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Edited Transcript of CENTURYPLY.NSE earnings conference call or presentation 14-Aug-19 8:30am GMT

Q1 2020 Century Plyboards (India) Ltd Earnings Call

Kolkata Aug 26, 2019 (Thomson StreetEvents) -- Edited Transcript of Century Plyboards (India) Ltd earnings conference call or presentation Wednesday, August 14, 2019 at 8:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Arun Kumar Julasaria

Century Plyboards (India) Limited - CFO

* Keshav Bhajanka

Century Plyboards (India) Limited - Executive Director

* Sajjan Bhajanka

Century Plyboards (India) Limited - Chairman of the Board & MD

* Sanjay Agarwal

Century Plyboards (India) Limited - MD, CEO & Executive Director

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Conference Call Participants

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* Aasim Bharde

IDFC Securities Limited, Research Division - Research Analyst

* Achal Lohade

JM Financial Institutional Securities Limited, Research Division - VP

* Ashish Poddar

Anand Rathi Financial Services Limited, Research Division - Research Analyst

* Ayush Bagla

SBICAP Securities Ltd., Research Division - Associate of Midcap

* Lakshminarayana Ganti

SBICAP Securities Ltd., Research Division - Co-Head of Institutional Research

* Nehal Shah

ICICI Securities Limited, Research Division - VP of Research of Midcaps

* Pranav Mehta

Equirus Securities Private Limited, Research Division - Associate

* Praveen Sahay

Edelweiss Securities Ltd., Research Division - Assistant VP of Equity Research & Research Analyst

* Siddharth Rajpurohit

JHP Securities (P) Ltd., Research Division - Research Analyst

* Sneha Talreja

Edelweiss Securities Ltd., Research Division - Research Analyst

* Yash Gupta;Prince Poly Plast Private Limited;Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, good day, and welcome to the Century Plyboards Limited Q1 FY '20 Earnings Conference Call hosted by SBICAP Securities Limited. (Operator Instructions) Please note that this conference is being recorded.

I now hand the conference over to Mr. Ayush Bagla from SBICAP Securities. Thank you. And over to you, sir.

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Ayush Bagla, SBICAP Securities Ltd., Research Division - Associate of Midcap [2]

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Thank you, Needam. Good afternoon, everyone, and welcome to Q1 FY '20 earnings conference call of Century Plyboards India Limited. I would like to thank the management for again giving SBICAP Securities the opportunity to host this call.

I have with me, Mr. Lakshminarayana Ganti, Head of Research at SBICAP Securities. From the CenturyPly management team, we have Mr. Sajjan Bhajanka, Chairman, Mr. Sanjay Agarwal, MD and CEO; Mr. Keshav Bhajanka; ED and Mr. Arun Julasaria, CFO.

We will begin the call with opening remarks from management, and then move to Q&A. Thank you.

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Sanjay Agarwal, Century Plyboards (India) Limited - MD, CEO & Executive Director [3]

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Good afternoon, friends. I am Sanjay Agarwal, Managing Director of the company. I have with me, Sajjan Bhajanka, Chairman; Keshav Bhajanka, ED; and Mr. Arun Julasaria, CFO of the company, for the first quarter results call of CenturyPly.

We have performed very well in this quarter. Our revenues and margins have improved significantly, and this performance is shown in Q1 numbers. Though volumes did not grow much in plywood segment, margins have significantly improved. We are full face in this segment. Our company -- our country takes its own time to adopt to a new system. And in production of GST and other collective reforms, will certainly deliver robust growth in times to come.

In laminate division, we have seen sustained growth as well as improvements in margins. We also expect much robust performance in this dividend in quarters to come. Our new ventures of MDF and particle board have reached the optimum and best capacity utilization. This result is -- the result is, we are achieving desired topline and very good operational margins. Both the divisions have performed excessively well. Company is contemplating expansion of both MDF and particle board, as they have reached their optimum and best capacity utilization.

CFS division has faced issues to new competition, and it will take a year or 2 to absorb the capacity in the market and the performance to come back to normal. The GDP of West Bengal is one of the best in India today. I think it has happened because of the lower GDP batch base of West Bengal. But this growth of about, say, 12% GDP growth in West Bengal will certainly reflect on our CFS division in times to come.

ForEx fluctuations have been very high and would have been resulted in huge losses to the company, but due to timely action taken by our Chairman, we have hedged our position, which has resulted in good benefits from the company. USD 20 million were hedged $1 was at INR 69.

On debt front, our long-term debt stood at around INR 120 crores. The sales has been reducing continuously through internal accruals and as a result, our long-term debt ratio is lowest at 0.16. I assure our investor fraternity that CenturyPly maintains a very transparent system and also maintains the best corporate governance practices.

Now I hand over to our CFO, Mr. Arun Julasaria to take you with key financial data for current quarter, post which we are open to questions and answers. Thank you.

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Arun Kumar Julasaria, Century Plyboards (India) Limited - CFO [4]

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Good afternoon, ladies and gentlemen. First of all, I'll have to mention customary disclaimer that this con call is just to discuss company's historical numbers and future outlook. In no way this should be construed as invitation to invest in the company. The results for the first quarter, along with detailed analysis is already mailed to you and also posted on stock exchanges and company websites. So I'll not take much of your time and take you through the basic numbers and macros.

On Y-o-Y basis, overall net revenue, including other operating income increased from INR 537 crores to INR 574 crores, with a growth of 7%. Blended EBITDA margins are now 16.3%, against 13.5% from last whole year. EBIT margins are now 13.4%, against 11.3% from last full year. EBITDA is now at 11.8% compared to 9.4% last full year.

Profitability improved due to stable operations, stable rupee and overall improved performance, particularly in MDF segment. Results for Q2 maybe a bit adversely affected due to flooding and problems of goods momentum across country. However, for the whole year, we are targeting blended top line growth of 10%, with EBITDA margins of near about 15% and PBT of 11%.

Tax rate will depend upon product mix, profit mix from exempted and other units, but likely to be at 25% with the outflow restricted to net worth of 22% approx. With these words, I would like to conclude and we invite questions and answers -- questions from participants, please.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from the line of Yash Gupta from Prince Poly Plast Private Limited.

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Yash Gupta;Prince Poly Plast Private Limited;Analyst, [2]

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Sir, first question is that there is a spike in the MDF price from INR 20,126 to INR 20,986. Any idea about the demand/supply scenario?

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Sanjay Agarwal, Century Plyboards (India) Limited - MD, CEO & Executive Director [3]

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This is a jump, then before many regions. We have taken a small price increase in our teak products also. And due to the mix of decorated MDF is that premium MDF and we have the HDHMR products. So whenever the mix changes, the prices may maybe a little bit up and down. As far as the demand-supply is concerned, the supply actually has not increased in last about 6, 8 months, 9 months’ time before that, of course, by production of Action and Green had come. As far as North India is concerned, the consumption is going good, and the growth in MDF is visible from our own consumption because we are now able to run our factory at full capacity at Hoshiarpur, and we are already in the court that we should now expand our capacity.

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Yash Gupta;Prince Poly Plast Private Limited;Analyst, [4]

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Okay. Can you give any number on the total MDF capacity in the whole country? And what is the supply at this point of time?

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Sanjay Agarwal, Century Plyboards (India) Limited - MD, CEO & Executive Director [5]

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In North India, there are 3 important players, Century is with capacity of 600 shipment per day, Green is with capacity of 600 shipment per day and Action is with capacity of 1,000 shipment per day. So in North India, 2,200 shipment per day capacities. And in South India, Green is over 1,000 shipment per day than Rushel Decor there with around 400 or 500, and they are expanding capacity, which should be operational by year-end and it should reach 2,000 again. Apart from these capacities, there may be some small capacities, but these are the major capacities, size in the 600 cubic meter more capacities of some small batch process plants, maybe there right now.

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Yash Gupta;Prince Poly Plast Private Limited;Analyst, [6]

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Okay. And what are expansion plans in MDF? By what capacities are planning to do that?

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Sanjay Agarwal, Century Plyboards (India) Limited - MD, CEO & Executive Director [7]

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We are planning to put up a joint plant in UP, UP is the richest in plantation timber so particularly Sitapur area is above that. We got a license from UP government for putting up our particle board and MDF plants. So we are planning capacity of around 500 each in UP under a single roof, 500 MDF, 500 particleboards.

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Operator [8]

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(Operator Instructions) The next question is from the line of Nehal Shah from ICICI Securities Limited.

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Nehal Shah, ICICI Securities Limited, Research Division - VP of Research of Midcaps [9]

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Sir, first thing, congratulating for a very, very good set of numbers. Sir on the plywood side, one question which arises has been the volatility in the margins. So while last year, we have been very, very gung-ho on margins at 16%, 17%, and which is going on.

Now the trajectory in last couple of quarters went down to 11%, 12%, and now it's again, gone up to 15%, 16%. So what kind of margins do we think is sustainable considering the kind of volatility we have seen in the recent past.

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Keshav Bhajanka, Century Plyboards (India) Limited - Executive Director [10]

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As far as last quarter was concerned, the volatility was due to a lot of other factors, a lot of marketing expenses taken and there's the political factor there, the political donation et cetera, has sort of reduced the margin in the last quarter.

But I believe that 14% plus margins is a bare minimum that will be looked into for this year. And going forward, we'll definitely try to improve upon this.

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Nehal Shah, ICICI Securities Limited, Research Division - VP of Research of Midcaps [11]

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The 14% plus margin. And what kind of growth are we looking at for the full year?

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Keshav Bhajanka, Century Plyboards (India) Limited - Executive Director [12]

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For the full year, for the remainder of the year, we were trying to touch double digit growth, but blended growth for the entire year should look at something between 7% to 8%.

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Nehal Shah, ICICI Securities Limited, Research Division - VP of Research of Midcaps [13]

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7% to 8% blended growth. Okay.

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Operator [14]

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(Operator Instructions) The next question is from the line of [Abhishek Joshi] from CIMB.

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Unidentified Analyst, [15]

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Sir in the MDF segment, have the prices of plain MDF stabilized you more or less? It was falling constantly last year. So what is the price trajectory from here on going forward for MDF?

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Sanjay Agarwal, Century Plyboards (India) Limited - MD, CEO & Executive Director [16]

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Prices had fallen last year, of course, after April last year, until maybe October you can say. And after that, they stabilized the prices have not gone down in this year, even invested for the prices have not gone down. And we have taken a small increase reverse in our thicker grades. Thicker grade means 6mm-plus thicknesses. We have taken price increase also. So what I view that there are no new capacity coming up and we've seen that nobody has even a planning for new capacities. So there is a stability in the market, and the consumption of MDF is increasing quite fairly it seems. There are no data available, but of course it seems that it is quite good. So I don't see any reason in near future for prices to go down. And that is why probably we are able to run our capacity to whatever we are able to produce now.

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Unidentified Analyst, [17]

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So can we see like sharp price increase at the same time, because of no significant capacity coming up in near future.

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Sanjay Agarwal, Century Plyboards (India) Limited - MD, CEO & Executive Director [18]

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No. There is no chance of any sharp prices increase because there is a threat from import always. If you receive extraordinary prices, the imports will come immediately. It takes hardly one month to get more produce from outside.

So I don't think there is any chance of sharp price increase. We actually love that if you can stabilize at these prices and maybe here and there at different times maybe take small increases. So -- and still, we know that Green has got this capacity of 1,000 cubic meter, 1,100 cubic meter in South so if the price has increased too much, they try again to get more from South to North, which again, we don't want. So I don't think sharp price increases are welcome.

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Unidentified Analyst, [19]

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This thing is also true for Northern region, right? Not only for South?

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Sanjay Agarwal, Century Plyboards (India) Limited - MD, CEO & Executive Director [20]

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Yes. It is. Mostly for Northern region because Southern region is actually open to imports a lot, and then they are not paying the transport charges also. Mostly imports will have come either on Western port or Southern port, and from there to bring to Northern India, the transportation charges are there. And that's why, actually, Northern India is a little protected.

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Unidentified Analyst, [21]

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Another question I wanted to ask was, your gross profit margin in the MDF segment has improved significantly. So has there been a significant reduction in raw materials capacity utilization?

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Sanjay Agarwal, Century Plyboards (India) Limited - MD, CEO & Executive Director [22]

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Basically capacity utilization has improved. You will see that I think our growth this year is around 30%, in sales volumes -- 39%. About 39% is the growth in our sales volume on a given -- on year-on-year.

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Unidentified Analyst, [23]

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Okay. So the gross profit margins are basically increased because of operating leverage, right?

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Sanjay Agarwal, Century Plyboards (India) Limited - MD, CEO & Executive Director [24]

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Yes. Absolutely.

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Unidentified Analyst, [25]

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And one last question, how is the demand spending growth for your plywood segment? Like one ground, is there any improvement in the sentiments of the real estate sector also.

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Sanjay Agarwal, Century Plyboards (India) Limited - MD, CEO & Executive Director [26]

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I think you know the real sector -- the real estate sector is better than us. There are no positive sides at all, and whether it's since that time have been going only still from back to work. So that is not there. And that's why, probably, we are not seeing any much growth in our plywood sales. Once the real estate sector really picks up growth. We will see much larger growth in plywood segment.

And as you know, now we are reading everywhere that all other industries are suffering because of the economic slowdown after the budget. So that's -- but then, when we are actually able to continue, and we have been able to improve our profits. So that is a plus point, I think Century Plyboards has given its highest ever EBITDA for many quarters.

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Unidentified Analyst, [27]

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So how successful have you been to capture the mid-segment plywood market? You were trying to actually do that.

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Sanjay Agarwal, Century Plyboards (India) Limited - MD, CEO & Executive Director [28]

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That is where the main growth is coming from. Otherwise, our main brand is not growing at the pace of even 8% or 9% or 7% also. That is where the growth is coming mainly from the mix segments.

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Unidentified Analyst, [29]

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Can you give the volume break-up of growth between premium segment, made segment?

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Sanjay Agarwal, Century Plyboards (India) Limited - MD, CEO & Executive Director [30]

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That I think if you connect with our finance department later on, they will be able to give. You can message them, they will certainly supply you. The numbers are higher.

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Operator [31]

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

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Sneha Talreja, Edelweiss Securities Ltd., Research Division - Research Analyst [32]

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Actually it is more pertaining to the plywood segment. I might be repeating this question. I just wanted to get more clarity on the margin expansion that we've seen in the current quarter.

So as you mentioned, last quarter, there were some extraordinary expenses you see here in Q3. The margin stood at about 12%. Why have suddenly margins have come to 15%? What is the sustainability of these margins at these levels?

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Sajjan Bhajanka, Century Plyboards (India) Limited - Chairman of the Board & MD [33]

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You'll have to grow segment rate. If you are talking about blended focus margins, as I said at the beginning, the total margins there mainly improved because of stable rupee. And overall improving in all the segments, particularly in MDF. And if we talk of sustainabilities then focus margins for this quarter, EBITDA margins for this quarter...

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Sneha Talreja, Edelweiss Securities Ltd., Research Division - Research Analyst [34]

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No, I was particularly talking about the plywood segment. Where for MDF do we understand this operating plywoods coming in...

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Sajjan Bhajanka, Century Plyboards (India) Limited - Chairman of the Board & MD [35]

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But you were talking about plywoods?

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Sneha Talreja, Edelweiss Securities Ltd., Research Division - Research Analyst [36]

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Right, sir.

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Sajjan Bhajanka, Century Plyboards (India) Limited - Chairman of the Board & MD [37]

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In plywood, there is -- we have taken certain results of cost cutting and then chemicals are one very important ingredient in the slide-making. So the prices of phenol is formaldehyde, they have come down substantially.

So we are able to sell some things on the raw materials front. And at the same time, the face linear prices have also come down. Core linear prices are more resistant and our selling price is, again, more or less stable. So we have not reduced -- we have not taken any price cuts. And at the same time, we have shared on the raw material projects.

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Sneha Talreja, Edelweiss Securities Ltd., Research Division - Research Analyst [38]

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Okay. How are the price moments now? Do we expect to take any -- I mean, give any discount to dealers or something in the next quarter, as the prices have come down? Or can we expect these kind of volumes, to sustain?

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Sajjan Bhajanka, Century Plyboards (India) Limited - Chairman of the Board & MD [39]

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Whatever the present that are from India that would be continued as it is. So what are the dealer's margin, other things, payment terms, incentives, linked, higher turnover. So there is a set mechanism for that and, that will continue change at least. And on the branded segment, although there is some demand resistance, it is not growing. But at the same time, there is no price pressures. None of the leading manufacturers were intending to reduce price or there is any control of competition as well.

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Sneha Talreja, Edelweiss Securities Ltd., Research Division - Research Analyst [40]

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So one other thing, what is up with our market, we had a strategy of gaining market share. That is what we were highlighting in last 2 quarters. Are we continuing to see that which has been -- we would be okay compromising on the margins, but we would want to gain market share?

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Sajjan Bhajanka, Century Plyboards (India) Limited - Chairman of the Board & MD [41]

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Last quarter, there was one like Green, they have stated so Green panel that is your new end-to-end and at the time around green plywood, there had existing manufacturing capacity. So they, along with the outsourcing, they kept on maintaining their volumes. And in the meanwhile, in the first -- last year, Green panel could not sell sufficient quantity. So they have also entered the market with discounts and other things and competition. So we kept ourselves aloof from that. So we didn't enter into the price cutting and other things. And so the cost of like increasing volumes, we maintain our margins. For the last quarter and for the current also, we maintained the same thing. And things will be stabilized after this Green's split and [all rest], things we will back to get down.

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Sneha Talreja, Edelweiss Securities Ltd., Research Division - Research Analyst [42]

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Okay. Sir, what would be a split write-down between the Sainik and premium brand?

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Sanjay Agarwal, Century Plyboards (India) Limited - MD, CEO & Executive Director [43]

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Sneha, the premium brand will actually still be the major share. So about, I think, 45% is still the premium brand, and the rest of them is actually either the middle level brand or the second level brand are there, actually.

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Sneha Talreja, Edelweiss Securities Ltd., Research Division - Research Analyst [44]

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And so this is versus our last quarter -- or I mean, corresponding quarter same year would be how much, with Q1 FY '19?

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Sanjay Agarwal, Century Plyboards (India) Limited - MD, CEO & Executive Director [45]

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There is likely that data is -- I mean I have not checked that, what is the difference since last quarter, but there is not huge differences because these growths are happening in -- at a slow pace only. So if the main brand is growing at maybe, say, 3% or -- so these brands are growing maybe at 10%.

And the quantity of the middle level is not so high, even the 10% quantity is really not making much of a difference to the total percentage. So yes, slowly, slowly, they are growing. And we hope and we expect that the way the market and the economy is in a year or 2 years' time, these new brands will actually take over the main brand, actually, and that is where the main growth will come from.

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Sneha Talreja, Edelweiss Securities Ltd., Research Division - Research Analyst [46]

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Got it. Sir, my last question, if I may be allowed, is related to Laos. Can you just -- so you have mentioned that you would be taking -- you might have to take INR 75 crores of a one-off kind of a thing. Can you give some more clarity what has happened in Laos' front?

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Sanjay Agarwal, Century Plyboards (India) Limited - MD, CEO & Executive Director [47]

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Laos actually on average have mega share in the field of veneer, so we were not only managing our own requirement of sales in veneer. But in addition to that, we were one of the biggest seller of veneer in the country. So initially, we were importing timber, and we had 4 factories manufacturing veneer: Kolkata, Chennai, Kandla and Karnal. Then gradually restrictions started coming in, in the exporting country of timber and the first was the Myanmar. They put a ban on export of timber that was 1st April, '14. So before that, we have set up a unit in Myanmar. And it was announced 1 year in advance that they are going to export then of timber. So we created considerable stock in India. So '14/'15, we earn good money in veneer, we produce in India. At the same time, we announced the capacity of our Myanmar plant and kept on exporting from there. But the next year, Myanmar government changed and the new chairman, they put a ban on timber cutting in Myanmar.

So that time again, to maintain our own veneer requirement and to supply the market, we find a new opportunity in Laos. So Laos, we met events -- we made events with 5, 6 existing units in Laos, and we supplied machinery to them, pealing, boilers and started manufacturing veneer there and started bringing veneer to India for our own consumption and for selling. But in May '17, Laos government also bans export of veneer. And this is the only country in the world which has treated face veneer as intermediate products, and not finished products. Otherwise, in the world over, veneer is treated as the finished product and got separate HSN, so we pleaded the government to their high level delegation led by a minister who came to India and discussed with us and kept on representing to them, and in the meanwhile, whatever stock we had in Laos that they allowed to, so we exported to India, so that we converted to veneer the timber that was available and the veneer available that we produce. And in the meanwhile, one unit we converted to plywood, also in Laos.

And the idea was, from the total 6 units all the veneer generated from all the units would come to one plywood unit and we should manufacture, but as all the 5 units that we had to shut down, due to the ban on export of veneer, so there was no availability of core veneer also to run the unit in Laos, so now Laos government wants us that we should put plywood unit in all the factories. So this will not be because of 2 factory. Already, we have announced them last year all the remaining that was there. So we took out the machine and the fundamentals, so now we have the 2 units, one is on the FDI basis, on the lead then from Laos government and where we have installed veneer machines. The one unit we have in the joint venture of the local units and which is for the making of plywood, and 2 units are there. We have tied up with the existing business holders of saw mills and supplied them with machines, but we are not bringing numbers. So some filling machines we have supplied them along with the units.

And so joint 2 factories are closed down and those we are not revived, one factory which is for veneer, that we will check the decision what to do. And again, that one factory which we shall again -- we have to take a decision on that, so we start making the plywood and with the veneer and we are trying to sign some joint venture partners also, and so some foreign company or some local company form the joint venture, so just the return is from the Laos government, it was in the month of June only that indicating that we are not going to start veneer export, and they want us to convert our units to the plywood, so that cannot build it. And we may take reasonably or partially that we are working on that. And many exploring the possibilities of joint venture, so time will tell. But this I elaborate for you, I think all the people of the land may be interested to know more about Laos, so for the knowledge of everybody I explained in detail.

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Operator [48]

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

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Pranav Mehta, Equirus Securities Private Limited, Research Division - Associate [49]

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Congratulations on the good set of numbers. So I just wanted to understand on the raw material part on the plywood side. So is there any chance that the plantation timber prices might shoot up in the next, let's say, 6 or 9 months because of the unavailability of plantation timber particularly in the North India region. And with the fall in fees for veneer, is this sustainable? Or will it move back to original prices within 1 or 2 quarters?

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Sajjan Bhajanka, Century Plyboards (India) Limited - Chairman of the Board & MD [50]

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In plywood there was 3 major components, one is core veneer, one face veneer and glue adhesive, so both front veneer prices are coming down, and as far as core veneer is concerned, there is no dearth of that. The UP government last year has given many new licenses for putting of veneer peelings, supply of core from UP is encouraged. And there are some pressures on plywood sales and what particularly for the unorganized players, so unorganized players there are specific problems, and many factories, Punjab to Haryana, had been closed down because of earlier they had benefits, and no more, earlier out of 3,300 number of players in this, 3,200 were either fully exempted or partially exempted. Now none of them are exempted, now all 3,300 players are in full duty sectors. So their financials are initiatives and there are somethings that there will some migrate from this.

And overall, MDF and plywood with the other possible growth in the panel segment is partially taken up by the MDF and particleboard, so the plywood growth hedges subdues, so it is not growing as its need to grow from last decade or so. So that is the one thing and so I don't see any problem in make face veneer. We have now enhanced our production in Myanmar region, because their prices have come down and it is making profit now and at the same time we are putting up a unit in Laos -- sorry Gabon, because Gabon has become new source of veneer for Indian companies. India private manufacturers and Gabon, the price of the timber that is Okoume is for the phase is comparatively much cheaper. So the cost of veneer from day 1 would be less, at the same time, Gurjan from Myanmar is more preferred. So for the better quality, better brands we will continue using Gurjan, and for our less costly brands, we may shift to Okoume. At the moment, we are buying a Okoume from the Gabon units and our own units in are likely to start production from the month of December.

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Pranav Mehta, Equirus Securities Private Limited, Research Division - Associate [51]

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Okay. And Myanmar unit, has their supply from the government improved in last 6, 9 months?

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Sajjan Bhajanka, Century Plyboards (India) Limited - Chairman of the Board & MD [52]

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Yes. In Myanmar last 2 years, more than 50% of these units has already been shut down. And the remaining units are operating at a lower level so there is less demand and there's 2 years back, or even last year, we took timber in government auctions at USD 1,100, USD 1,200 per hoppus ton, now the prices have gone down to around 700 level so this is first level, here we can produce, also, we can make some earnings also. And at this level, the Myanmar business are sustainable, so whether we are increasing our collection in Myanmar.

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Pranav Mehta, Equirus Securities Private Limited, Research Division - Associate [53]

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And answer another question was related to MDF. So and what would be your targeted capacity utilization for FY '20 in MDF?

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Sajjan Bhajanka, Century Plyboards (India) Limited - Chairman of the Board & MD [54]

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It should be around 90%.

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Pranav Mehta, Equirus Securities Private Limited, Research Division - Associate [55]

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90%. Okay. And sir, what about particle board?

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Sajjan Bhajanka, Century Plyboards (India) Limited - Chairman of the Board & MD [56]

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It maybe 100% and maybe 160-plus recently.

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Pranav Mehta, Equirus Securities Private Limited, Research Division - Associate [57]

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And related to particle board, so now I think you're running at optimum utilization. There is a new plant which comes in, you'll be able to serve the market with your existing plant? Or you need to do some outsourcing as well?

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Sajjan Bhajanka, Century Plyboards (India) Limited - Chairman of the Board & MD [58]

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And now there are many developments and relate to the thinner plywood, to some extent, it is being replaced by MDF. So MDF is one of the OEMs, like particle board. This is predominately till today is also be consumed by the OEMs to manufacture the furniture and tilt board furniture. IKEA, like the use 90% plus particle board, but MDF it has found usage in the domestic consumers also with the homes. They started being sold from the plywood dealers, factory and the dealers also, and so we are very sure UP state and a big market for plywood -- like we are contemplating 500 to 1,200 capacity for both MDF and particle board.

And in India, particularly, if you divide India by east and west that the entire excluding UP from the west, then entire line, there's not a single particle factory in the eastern side of the vertical divide. And there is no MDF factory. So only one MDF factory will come in Vijayawada that would be in South India. And then we have both of our factories, plywood factories, ours and that one associated decor, that is also in South India. So North India on the eastern side of the divide, vertical divide, there are no particle factory and no MDF factory so we don't see any problems because there it would take us more than a year now to establish the plant. And then first year, there would be taking trouble to reach the optimum production that will raise minimum of one year. So after 2 years, we are pretty sure that we should be able to sell the entire production.

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Operator [59]

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The next question is from the line of Aasim Bharde from IDFC Securities Limited.

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Aasim Bharde, IDFC Securities Limited, Research Division - Research Analyst [60]

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So had a few questions. Firstly, this particle and MDF unit that you plan to set up in UP, so what would be the total CapEx and when do you envision this plant is to be opened.

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Sajjan Bhajanka, Century Plyboards (India) Limited - Chairman of the Board & MD [61]

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It should take around 15 months from now, and total CapEx should be because it is 2: both particle board plant and MDF plant, and hedge like electrical services like chipping, like the energy plant did all would be common so with that we still be able to save because of Hoshiarpur. Our total investment will be around INR 350 crores for 600 cubic meter capacity. So here, we are more or less same capacity we're contemplating. And particle board cost of the machines are competitively less. So maybe it's something between INR 400 crores to INR 450 crores or 1,000 cubic meter capacity.

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Aasim Bharde, IDFC Securities Limited, Research Division - Research Analyst [62]

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And why particularly UP greenfield? So I think earlier you're also planning to expand our Hoshiarpur capacity, right? Has that plan been put on the back burner for now?

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Sajjan Bhajanka, Century Plyboards (India) Limited - Chairman of the Board & MD [63]

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Yes, we had a lot of discussion on that, and we have deliberated. So there were certain considerations for this. One thing is the price of plantation timber already around INR 3.40, INR 3.50 in Hoshiarpur and if we increase capacity there, we start buying more material. So that cost would have jumped to maybe around the INR 4 per kg. And in UP, there is sufficient raw material available for MDF and particle board at INR 2 per kg, so that was one thing and from Hoshiarpur and from UP like the distance to the main market that Delhi or the Central India and this thing, is more or less the same, so on the finished product front or logistic would be more or less the same.

On raw material front, it would be less. And another advantage is there in UP, because we have signed the agreement during the invest UP and it was their policy also, we are entitled to 200%, up to 200% tax benefit in next 10 years from the revenues from the GST. So whatever the state GST we earn that would be exempted up to the level of 200% or investment for coming 10 years. So these were the precedences and UP itself is a big market, a lot of new OEMs are coming up in UP, this will lead the particleboard for that. And the plywood, it is finding usage in the domestic segment.

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Aasim Bharde, IDFC Securities Limited, Research Division - Research Analyst [64]

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This South India Greenply has expanded capacity recently and Rushell will also be expanding capacity soon. And these expansions are pretty massive. So is there a possibility that these South India players can possibly disrupt the market in the north. So you seeing price stability right now, but can that be sustainable given that they're used capacity in the south of -- southern markets, right?

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Sajjan Bhajanka, Century Plyboards (India) Limited - Chairman of the Board & MD [65]

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So South India because this greens plant is very distant South. It is near Chennai, and like on the western side you have a Kandla port and Eastern side, you have Port of Calcutta, Paradeep. So the MDF could be imported to any of these ports. So these are the dividing line, the south, they have to compete with the imported MDF. So our solicit in the additional cost which the either the importer would incur or the southern plants will incur in bringing the material from South to North or from the importing port to North India, so that is a clear difference of around another INR 3,000 to INR 3,500 per cubic meters. That is giving us extra comfort.

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Aasim Bharde, IDFC Securities Limited, Research Division - Research Analyst [66]

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Okay. So it will not be economically beneficial for the southern players to disrupt the market in case there is a demand issue in the South. Okay.

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Sajjan Bhajanka, Century Plyboards (India) Limited - Chairman of the Board & MD [67]

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Yes.

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Aasim Bharde, IDFC Securities Limited, Research Division - Research Analyst [68]

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Another question. Sir, in the opening remarks, you guys mentioned that Q2 could be disrupted due to flood. Would you be able to give us an estimate of the potential loss in revenue?

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Sanjay Agarwal, Century Plyboards (India) Limited - MD, CEO & Executive Director [69]

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Yes. And you see that this kind of a caveat, actually, that is really not going to disrupt totally, but there's a caveat because Kerala is a big market for us and it is completely under flood and part of Maharashtra and Bihar and so it's kind of caveat, it is nothing alarming.

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Sajjan Bhajanka, Century Plyboards (India) Limited - Chairman of the Board & MD [70]

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And after floods, again, there could be demand for plywood due to disruption by flood due to the people that have to go for new furniture, new distinct repairs and other things. Usually, the floods are followed by demand for our products.

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Aasim Bharde, IDFC Securities Limited, Research Division - Research Analyst [71]

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On the laminate side, are there any near-term plans to increase capacity in a greenfield or brown?

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Keshav Bhajanka, Century Plyboards (India) Limited - Executive Director [72]

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No, currently, there are no plans to increase capacity. We are currently operating at 100% capacity on 5 of our line. We have 6 installments. Our first target is to reach 100% utilization for all 6 plants.

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Aasim Bharde, IDFC Securities Limited, Research Division - Research Analyst [73]

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That would be achievable during this year itself?

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Keshav Bhajanka, Century Plyboards (India) Limited - Executive Director [74]

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Yes, as we guided in Q4.

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Aasim Bharde, IDFC Securities Limited, Research Division - Research Analyst [75]

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Okay. So on the Gabon face veneer plant, you said is going to come by December of this year. So how much CapEx has been committed for this? And will this plant capacity be sufficient for us? Or would you be selling externally as well?

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Sajjan Bhajanka, Century Plyboards (India) Limited - Chairman of the Board & MD [76]

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We shall be selling externally as well, because usually we use the prime grids for our own requirement. And the lower grids, we sell in the market. So this we are doing earlier also for Gurjan, from Laos, from Myanmar, and we are using prime grid outset and lower grids at a lower price, we are selling in the market. So service strategy will continue and as far as CapEx is concerned, the major investment on the land which is around INR 16 crores. So that is acquired by us, or the policy of Gabon, that SEZ joint venture between Olam and government of Gabon, so they give this on installments. So our installment against this INR 16 crores, would be around INR 3 crores we have already paid, and the remaining amount we have to pay in 42 months, in the next 3, 3.5 years. And apart from this, there would be CapEx of around INR 10 crores, machine and other infrastructure.

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Aasim Bharde, IDFC Securities Limited, Research Division - Research Analyst [77]

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Approximately INR 25 crores, INR 26 crores will be total...

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Sajjan Bhajanka, Century Plyboards (India) Limited - Chairman of the Board & MD [78]

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Yes INR 25 crores, INR 26 crores would be the ultimate investment. And in timber, now I think this around INR 13 crores will be in installments. And first installment would start after 6 months of production.

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Aasim Bharde, IDFC Securities Limited, Research Division - Research Analyst [79]

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One final question, sir, your consol level PAT was about 400 million-odd. While at stand-alone, it was at 480 million. Even on EBITDA, there is a 60 million difference. So could you help me understand which subsidiaries are driving the loss at the consol level?

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Arun Kumar Julasaria, Century Plyboards (India) Limited - CFO [80]

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Got it. In Q1, this is also mainly in our Myanmar region, but the Myanmar region we're speaking isn't very far. By year-end, there will be no loss. There will be some positive reserves in fact.

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Operator [81]

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Next question is from the line of Lakshminarayana Ganti from SBICAP Securities.

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Lakshminarayana Ganti, SBICAP Securities Ltd., Research Division - Co-Head of Institutional Research [82]

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So one question on MDF. For the South players like, say, Green panel, et cetera. For this quarter, there was a 25% decline in realizations. 20% to 25% drop is there. You have not reported such a sharp drop. So the dynamics continue to be very bad in the south market? Or how do we interpret that?

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Sajjan Bhajanka, Century Plyboards (India) Limited - Chairman of the Board & MD [83]

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I have already told you the biggest threat to the south market is imports. There was an increase in prices of MDF are coming down and mainly our neighboring countries, the Asian countries like Vietnam, Indonesia and Malaysia, Thailand. So these countries are exempted from any import duty due to that agreement between India government and SEZ so there is 0 import duty. So there is no duty barrier. And most of these countries are not covered under antidumping also. So that way, it becomes and the domestic is by ship. If the material when it comes to these ports, their logistic cost are also very less. So South India is facing a very big competition from the imports. And like even particleboards with our southern plants, we have to compete directly from the imports. We have to match the cost with the import. In North India, we still have debt advantage. The price will be a little better. It consists of the import price plus the logistic costs from the nearest port to the northern Indian destinations.

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Operator [84]

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

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Praveen Sahay, Edelweiss Securities Ltd., Research Division - Assistant VP of Equity Research & Research Analyst [85]

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Sir, my first question is, is there a land acquisition done for Sitapur plant or is still in the nascent stage?

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Sajjan Bhajanka, Century Plyboards (India) Limited - Chairman of the Board & MD [86]

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We have offers from government in the Industrial district. But that land is very costly so that we are keeping in standby. That land would cost us around INR 70 lakhs per acre and whereas other lands are available in the vicinity of INR 20 lakhs per acre. Our team is working there. We have found certain plots there in different areas and which are very, very central. Also raw material availability wise, so connected with the main roads and electricity availability.

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Praveen Sahay, Edelweiss Securities Ltd., Research Division - Assistant VP of Equity Research & Research Analyst [87]

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So for 15 Months, you will achieve this?

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Sajjan Bhajanka, Century Plyboards (India) Limited - Chairman of the Board & MD [88]

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Once we placed the order for machines, the first consignment would start reaching India after 6 months. And in Hoshiarpur also, we did exactly the same, we decided for the machines placed to order on December '15, and then we purchase land by April '16. And then we completed the plant in another 1.5 years, and started commercial production from October '17, so more or less, same strategy will be there in UP.

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Praveen Sahay, Edelweiss Securities Ltd., Research Division - Assistant VP of Equity Research & Research Analyst [89]

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Secondly, sir, in Kerala, as you had said that, that's one of the major market. So can you give some sense of the last year, because last year also, there was some flood. So have you received some incremental business post of flood last year from this region?

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Sanjay Agarwal, Century Plyboards (India) Limited - MD, CEO & Executive Director [90]

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Yes. Very frankly, it's difficult to remember. Kerala is a very important market for us because of being near the coastal zone. The consumption of premium plywood is quite true there. At this moment because of all the problems of transport and handling, et cetera, there are certain issues. But actually, that caveat to us filed by Julasaria Ji, because we expect that we have some changes will be there, but they will not be at an alarming level. I don't think last year we were affected, and we'll get something really very good. Even the downside is small and upside also will be -- yes, there will be an upside because of the floods. There will be an upside after the flood. There is extra demand.

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Praveen Sahay, Edelweiss Securities Ltd., Research Division - Assistant VP of Equity Research & Research Analyst [91]

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Okay. And lastly, on your thicker MDF, so how is going to price of that thicker MDF as compared to your average realization?

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Sajjan Bhajanka, Century Plyboards (India) Limited - Chairman of the Board & MD [92]

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Thicker MDF, the prices are comparatively lower in comparison to thinner, so like 2 mm is costlier and then 3 mm, 4 mm, gradually, there is some difference, but not much in cubic meter terms, but with the maximum and minimum, the difference is within INR 2,000 cubic meter. Again, production is more in thicker and in thinner, production is less, so the plant profitability-wise is more or less the same.

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Praveen Sahay, Edelweiss Securities Ltd., Research Division - Assistant VP of Equity Research & Research Analyst [93]

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Okay. So is there any contribution as such, like this much of contribution is from the thicker in that number, do you have?

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Sajjan Bhajanka, Century Plyboards (India) Limited - Chairman of the Board & MD [94]

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We have. But at the moment, the figures are not in hand with us.

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Operator [95]

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(Operator Instructions) The next question is from the line of Siddharth Rajpurohit from JHP Securities.

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Siddharth Rajpurohit, JHP Securities (P) Ltd., Research Division - Research Analyst [96]

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So what will be the contribution of Sainik in the overall plant segment.

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Sajjan Bhajanka, Century Plyboards (India) Limited - Chairman of the Board & MD [97]

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So I'm thinking about INR 12 lakhs out of INR 50 lakhs, about 30%

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Siddharth Rajpurohit, JHP Securities (P) Ltd., Research Division - Research Analyst [98]

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Okay. And what will be the margin difference, sir, between the new product and Sainik?

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Arun Kumar Julasaria, Century Plyboards (India) Limited - CFO [99]

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There is a difference. Margin in Sainik is lesser and margin in the prime is higher.

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Siddharth Rajpurohit, JHP Securities (P) Ltd., Research Division - Research Analyst [100]

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Ballpark numbers, sir, what will be the difference? Rough estimate, sir?

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Sajjan Bhajanka, Century Plyboards (India) Limited - Chairman of the Board & MD [101]

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You want break up between Sainik and prime?

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Siddharth Rajpurohit, JHP Securities (P) Ltd., Research Division - Research Analyst [102]

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Your main product, Sainik ply, what will be the margin difference between Sainik and prime in pricing?

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Sajjan Bhajanka, Century Plyboards (India) Limited - Chairman of the Board & MD [103]

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Generally, by value 30% is Sainik. But volume number, I don't think instantly you can tell it separately.

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Siddharth Rajpurohit, JHP Securities (P) Ltd., Research Division - Research Analyst [104]

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Sir, I'm talking about margin difference at the EBITDA level, operating level, margin difference?

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Sajjan Bhajanka, Century Plyboards (India) Limited - Chairman of the Board & MD [105]

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Margins level I mean to say it is the same because a lot of overheads are same.

Like we cover our overheads of marketing and sales, mostly in our prime products. And in the lower products, there is some item for outsourcing also so those outsource product under our quality control are channelized in the best way possible logistically from the source to the destination. So we reduced cost in that so whatever we are that is by better logistics, by better turnover, and keeping the cost of sales lower, so although there is 25%, 30% difference in the price in our premium product and this thing, but difference in the cost is not that much. There is difference in cost also, the premium products, raw materials and other thing and configuration, the quality of the raw material. These are of better standard. And the lower product is competitive less. But again, it doesn't meet all the standard, BIS and other things, so the difference is not that much. But due to better logistics, we try to make up for this thing. And with some item outsourced, we keep the cost also under control.

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Siddharth Rajpurohit, JHP Securities (P) Ltd., Research Division - Research Analyst [106]

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Okay. And sir, can you give me your various segment-wise, top line growth and margin expectation?

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Sajjan Bhajanka, Century Plyboards (India) Limited - Chairman of the Board & MD [107]

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All the little figures are not handy with us, so you can call Mr. Arun Julasaria or Mr. Abhishek Rathi later on and they will give you the figures.

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Siddharth Rajpurohit, JHP Securities (P) Ltd., Research Division - Research Analyst [108]

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Okay. But consolidated -- on a consolidated basis, we are expecting a 10% top line growth and 15% EBITDA margin to be maintained, right, sir?

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Unidentified Company Representative, [109]

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Yes.

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Siddharth Rajpurohit, JHP Securities (P) Ltd., Research Division - Research Analyst [110]

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Thank you and all the best.

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Operator [111]

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The next question is from the line of [Abishek Joshi] from CIMB.

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Unidentified Analyst, [112]

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Sir, the GST tax exemption, you were talking about, is it related to Sitapur plant, right?

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Sajjan Bhajanka, Century Plyboards (India) Limited - Chairman of the Board & MD [113]

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Yes. To some extent it would be available to us in Hoshiarpur plant also. But Hoshiarpur is governed by Punjab government policy, and they have kept the benefit to 70% of the investment. And in UP, it is 200% of the investment, but 200% in 10 years, is usually not achievable. We will not be able to achieve because this would be in the form of the step GST which is at the highest level, 9%. But there would be some input credit also. So effective GST utilization would be 5% to 6%, so 5% to 6% in 10 years. So hardly we will be able to earn around 100% of the investment. So in 10 years, our investment would become free, but the GST benefit is available in Punjab also and in UP also.

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Unidentified Analyst, [114]

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When this new plant, Sitapur plant become optimally, it can be -- it achieves an optimal capacity. So then you would have better pricing power in MDF segment because of this benefit?

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Sajjan Bhajanka, Century Plyboards (India) Limited - Chairman of the Board & MD [115]

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The MDF, as far as my team, led by Mr. Sanjay Agarwal, he's very confident. Today, we have availability of another 300 cubic meter of MDF, we can easily sell it. So that is our future plan, so by the time our production comes, this 500 cubic meters will not be a challenge.

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Unidentified Analyst, [116]

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No. I wanted to understand if this GST exemption will give you any extra benefit to increase your margins or to capture more market shares in future?

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Sajjan Bhajanka, Century Plyboards (India) Limited - Chairman of the Board & MD [117]

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Hopefully, we will not pass on this benefit. Generally, we will not pass on this benefit. And whatever, like on the price front, the price, we will totally increase price. So there, it will give us better like absorbing limit. It would be there with us.

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Unidentified Analyst, [118]

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Yes. So we would have better margins you want to say.

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Sajjan Bhajanka, Century Plyboards (India) Limited - Chairman of the Board & MD [119]

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Yes.

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Unidentified Analyst, [120]

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Can you roughly quantify what can be -- like, by how much percentage points can the margin increase?

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Unidentified Company Representative, [121]

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Keshav?

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Keshav Bhajanka, Century Plyboards (India) Limited - Executive Director [122]

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Yes. Just give me one second. We will have 2 distinct advantages. One will be lower cost and the second will be the GST benefit that we will get. Both of these will depend, I think lower prices have been low enough to convert for what is in Hoshiarpur versus what is in UP, 1 year come down, which is difficult to do. For the GST benefit, it will depend on how much we will see in this sell in this state. So I can't give you approximately any figures at the moment. But definitely, we should look at a higher EBITDA in Sitapur as compared to Hoshiarpur, both running at high capacity utilization.

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Operator [123]

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

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Achal Lohade, JM Financial Institutional Securities Limited, Research Division - VP [124]

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Sorry, I joined the call a little late. Are you talking about new capacity addition for MDF in UP? What is the status?

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Sajjan Bhajanka, Century Plyboards (India) Limited - Chairman of the Board & MD [125]

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We will explain this we are planning, new capacity of around 500 cubic meter per day of MDF, and 500 cubic meter per day of particleboard under a single roof in the UP.

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Achal Lohade, JM Financial Institutional Securities Limited, Research Division - VP [126]

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Okay. And what is the CapEx are we talking about in the timeline, sir?

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Sajjan Bhajanka, Century Plyboards (India) Limited - Chairman of the Board & MD [127]

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Around -- between INR 400 crores to INR 450 crores.

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Achal Lohade, JM Financial Institutional Securities Limited, Research Division - VP [128]

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Both these plants put together? Both these...

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Sajjan Bhajanka, Century Plyboards (India) Limited - Chairman of the Board & MD [129]

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They are put together because many things would be common for these -- for both the plants.

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Achal Lohade, JM Financial Institutional Securities Limited, Research Division - VP [130]

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In 2 years you think?

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Sajjan Bhajanka, Century Plyboards (India) Limited - Chairman of the Board & MD [131]

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We expect to complete the erection by 1.5 years.

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Achal Lohade, JM Financial Institutional Securities Limited, Research Division - VP [132]

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Okay. And in terms of the pricing. Can you talk a little bit about how are the pricing scenario with respect to MDF? What is the price increase we have taken? And was that entirely been absorbed by the channel for both MDF as well as ply?

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Sajjan Bhajanka, Century Plyboards (India) Limited - Chairman of the Board & MD [133]

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Last 6 months, we have taken price increase and from the thicker grades, thicker grades of MDF, and that has been well absorbed and are applicable. And at the moment, we are comfortable with margins with productivity and with all the things. And again, when we get a little opportunity as for the demand-supply cycle, we will try to improve.

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Achal Lohade, JM Financial Institutional Securities Limited, Research Division - VP [134]

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Right. But what was the price increase and how much is the thick MDF as a percentage of total volumes, sir?

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Sajjan Bhajanka, Century Plyboards (India) Limited - Chairman of the Board & MD [135]

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Thick MDF is about 75% of the total volume and the pricing we took was about 3% to 4% depending on thicknesses and all that actually. That is about MDF. And plywood, we have taken a very small price increase of 1% across all products, and we have taken about 3% to 4% increase on MR products, Sainik MR products.

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Achal Lohade, JM Financial Institutional Securities Limited, Research Division - VP [136]

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And with respect to margins, the margin improvement, if I look at on a Q-o-Q basis from fourth quarter to first quarter for the MDF business, can you explain as to what is driving this margin improvement? Is it...

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Sajjan Bhajanka, Century Plyboards (India) Limited - Chairman of the Board & MD [137]

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Basically better utilization, capacity utilization. You will see that year-on-year from Q1 last year to this year, our capacity inflation is 39% up. So that is the basic reason that we are more efficient.

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Keshav Bhajanka, Century Plyboards (India) Limited - Executive Director [138]

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And in MDF, like variables are comparatively lower, variable costs is comparatively lower. With every higher production, every increase in production, our overall costs come down. The fixed cost is very high.

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Achal Lohade, JM Financial Institutional Securities Limited, Research Division - VP [139]

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No. I was talking about from fourth quarter to first quarter, margins have improved from 15% to 23%. So I was just curious, is there any cost or is there any one off?

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Sajjan Bhajanka, Century Plyboards (India) Limited - Chairman of the Board & MD [140]

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The cost roughly is also there, because the adhesive price that has substantially come down like formalin, formalin is a major distinct, melamine and formalin, these 2 ingredients are available at cheaper price. And at the same time, we have done some improvement in our operations. So earlier, our electricity consumption was around 350 units per cubic meter, that has come down to 250 units per cubic meter. And again, we have installed some equipments, which have reduced our group consumption costs. So these are collective measures, higher capacity utilization, better management, reduction in the cost, so these are all factored in.

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Achal Lohade, JM Financial Institutional Securities Limited, Research Division - VP [141]

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What is -- what kind of margins are we looking at from the full year perspective? You think the current margin is...

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Sajjan Bhajanka, Century Plyboards (India) Limited - Chairman of the Board & MD [142]

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Yes. Current margins will continue that is coupled with some more improvement, but there is no chance of going back.

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Achal Lohade, JM Financial Institutional Securities Limited, Research Division - VP [143]

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Understood. And specifically with respect to the MDF segment, what is the mix in terms of north and south for us? Like how much do we sell in western and southern markets?

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Sajjan Bhajanka, Century Plyboards (India) Limited - Chairman of the Board & MD [144]

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We are selling about 70% -- 70%, 75% in the northern market. And this is west, eastern, south mixed.

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Keshav Bhajanka, Century Plyboards (India) Limited - Executive Director [145]

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And in other markets, we are selling mainly the premium products, not like waterproof grade, FDA grade to mostly we sell those products. So where -- even another like that they are costlier product, the logistics constitutes lower portion of that product realization.

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Achal Lohade, JM Financial Institutional Securities Limited, Research Division - VP [146]

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Right. And what would be the mix of these high value, value-added products, premium products in total, sir?

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Sajjan Bhajanka, Century Plyboards (India) Limited - Chairman of the Board & MD [147]

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In total, now we are managing around 20% premium, 50%.

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Achal Lohade, JM Financial Institutional Securities Limited, Research Division - VP [148]

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Okay. Got it. And I was trying to ask with respect to pricing, specifically for South market, given the capacity of another competitor coming on stream sometime.

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Sajjan Bhajanka, Century Plyboards (India) Limited - Chairman of the Board & MD [149]

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Yes. Southern market, the passage has duly reduced, but we are still maintaining, as far as our expected realization to the company is concerned, we are able to maintain the same utilization as we are realizing in north, that's why you know, slowly, slowly, our sales to south will be reducing as and when they are increasing their presence in the market. And for that, we are fully ready. That's not an issue with us.

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Achal Lohade, JM Financial Institutional Securities Limited, Research Division - VP [150]

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Right. And just last question, if I may, sir, with respect to the ply, growth has been fairly subdued for a while now. So how do you see the scenario, as that scenario kind of worsen, we could expect to the demand at the industry level? And what kind of growth are we looking at for this segment?

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Sajjan Bhajanka, Century Plyboards (India) Limited - Chairman of the Board & MD [151]

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The growth in plywood would continue to be subdued because world over that was the scenario. The plywood, the MDF, particleboard, they are increasing over the last 3 decades. So maybe China, first MDF plant might be installed 30 years back and in these 30 years, now plywood, MDF and particleboard have surpassed plywood and the plywood's total volume, maybe 17 million cubic meters and MDF and particleboard joint volume is around 85 million, 90 million cubic meters. So that way, in India also, at the moment, our total volume of plywood is around 10 million cubic meters. And MDF and particle board together is less than 2 million cubic meters. So MDF and particle board will keep on growing at a very rapid pace, and we expect the constitution of India and more like the people go for tailor-made furniture and even it is carpenters, so plywood continue in the market. It will -- but the growth would be subdued if the MDF particle board is growing at a rate of 20% per annum. Plywood may grow at the rate of 5%.

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Operator [152]

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Next question is from the line of Ashish Poddar from Anand Rathi Services and Stockbrokers.

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Ashish Poddar, Anand Rathi Financial Services Limited, Research Division - Research Analyst [153]

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My question is, out of this INR 400 crores, INR 450 crores of CapEx. If you can divide in FY '20 and '21, what will be the number, and also the source of funding for that.

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Sajjan Bhajanka, Century Plyboards (India) Limited - Chairman of the Board & MD [154]

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Like CapEx would we start. First, we have to give some advances, we have to buy land, so this maybe there would be around INR 50 crores to INR 100 crores within this financial year. And the rest would be incurred in the next financial year. And typically, essentially, we really don't take more than 50% from these institutions, so although the 50% would be our existing surplus and our generations in the next 1.5 years and 50%, we should borrow from the institutions, maybe in the view of ECB the term loan from there.

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Ashish Poddar, Anand Rathi Financial Services Limited, Research Division - Research Analyst [155]

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Okay. Now is this plant gone up or still there is a chance to make some changes in the plan?

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Sajjan Bhajanka, Century Plyboards (India) Limited - Chairman of the Board & MD [156]

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Yes, until whatever is finally like conceived and finally concluded, until then whatever inputs we get accordingly, we keep on improving. And at the moment, we shall put the order to the machinery suppliers, so that day it will come up.

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Operator [157]

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As there are no further questions. I will now hand the conference to the management for closing comments.

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Unidentified Company Representative, [158]

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So friends, thank you so much for joining us on the call and taking your time looking and listening to us, and hopefully, we will see you next time in Q2 FY '20 earnings call. Thank you so much.

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Operator [159]

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Thank you. On behalf of SBICAP Securities Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.