,188 crores.
  2. Gross margin improved to 55.6% in Q3, but EBITDA margin declined to 9.2% due to higher operating costs.
  3. Company incurred a net loss of INR0.6 crores in Q3, and 9M net profit was down 77% to INR15.5 crores.
  4. Laminate segment revenue grew 8.1% in Q3, with EBITDA margin at 14.5% and 83% utilization.
  5. Plywood and Allied segment revenue grew 9.5% in Q3, but reported an EBITDA loss of INR13.3 crores.

Future Growth Prospects

  1. Naidupeta plant brownfield expansion for laminates is on track for Q4 FY27 completion.
  2. Management expects Q4 FY26 revenue growth to be around 18% and overall FY26 growth near 18-20%.
  3. Plywood and chipboard segments are targeted to achieve EBITDA breakeven in the next fiscal year.
  4. Targeted capacity utilization for chipboard and plywood plants is 55-60% for FY27.
  5. New high moisture resistant chipboard launched, receiving good market feedback.

Management Insights

  1. Q3 was a slower quarter due to holiday season and work disruptions, impacting revenues.
  2. Gross margins improved due to pricing discipline and raw material cost management.
  3. Streamlined brand architecture into two main brands: Greenlam and Mikasa, to enhance value.
  4. Chipboard business is gradually improving, with reduced losses and new product launches.
  5. Confident that Q4 will see improved performance, aligning with historical trends of Q2 and Q4 being stronger.

Signs of Skepticism

  1. Management could not quantify total installed chipboard capacity or provide specific Mikasa brand revenue for prior years.
  2. Plywood segment breakeven target implicitly shifted from Q4 FY26 to 'next year' due to slower performance.
  3. Management attributed demand slowdown to 'general feedback' and 'so many issues' without specific quantification.
  4. Acknowledged Q3 revenue was 'a bit lower' than expectations without fully detailing the shortfall's impact.

Risk Factors

  1. Q3 revenues were lower than expected due to holiday season and postponed export shipments.
  2. Domestic business has been slower than anticipated, impacting overall growth.
  3. Higher operating costs, interest, and depreciation led to a decline in EBITDA margin and net profit.
  4. Plywood segment performance has been slower than expected, continuing to incur losses.
  5. Weakening rupee and US tariffs are impacting import costs and export competitiveness.

Good To Know

  1. Working capital cycle improved by 9 days to 58 days in Q3 FY26 compared to Q3 last year.
  2. Net debt stood at INR1,010 crores as of December 31st.
  3. Exceptional loss of INR6.2 crores was incurred due to a wage code matter.
  4. The company was awarded the largest exporter of laminates for 16 years.
  5. Brand architecture now features Greenlam (laminates, facade, chipboard) and Mikasa (laminates, plywood, veneer, flooring, door).

Key Drivers

  1. Naidupeta plant expansion completion.
  2. Plywood and chipboard breakeven.
  3. Streamlined brand architecture benefits.
  4. Improved Q4 revenue growth.

Key Analyst Discussions

Competitive Environment

  1. No new major chipboard capacities are currently coming up in the market.
  2. Unorganized chipboard players offer subpar quality, with pricing 15-20% lower than organized players.
  3. Company focuses on superior quality chipboard, believing the market is moving towards better offerings.
  4. Laminate pricing is stable domestically and internationally, with some discounts due to currency depreciation.
  5. Raw material costs, including chemicals and resin, have remained largely stable despite rupee depreciation.

Market Trends & Consumer Behavior

  1. Q3 experienced seasonal demand dip, traditionally weaker than Q2 and Q4.
  2. General market feedback indicates slow demand and cash flow challenges.
  3. Export shipments were postponed from December to January, impacting Q3 volumes.
  4. Weakening rupee contributed to improved laminate realization in December quarter.
  5. Management expects demand to pick up in Q4, leading to better revenue and profitability.

Financial Highlights

  1. Company maintains FY26 top-line growth guidance of 18-20%, with Q4 expected to be strong.
  2. Plywood and chipboard segments are expected to achieve EBITDA breakeven in the next fiscal year.
  3. Remaining capex of INR50-75 crores is expected to be spent by Q1 of next year.
  4. EBITDA margin declined due to higher operating costs, forex fluctuations, and chipboard unit losses.
  5. Q4 is expected to see a bounce back in profitability and revenue growth across divisions.

Product Composition

  1. Launched a BWP+ variant for plywood, priced 5-6% lower than marine-grade, to address market gaps.
  2. Promoting melamine-faced chipboard and high moisture resistant grades to improve value mix.
  3. Mikasa laminates are priced 3-5% lower than Greenlam pre-lam laminates, but not a price-driven program.
  4. Chipboard capacity utilization is targeted at 55-60% for FY27.
  5. Plywood plant utilization is currently around 30-35%, with a target of 55-60% for FY27.

Strategic Considerations

  1. Streamlined brand architecture to Greenlam and Mikasa for better operational efficiency and brand promotion.
  2. Mikasa brand now encompasses a potential INR1,000 crores portfolio across multiple categories.
  3. Company is focusing on upsell and introducing superior product variants in chipboard range.
  4. Addressing US tariffs by increasing prices and offsetting some impact with rupee depreciation.
  5. Working to build network and customer base for the chipboard business.
Greenlam Industries Ltd (GREENLAM) Concall Report Analysis & Insights | Dhanarthi