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Greenlam Industries Ltd
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Ladies and gentlemen, good day, and welcome to Greenlam Industries Limited Q2 and H1 FY '23 Earnings Conference Call.
This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on the date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Saurabh Mittal, Managing Director and Chief Executive Officer, Greenlam Industries Limited. Thank you, and over to you, sir.
Thanks. Good afternoon, friends. A very warm welcome to all of you all on this call. I'm joined by Ashok, our CFO; Samarth, from the finance team; and SGA, our Investor Relations advisor. The results and presentations have been available on the stock exchanges and the company website. I hope you've had a chance to look at them. And I will give you a few key highlights for the quarter gone by and updates on the new projects.
The Gujarat factory at Prantij started in August -- started the commercial production in August, and we started the plant in a record time. The refurbishment work of the expanded capacity is going on and is going on as per schedule. And this should happen -- it should come into production by Q4 of this financial year. We concluded our equity raise in this quarter. We concluded all the debt closures for the projects at Andhra Pradesh and Tamil Nadu and noteworthy is that IFC has agreed to part fund the debt for our Andhra Pradesh project. The startup of the plywood and laminate expanded capacity at Tamil Nadu and Andhra Pradesh, respectively, will be in Q4 of FY '23. The startup of the particle board line will be in Q4 of FY '24. Most of the important equipments, et cetera, have all been placed and project is moving as per plan with some challenges due to rains, et cetera, in Tamil Nadu and Andhra, but by and large, it's moving on schedule.
The team set up for the new plywood business is underway, and that's also progressing fairly well. In the existing business, in last quarter, on the export front, we did reasonably well in the markets of U.S., Europe, Asia, U.K. I think those markets did well. We had challenges in few of our emerging markets because of the currency crisis in those countries. And few of them are normalizing as we talk. In the domestic market too there was a little bit of a challenge in terms of demand, but overall, we could grow each segment in value terms sequentially and year-on-year, on the domestic front.
So by and large, these were the key points from my side. I will have Ashok take you through the financial performance, post which, we'll be happy to address your questions and queries. Ashok, over to you.
Thank you, sir. Good afternoon, friends. I'll take you through the financial performance.
For the Q2 FY '23 on a consol basis, our net revenue grew by 14% on a year-on-year basis and grew by 10.1% on sequential basis and stood at INR 518 crore in this quarter as compared to INR 454 crore last year same quarter. Gross margin grew by 110 basis point to 44.6% in Q2 FY '23 from 43.5% in Q2 FY '22. On a sequential basis, gross margin was down by 40 basis point. Gross margin in absolute term grew by 16.8% to INR 231 crore in this quarter as compared to INR 198 crore in Q2 last year. EBITDA margin was up by 30 basis point and stood at 10.4% in Q2 FY '23 as compared to 10.1% in Q2 FY '22. On a sequential basis, EBITDA margin was down by 30 basis point. EBITDA in absolute term grew by 17% to INR 53.7 crore as compared to INR 45.9 crore in Q2 FY '22. Net profit for the quarter stood at 29.2% as against 20.7% in the Q2 last year.
Consolidated -- moving on to half yearly performance, consolidated net revenue for this half year grew by 25.1% on year-on-year basis and stood at INR 989 crore as compared to INR 790 crore last year same period. Gross margin was up by 30 basis point to 44.8% in this half year from 44.5% last year. Gross margin in absolute term grew by 25.8% to INR 443 crore as compared to INR 352 crore last year same period. EBITDA margin during the half year period remained flat at 10.5%. EBITDA in absolute term grew by 23.7% to INR 104 crore as compared to INR 84 crore previous year. Net margin grew by 41% to INR 53.8 crore in this half year as against INR 38 crore last year.
Now I'll move on to the segmental performance. Laminate, which is the major segment, for this quarter, our revenue grew by 13.7% on year-on-year basis and 9.5% on a sequential basis and stood at INR 471 crore as against INR 414.6 crore, Q2 FY '22. However, volume degrew by 10.2% on year-on-year basis. Domestic laminate revenue grew by 15.8% on year-on-year basis and grew by 11.5% sequentially in value term. Volume degrowth on year-on-year basis stood at 8.5%. International laminate revenue grew by 11.5% on year-on-year basis and 7.6% on sequential basis in value term. Volume degrew by 12% on year-on-year basis. EBITDA margin stood at 12.1%, a growth of 60 basis point on year-on-year basis and a degrowth of 30 basis point on quarter-on-quarter basis. Production volume were at 4.22 million sheets at a utilization of 99%. Sales volume for the quarter stood at 4.26 million sheets and our average realization for the quarter stood at INR 1,059 per sheet.
Moving on to half yearly performance. Laminate revenue grew by 24.5% to INR 901 crore this year as against INR 724 crore last year. Volume degrew by 4.2% on year-on-year basis. Domestic laminate revenue grew by 42.4% in value term. Volume growth stood at 9.6%. International laminate revenue grew by 10.8% in value term. Our volume degrew by 16.2%. EBITDA margin stood at 12.2%, a degrowth of 10 basis point. Production volume were at 8.51 million sheets and at a utilization level of 104%. Sales volume for this half year stood at 8.19 million sheets. Our average realization during this period was INR 1,049 per sheet.
Now moving on to decorative veneer and allied segment, which consists of decorative veneer, engineered floors and engineered doors. In the decorative veneer segment, revenue grew by 18% on year-on-year basis and 17.4% on sequential basis to INR 29.17 crore from INR 25.1 crore in Q2 last year. Volume grew by 11.8% on year-on-year basis. Revenue of decorative veneer business grew by 47% on year-on-year basis to INR 54.9 crore in this half year from INR 37 crore last year. Volume grew by 25% and volume in this quarter stood at 0.39 million square meter and for the half year stood at 0.64 million square meter. Capacity utilization in the quarter stood at 37%, and for the half year, it was 32%. Average realization for the quarter stood at INR 746 and for the half year stood at INR 851.
Moving on to engineered wood and flooring. Revenue grew by 47% on year-on-year basis and grew by 3% on a sequential basis to INR 11.8 crore in this quarter from INR 8 crore last quarter. Revenue of engineered wood and flooring grew by 51% in this half year to INR 23 crore as against INR 15.4 crore last half year. However, capacity utilization were at 11% in this quarter and 12% for the half year.
In the engineered door segment, revenue degrew by 16.6% on year-on-year basis and grew by 46% on sequential basis to INR 5.3 crore in this quarter as against INR 6.4 crore, Q2 FY '22. For the half year, revenue degrew by 33% to INR 8.9 crore as against INR 13.3 crore last year. Capacity utilization in this quarter stood at 17% and for the half year, it was 12%.
Net debt for the quarter ended stood at INR 75.5 crore, as against INR 220 crore since we have raised INR 195 crore by way of preferential issue of equity shares. Net working capital for this quarter stood at 69 days and for the half year stood at 72 days.
That's all from my side. I would now like to open the floor for the question and answer. Thank you.
[Operator Instructions] The first question is from the line of Harsh Shah from Dalal & Broacha Stock Broking.
So my question is on the exports market. So how is the situation right now shaping up in your key geographies? And going forward, do you believe that the export market would grow faster than the domestic market, meaning whether the ratio of exports to domestic, would it be 50-50? And what will be the value-added mix currently in the laminate segment?
The export market will continue to grow, and the challenges being faced by our competition, which is Russian costs in Europe and some other markets, we see that as an opportunity. So we think export market will continue to grow. Over a longer period of time, we believe, in laminates, the mix between domestic and exports will be very similar considering the Gujarat factory and considering the Andhra Pradesh plant also. So I really think both will grow at a similar percent and the mix between the 2 will also be 50% each nearly, plus/minus, depending on a quarter here or there, but by and large, that's what we expect on the exports.
Okay. And the margins, would it be better in exports?
So, we've said this in the past also, really, it depends when you say exports because we operate in several geographies and some markets we're still being in an export market, some we already settled. So it really depends market to market, geography to geography, but very hard to give you answer on this. But we believe more or less, on an average basis, it'll be very similar. There could be some export markets which are more profitable, there could be some export markets which are less profitable, but considering the mix of productions, sizes and dimensions, we have to be across geographies. So it'll be very similar.
Okay. And what will be value-added mix for this quarter, the laminates?
When you say value-added, what would you mean by that? Are we talking about -- because we've given out our average realization, which is INR 1,059 per sheet, right? So when you say value-added, very hard because we don't map that independently.
Okay. Yes, yes. No issues. And one last question. Is it that we have any exclusive distributors for our laminate segment and [Technical Difficulty]?
I'm so sorry. Can you come again on this, please?
Yes. So in the laminate segment, do we have any exclusive distributors for our product and whether they reflect on our payroll?
No, so we have distributors who exclusively work with our brands and products in both domestic and international markets. And what was the question about the payroll, please?
[Technical Difficulty]
Your voice is cracking, I'm so sorry.
Harsh, may I request you to come in network area, please? you're not very clear.
Is it clear now?
Yes, please go ahead.
Yes. So these exclusive distributors, do they come on our payroll that, meaning, do we pay them the salaries...
No, no, no. We don't -- how will they come on our payroll? These are all third-party distribution, and so they don't come on our payroll, they're distributors right?
The next question is from the line of Sneha Talreja from Edelweiss.
Are you able to hear me?
Sneha, we are not able to hear you very clear. Please be a bit loud.
Is it better?
Yes.
Yes. Just couple of questions from my end. What I wanted to understand was this recent diversification that the management is going through in particle board or plywood. Any thoughts that you have that you will be reevaluating your investments in doors and flooring business? What I want to understand is although the losses at this time point of time are small, but they too must be consuming some amount of management bandwidth here.
So flooring and doors, if you see, the business has grown in this quarter by about -- consolidated all the veneer category by about 17%, 18%, and we've reduced our working capital base in this category. And the business doesn't need any more fixed capital and doesn't need any further working capital also. So -- and I think we're on a certain trajectory. I mean, sometimes it just takes more time to set up a business. So we're looking at continuing with these businesses.
Understood. Secondly, what I wanted to understand is, this time, if I look at your exports business that has taken a hit, one of the factors that you mentioned is emerging markets, you faced certain currency-related issues. Are those issues sorted out? When do we see that normalizing? And secondly, to do with realization, we have seen very significant changes in realization. I mean your export realization have grown up significantly versus domestic. Reasons for the same?
So like I said earlier, several markets we've had, those markets facing currency problems of dollars not being available or banks not able to open LCs on time, et cetera, while we have good demand, and we have orders in those markets. So few of those markets might get stabilized within this quarter, let's say. And I guess 1 or 2 will move to next quarter, maybe even beyond that. But that doesn't mean -- we are trying to grow the other markets. So we should be okay on that front. As far as the export realization growth is concerned, because the volumes are down in some of these emerging markets, the denominator has changed and that shows a high realization growth per sheet. If those volumes were there, maybe the realization per sheet -- the growth would have been slightly lower. So otherwise, nothing substantial has changed between exports and domestic in terms of realization.
What I wanted to understand is we are taking similar price hikes in both the market to pass on the raw material costs.
Yes, correct. So like I said, because volumes are down, so the denominator -- the markets in which -- where we are not being able to ship enough, and those probably are not high-value markets, and that's why your realization growth seems to be higher.
Okay. Understood. I think it's to do with the emerging market versus the -- okay.
Yes. And as far as the price hikes are concerned, Q2, we have not taken any price hikes. We took the price hike in Q1.
Okay. But are the raw material costs now completely absorptive because we are yet to see any kind of improvement in trajectory with respect to margins last quarter or before that. We understood that we are sitting with some amount of high-cost inventory. So just trying to understand, is that high-cost inventory impact done with and from now on, can we see a gradual impact without any increase in prices?
So clearly, we're not raising any prices. If you see Q2, chemical costs have softened, but deco paper costs, craft costs, costs of veneer, ply haven't softened, actually they've gone up versus Q1 or Q2 of last year. As we talk right now, we believe chemical costs will soften further. And paper costs haven't really gone down, it also depends on the currencies probably going up a bit. We also had some initial stabilization losses of the Gujarat factory, which has also been factored in the EBITDA although we started production on 20th of August and we just started 2 line. The third line is still being ready for production. So there's 2 presses while the costs have been a bit -- there have been [indiscernible] costs also, we have some small losses there too. So these are the factors. So Ashok wants to talk a bit more on the raw material.
Sneha, in terms of base paper, it's -- prices are still -- in the quarter 2 also, it has slightly gone up and in this quarter also it is looking to be slightly going up. Of course, the benefit of -- whatever benefit of freight --ocean freight improvement that is coming, but still the price of this -- our design paper is slightly high.
So any plans of taking any further price hike to absorb the same, sir?
No. So we are not looking at any further price hikes. I think just better utilization of all the plants and the product mix we have, should -- because we are about 12.2% or something in laminates, while you see the margins, I think you cannot not see the working capital cycle and ROCE in that business. So we are operating at within 15% of sales working capital cycle and about 33%, 34% of ROCEs before taxes, obviously. So margins also have to be seen in tandem with the capital investment and the ROCEs. So we're not taking any price hikes, but we think with the value mix, et cetera, we should be okay with that.
Understood. And the small loss that you mentioned on the Gujarat plant side, can we have that number also in, please?
We cannot have that number right now.
[Operator Instructions] The next question is from the line of Keshav Lahoti from HDFC Securities.
So I wanted to get a trend like what's happening on the particle board. Is the import picking up?
Yes, so Keshav, on the imports, what I know is that not much imports are happening although some stray production is there. So I don't have a major update on what is right now the math of how much imports have picked up, if any. But not that I know of, I still believe there's a shortage of good quality boards in the market. Boards are available but the right quality boards, which are laminatable boards with the right physical properties and decorative properties, I still believe there's a shortage of that…
Okay. And for the Gujarat plant, should we expect any stabilization loss to continue in Q3 also?
I think, if any, would be very small. So, if any, will be very small because effectively, the capacity -- the effective production capacity will be placed in Q4. So if any, would be small.
Okay. And what was the capacity utilization for veneer, floor and door segment?
Did you ask veneer and door?
Veneer, door and floor.
Yes.
Yes. For the veneer, it was around 37%; for the floor, it was 11%; and for the door, it was 17% in this quarter.
Okay. Understood. One last question from my side. I might have missed in the opening commentary. What is your growth in Q2, year-on-year, for domestic and export?
Sorry, your voice is not clear, Keshav. So sorry, yes? Be a bit louder.
Yes. One last question from my side. What is your revenue growth in Q2 for export and domestic markets separately?
Okay. In this quarter?
Yes.
Yes. It was 17.9% on the domestic market and on quarter-on-quarter basis and 9.8% in exports.
[Operator Instructions] The next question is from the line of Anand Venugopal from BMSPL.
Just I have one question. So how does the unorganized competition in the domestic market affect the demand for organized players like Greenlam, et cetera? So -- because I would assume these are different products with different type of customer profile.
Unorganized market would affect the demand in the sense they will have cheaper products, noncompliant products in terms of product quality, poor quality. So -- and, yes, so I think that'll impact the demand mostly on the price, the prices to cost to -- price to channel partners, dealers, carpenters, lower than organized plants.
The next question is from the line of Pranav from Equirus Securities.
Sir, I wanted to understand on how you are seeing things on the export side, particularly with the major consumers facing kind of inflationary pressure and because of that housing -- new construction and innovation demand getting impacted. So any thoughts on how market could evolve going forward?
So on the export front, we see freights reducing. So the customer's cost of our products is coming down because we were charging them for the additional freight. So freights have got corrected and that cost reduction is being passed on to the customers because we were charging them in the previous time. And so non-emerging markets, we think, it's an opportunity to take market share from the international players. Emerging markets have their own problems where demand is there, but there are currency challenges. But overall, give or take, some markets, there could be some challenges, some markets will keep growing. I think we should be pretty okay with the export business. Did I answer your question?
Yes, sir, it does. And sir, any thoughts on how veneer segment is expected to do going forward? Because from my understanding, competition has increased in last 2 years and the EBITDA margins, as of now, remain severely impacted. So how will this segment do going forward?
The veneer segment alone, we had cost pressures in Q2. We have taken some price increases in veneer and the flooring segment. And as we talk, I think probably the trajectory of volume value will grow over the next period or so, but competitive pressures still remains, especially in the veneer segment, yes? That still remains there.
Okay, sir. And sir, on the debt front, so how are things shaping up? What will be a peak debt I think it could be reached by FY '25 end? So what will be the peak debt? And how are you planning to delever the balance sheet after that?
So, Pranav, the peak debt, we are expecting to reach by end of FY '24. By then, most of these projects which we've announced as of now will be over. And we expect peak debt -- peak net debt in the range of -- decor and everything will depend upon the cash flow also, but in the range of around INR 800 crore -- INR 750 crore, INR 800 crore in that range only. We have already deleveraged in terms of we have raised INR 200 crore of equity, and we think that we will be able to manage with the existing cash flow.
The next question is from the line of Ronald Siyoni from Sharekhan Limited.
One question on the demand side, like, how have you seen the demand post quarter, especially when there was a festive season in October? And post October, how has been the demand? Has there been difference in demand uptake, especially in domestic markets?
Domestic market, October, clearly, was slow because of all these holidays and festivals, and both the festivals happening in the same month hasn't turned on demand. So to that extent, yes, markets were shut for good depending on the geography, but 5 to 7 days, where it is. And as we talk right now, things are coming back or nearly back to normalcy.
Okay. And have you, as a company, outlined a strategy over the next 3 to 5 years' time line, where does the company want to reach in terms of top line or margins or profitability, anything of that sort over a longer period?
Sure. I think with the investments we are doing, there is a plan of the investments and the categories of products we are expanding into and capacity expansion happening in the core business. So there is a plan of -- in the directions you just said in terms of utilization targets and revenue numbers, margins, et cetera.
But you would not want to highlight the numbers or anything of that sort, at least on the top line?
Yes, we have -- when we read the strategy of last year, but while we agreed to expand into the particle board space and build a plywood plant, we did -- we gave some indication on the -- what the revenues should be, so that's on the -- on our company's website and maybe you can connect with Ashok at later point and we can...
Okay, that would be maintained more or less.
Yes, yes. So Gujarat factory addition happened post that, so to that extent, that number will get added on, but maybe Ashok can refresh you on those numbers further.
Sure, sir. And anything over organized players' capacity additions taking place over the next 2 years, especially and most people say 15 to 18 months down the line or 2 years down the line, capacities are going to come onstream in, say, ply or particle board. So how do you see organized market playing out in terms of capacity additions and supply in the market?
So clearly, in the plywood, laminates, veneer space, the capacity is more than the utilization in general, right? The challenge is not the capacity, but the challenge is the product development, sales and marketing, demand generation. I think those are the typical challenges. So while, even today, as we talk, the overall theoretical installed capacity in the laminates business is very high, but besides 1 or 2 companies, I think most of them can't utilize capacities at any respectable level. So it's not only the capacity which needs to be utilized and just by having capacity, you can't necessarily go and sell, right? You also need the right products and the right distribution and sales and marketing et cetera.
So I think that's not unusual in our category, especially in plywood and laminates. As far as particle boards is concerned, you have capacity right now also in the market, you have lot of these bagasse-based, wood-based factories, which have poor quality of technology. So the quality of both [Technical Difficulty] in terms of their laminatable quality, screw holding quality is all very inferior quality imports. So as far as capacity expansion, the right quality boards, it is -- in particle boards, it's ours and another company, which is also undergoing capacity addition at this moment. So this is what it is.
As far as the market scenario is concerned, the whole OEM segment of machined furniture fabricator segment is growing. The furniture consumption will probably grow in the country. A lot of woodworking happening in plants and off the site and installations happening on the site. So we think from a capacity -- even if 1 more plant comes in or 2 plants come in, we really think, from a continuing capacity perspective, we don't believe it to be a mid-to-long term challenge. There could be some short-term challenges if excess capacity comes in particle board.
[Operator Instructions] The next question is from the line of [ Abhishek Dave ] from Bright Securities.
Am I audible?
Yes, Abhishek.
Firstly, congratulations on the good set of numbers. I would like to ask how is the doors and floors business performance this quarter? So can you -- how do we expect the performance in upcoming quarters?
In terms of doors and floors, Abhishek, if you see the numbers in this quarter has improved in comparison to previous quarter. And it was impacted in last 2 years due to pandemic and now we hope to rebuild this business and which is very much visible on our quarterly performance. And we hope that, going forward, this will further improve.
So on the numbers, [indiscernible] business did about INR 11.7 crores, which was about 50-odd percent value growth versus Q2 of previous year and about 3% growth in Q1 as Ashok mentioned on his presentation. And on the realization front too, there's a growth of about 28-odd percent versus Q2 of last year and about 7.5%, 8% versus Q1 of FY '23. The door business split a bit in Q2 versus last year Q2. That's primarily because we had some exports in the past and exports of doors and floors have virtually stopped right now because of the high sea freight. So all the numbers we see is of the domestic market only. But versus -- Q-on-Q versus Q1, the door business is also growing in value by about -- although base is very small, by about 50-odd percent. As we talk, the efforts are on to improve both the businesses, and we should get on with it.
Next question is from the line of Milind Muchhala from Julius Baer.
So I had a couple of questions. First, what we have seen is the realization on a sequential basis has moved up well by almost 5.5% for laminates. But despite this, the gross margins are lower by 40 bps. So what raw material head is kind of hitting the profitability?
Yes. So in terms of this -- our realization is going on, this is a mix of both the price hike in comparison to what we have taken in the previous year. But in quarter-on-quarter, it will not have much impact because we have taken in the beginning of the quarter. So the raw material price hike, as we have mentioned in the -- earlier in the call, the chemical prices are softening, but there's -- still there was a pricing hike in the cost of raw material in terms of paper, both in decorative and the craft paper. Further, since we've maintained a stock level, so the high-priced raw material was there at the beginning of the quarter 2, which, going forward, we feel that this will have a softening impact on the overall gross margins.
Also to add to Ashok, the production -- the sales from the Gujarat plant will have a lower gross margin because that's focused on the commodity segment of the domestic liner market [ as well as ] the level of lower gross margin that we -- products we're producing at the Behror and the Himachal plant.
Okay. But I believe that then would have got reflected in the realizations as well to some extent assuming that the Gujarat plant...
Yes, so, if you see realization, if you were to dissect this as domestic and exports, the domestic realization is up by only 0.4% on a sequential basis, right, while normally with the growth we do, it's probably a bit higher, it has got a bit -- it's a bit lower. On the export front, realizations look better but we lost out on the volume of some emerging markets, that's why you see a higher realization because the denominator of the quantity is lower. If the denominator was larger, realization there would have also been a bit lower. Rupee also depreciated against the dollar, which also shows, in rupee term, realization improvement, while rupee appreciated versus the euro and the pound, but net, we end up having some realization gain if the rupee had appreciated against the dollar. So I think all these factors have kind of contributed to what you are saying.
Okay. So for the laminate business per se then, what is the sustainable EBITDA margin that we kind of can target? And how soon do we think we can achieve that? So can we go back to that, say, 13%, 14%, kind of a trajectory?
So we were -- right now at about 12.2% or something of that sort in H1, right? So I think gradually, we should inch up with better outputs and some softening of RM costs with continued focus on value mix. So it should happen over a period of time.
Okay. And just last one on the veneer business. So here again, if I just look at the realization, so Y-o-Y, it was good, but sequentially, again, it's fallen quite a bit. It's down by, like, 11.5%. So what is leading to this huge volatility in the realization for veneers?
So it's probably just a mix of -- because the base is not so large, maybe it's a species mix. There's been some commodity sales in the -- the volumes of national veneer has gone up by 29%, 30%, the realizations have come down. So it probably will be that the mix of the species of the value mix has got altered between these 2 quarters, while, if you see versus last year, it's about -- there's a slight improvement on the realizations. And we've also taken some price hikes which will be effective in Q3. It is part of Q3. So it's routine business of value mix versus nonvalue mix, orders being serviced at that point.
So for this, veneer and allied segment, so can we kind of target an EBITDA breakeven kind of a level sometime in next fiscal?
So that is the target. But like this quarter, if you see, the revenues went up, but costs also went up of base ply, of veneers and here all the RM is imported in our sales and domestic market. So the currency devaluation to the segment -- overall as a company, we are nearly the same, but in this segment, that also impacted. So gross margins could improve despite value mix improving and volume improving, but, yes, we could target that. We are targeting that.
The next question is from the line of Nikhil Gada from Abakkus AMC.
Yes. I just have 1 question. You mentioned about the situation in Europe regarding the exports market and some disruption over there emerges as an opportunity for players like us to get some benefits out of it. So can you explain the situation in further detail and how we can benefit from this?
There's not much detail to explain here but, typically, the local manufacturing costs have gone up there in Europe in terms of electricity and energy and which kind of expands their -- increases their cost of production. And because we are present there with our resources in terms of warehousing, people, distribution, not so much still in the specification market, and they have challenges of servicing -- certain manufacturing plants have challenges. So we believe with our inventory and distribution in place, this would help us take some market share over a medium term period.
So there is nothing immediate per se, as in, we are not getting any major shift in inquiries or expect...
In laminate business, nothing happens immediately. It just takes time because the whole distribution cycle, because companies would also have inventory on ground, and that also gets consumed, they would have their own specifications, which would not turn tomorrow. But yes, over the medium to long term, I believe this is a possibility for us to take more market share, which we have been taking over the last several years. So I think it should only help us further in that direction.
The next question is from the line of [ Hitesh Agrawal ] from India Insight Value Fund.
In the particle board segment, I wanted to know, like, in the next 2 years, what is the revenue growth rate and the EBITDA margins we can see?
Yes, Hitesh, the particle board, as of now, we don't have this business or this prelam particle board is a very small component of the overall business. So particle board project, which we are as of now under implementation, that will come -- the commercial production is expected to start by Q4 of next year, which means FY '24. So it will take some time in terms of that -- for that business to build in. And what we have told in the previous presentation, at a full utilization, which can take around 3 to 4 years, this can have an EBITDA in the range of around 25% as and when it reaches the full utilization.
Okay. And just to have a color on the particle board industry as such, like, what will be the percentage share of the organized players and the unorganized players in particle board segment presently?
Currently, we are like, so-called, 2 organized players, and the revenues are not very large. So mostly, at the moment, it's dominated by unorganized players who have smaller plants in various parts of the country. But clearly, new capacity is coming in and we think organized companies will take more market share. So I think on a value, it'll be like 15%, 20% organized numbers at the moment, I guess, approximately.
Approx, okay. And imports would be forming what part in this segment?
So in the last year, 1.5 year, we believe imports have come down. But...
It will be -- probably whatever data available, Hitesh, it will be in that range of around 15%, 20% as of now.
Next question is from the line of Abhishek Getam from Alpha Invesco.
Hello. Am I audible?
Yes, Abhishek.
Yes. So the question was on particle boards. So I just wanted to have a flavor on -- so what sort of customer base would we be targeting? I mean you did mention like the OEMs. So would we be targeting the branded furniture players as sort of the customer base? If that's so, how does the working capital work out apart from our regular business? I mean given it's B2B, then would it be stretched? And another second question was, what is -- so you did mention most of the current particle board players, unorganized players are poor quality, low quality and we and one more player will be going for a high quality. So what will be the differential in realization, just a ballpark?
So I'll take the question on customer base. The customer base will be OEMs, people ordering office furniture, kitchen furniture, wardrobes, paneling and sales will move through the channel for all the smaller OEMs and maybe directly from the company to the large OEMs. So this will be the sales pattern. As far as the working capital matter is concerned, as we talk right now, particle board MDF have a shorter working capital cycle than the existing business, one, because most of the RM, not all, but most of the RM is locally-sourced. And the better days in the market are -- as far as domestic market, including what we do, are even lower, also because the number of SKUs in particle board is fewer than laminates. So inventory carrying at the market gets reduced. So on the working capital cycle, we budgeted for a lower working capital cycle than our existing business. Ashok can give the exact number.
Yes. We have taken around 45 days in terms of the working capital cycle as per our [indiscernible]. And I mean your another question in terms of realization difference between the organized and unorganized, so it will all depend upon the pre performance percentage of particle board we will be able to sell in the prelam condition and what we believe that with the better quality, which is available, we will be able to sell more of a prelam particle board whereas significant difference is there in comparison to plain particle.
Okay. But sort of plain particle board and premium particle board, so what will be the different sort of realization?
So the plain and prelam, the difference normally is in the range of around INR 10,000 a cubic meter -- around INR 9,000 to INR 10,000 a cubic meter.
Okay. Okay. Understood. And sorry, I missed, so for particle board, we will be having roughly 45 days working capital? Is that right?
Yes.
45 days. And in terms of like working capital to sales, you mentioned laminates is 15%. So basically particle would be lower than that?
In that range.
Yes, in that range, slightly lower.
The next question is from the line of Manish Mahawar from Antique Stockbroking.
Yes. Just in terms of export market perspective, are we seeing any slowdown in terms of demand? Because I think earlier in the opening comments, you have mentioned like there is some currency headwinds in terms of emerging market industries facing -- are you facing any demand slowdown?
So we said that several emerging markets have had a challenge in the Q2 period of currency availability, dollar availability from the Central Bank and opening up of LCs and paying the advances, et cetera. So those challenges have been there. 1 or 2 markets have got reasonably streamlined in this quarter, and we believe this could streamline over the next maybe 3 to 6 months. As far as the demand is concerned, the emerging markets, which have a challenge, while there is demand for our brand and our product set, but due to the currency challenges and there's a [indiscernible] of working capital, which we keep, we are not able to ship it. Overall, some markets will be minus, some will be more -- so we'll be fairly okay. But on an overall, we're looking fine.
Okay. So things are stable, basically.
Yes, it could be better always.
Okay, sure. And Ashok ji, can it be possible to repeat the number of -- I think so you have mentioned a number of domestic and export revenue growth for 2Q. I think you mentioned 17.9% and export is 8.9%, I think for the quarter, right?
Yes, yes, yes.
So that's right number and that is on a last Q2 to Q2, you said, right, Y-o-Y?
Yes.
Okay. And can it be possible to share the number in terms of volume growth in the domestic and export?
I will share that offline.
[Operator Instructions] We'll take the last question from the line of Hemant, as an individual investor.
A very good set of numbers. Sir, you have mentioned, I guess, that when particle board capacity can be fully utilized, it can generate 25% of EBITDA margins. And it will take around 2 to 3 years for it to be fully utilized?
3 to 4 years.
3 to 4 years. Okay. And sir, what kind of revenue potential are we targeting in FY '24 because we have our plywood plant coming, which will be operational, I think, by Q4 of this year? And the laminate -- the enhanced capacity in the Bloom Dekor, which we've acquired, it will also be contributing. So what kind of revenue potential we are targeting in FY '24? And if you can throw some light on maybe the margins on the plywood category as well?
Yes. So in terms of revenue potential or revenue target for that, the entire capacity will be available. It depends upon how much we can able to sell in the next year or in the very first year. So we believe from this year, there will be a potential of around 20%, 25% in -- around 20% in the next year in terms of that. And in terms of margin, that will all depend upon what kind of volume we're able to reach in this and what kind of utilization level we're able to reach in the next year for these new...
Sorry to cut you short, I was talking about the revenue potential, not from the plywood business, but on the whole, I mean, the consol level as a company.
So that's what, so apart from the existing businesses, which is there in this year, next year, we will have plywood businesses and a plywood business, and the laminate new units and for the Prantij, which we are right now -- we are doing the upgradation. All these, put together, have a revenue potential of close to around INR 1,100 crore, INR 1,200 crore that -- around full potential is there. That will all depend upon how much we can able to through the volume out of this in next year.
So you mean to say INR 1,100 crore, INR 1,200 crore kind of incremental revenue, right?
Yes, but that's on full potential, not on full capacity of the [ invoice ]. And we'll not get to full capacity next year, it'll probably happen over a period of 2 to 3 years.
And apart from this, the particle board, that will come in the Q4 of next year. So that capacity will be available for sale in the FY '25 only.
Sir, we have 1 more question from the line of [ Hina ] from [ DAM Capital ].
Yes. So I just wanted to know in laminates, on an annual basis, we've seen an expansion in the margins. So anything specific here that had led to this expansion?
[ Hina ], the expansion of margin in the current scenarios is as we have -- we are going through the project phase, so we believe that expansion in the margin will come -- will come -- first, it will come in the existing business on a gradual basis. And it will be visible once we're able to complete this project and reach up to a certain level of utilization.
Sure. No, what I was trying to ask is in Q2 compared to Q2 last year, we've seen an expansion in the margin for laminates. So anything specific here which had led to the expansion?
Cost has come down versus last year and some -- we've taken price hike so nothing specific.
Ladies and gentlemen, that would be the last question for today. I now hand the conference back to the management for the closing comments. Thank you, and over to you.
Thank you, everyone, for joining the call today. If you have any other queries, you may get in touch with us or SGA, our investor relations advisor. Thank you.
Thank you, everyone.
Thank you very much. Ladies and gentlemen, on behalf of Greenlam Industries Limited, that concludes today's call. Thank you all for joining us, and you may now disconnect your lines.