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00:00 - Century Plybos is a stock in focus.
00:02 We know that the real estate ancillary demand
00:04 has been kind of chalk and cheese,
00:06 but they also have a new capacity that has come on stream.
00:08 And lovely to have in Keshav Bhajanka,
00:10 Executive Director of the company,
00:11 to talk about how does he pencil in FY25 demand scenario,
00:16 what kind of capacities have come on stream,
00:18 and how does that place them in terms of execution?
00:20 Keshav, great having you.
00:21 Thanks for taking the time out.
00:23 And fill us in, Keshav, on the recent developments.
00:28 I believe there is a capacity that has come on stream,
00:31 and I believe, or rather, I would love for you to tell us
00:35 how is the demand scenario looking like currently?
00:37 - Good morning.
00:40 Thank you so much for having me on the show.
00:42 You are absolutely correct.
00:44 A new capacity has come on stream,
00:46 and we actually had trial production
00:48 earlier this month itself.
00:50 It is the largest capex in the history of our company,
00:54 and I think it bodes very well for next year.
00:57 We have doubled our capacity for MDF,
01:00 which is medium density fiber board,
01:02 from 950 to 1,900 cubic meters.
01:05 And I think this is going to give us
01:07 a huge, huge growth engine for next year.
01:10 Currently, we are predominantly a North-East gear,
01:13 having a unit in Oshawa.
01:15 Post the South unit, coming to full production,
01:18 we shall be a Pan India presence,
01:20 and that is going to help us substantially.
01:22 - Could you quantify that substantially?
01:25 Because for a company to get in its largest capacity
01:28 on stream would mean that the company
01:31 had thought through about the demand scenario
01:33 in most times, and it's coming in at a time
01:36 when demand might pick up,
01:37 and they might have the ability
01:39 to be able to service that demand.
01:41 So now give us the scenario with the newer capacity
01:44 having come on stream perspective.
01:45 - You're absolutely right.
01:49 Firstly, let me say that we are extremely bullish
01:51 about the demand scenario.
01:53 I know everybody has been talking
01:54 about the slight slowdown in the short term.
01:58 But the reason behind this is that,
02:01 after COVID, the takeoff in real estate was fantastic.
02:05 The quantum of inventory that got depleted,
02:08 that meant that there was a supply gap in the market.
02:12 Now with new launches catching up,
02:14 we believe that the next few years
02:16 are going to be very good.
02:17 And this real estate cycle, hopefully,
02:20 will last beyond seven, eight years,
02:21 and it should give us a lot of competitors.
02:24 At the same time, certain products in India,
02:26 such as particle board and medium density fiber board,
02:30 are under penetrated.
02:31 So already they have substantial dealings.
02:34 Alongside this, the real estate cycle doing well
02:37 is going to give us further impetus.
02:39 - Okay.
02:42 So, okay.
02:46 Let me try and get a sense in a different vacation.
02:50 For the longest time,
02:51 you guys were known to clock in that consistent,
02:54 compounded growth rates, which on the revenue front,
02:58 I'm not even going to bottom line,
02:59 which may have gotten a bit disturbed, if you will,
03:03 the last 12 months, let's say.
03:04 Do you return to the consistency of revenue growth
03:09 as a result of, hopefully, better demand,
03:13 as which you said you are constructive about,
03:15 and capacities to service that demand?
03:17 So what's the kind of outlook that you can paint
03:19 for FY20 from a growth perspective on the revenue front?
03:23 And then I'll come to the operational metrics.
03:25 - I think we will safely be back to the sort of 20%
03:32 plus compounded growth that you are referring to.
03:35 And we are fairly confident on the same.
03:38 Both the demand scenario and the new capacities
03:41 coming on stream are going to aid in the same.
03:44 And the objective shall be to outperform that 20%.
03:48 But definitely, we are looking at 20% plus growth.
03:50 - So now you have the capacity as well.
03:53 But just one quick thing, on the revenue front as well,
03:57 120% could be the volume growth.
03:59 There are question marks, or rather,
04:01 there were some thoughts around,
04:03 some articles around MDF pricing having come off
04:06 in quarter three, and correct us if we are wrong.
04:08 So what is the current pricing trend?
04:10 And could that impede the benefits
04:15 that come out of volume growth in the MDF business?
04:18 - (laughs) You know, you're absolutely right.
04:21 That's a very difficult question,
04:22 tricky question to answer.
04:24 But I think that yes, we are looking at a 20%
04:27 plus value growth.
04:29 So I think the volume growth plus the realization
04:33 both taken into account,
04:35 we should grow our revenue by 20% plus.
04:38 - Oh, okay.
04:39 So independent of not just MDF,
04:42 but the other aspects of the business as well,
04:44 even if there was pricing pressure,
04:45 you believe volume growth will take care of it?
04:48 - Yes.
04:50 - And if pricing behaves better then, Keshav,
04:53 then you think that 20% can be eclipsed?
04:55 - I think that we will try and overachieve that 20%.
05:02 If the macroeconomic scenario favors us,
05:06 then maybe a little higher than that.
05:08 - Okay, okay.
05:10 Last couple of things, Keshav.
05:12 One is this whole argument around
05:15 why the ancillary demand may not have been very strong.
05:18 And one of the reasons being given was that
05:21 the old inventory was getting cleared.
05:24 And now people have gotten the keys to their homes.
05:27 And now that the interior works would have started
05:30 so on so forth, et cetera, et cetera.
05:32 We will see the demand for ancillary products
05:36 booming in FY25.
05:37 There's also this whole argument
05:38 around how global capability centers
05:41 have set up shop in a big way,
05:43 especially in South India.
05:44 And we'll probably see demand from the commercial space
05:46 coming up in a big way too.
05:48 I would love to know if that is the basis
05:50 of the strength in demand that you are forecasting
05:53 or is it something else?
05:54 - You're absolutely right.
05:58 That is a big basis for the strength in demand
06:01 that we are looking at.
06:03 But alongside that, I think one other element
06:05 is that there is a move towards more branded players.
06:10 I think that the unbranded segment has lost traction
06:13 post COVID as compared to the branded players.
06:16 But I think both of these are going to play in our favor
06:19 and this is going to lead to an overall positive scenario
06:23 going forward, not just in the short term,
06:25 but in the medium to long term as well.
06:27 - In the medium to long term as well.
06:29 Okay.
06:30 Last question.
06:32 Do you foresee any reason or any need
06:38 for raising any kind of capital, equity or debt
06:43 in the near term, part one.
06:44 Part two, could operational metrics or margins
06:47 come under pressure because of rising costs?
06:50 - No, I don't see any need to increase any equity
06:56 going forward.
06:58 Having said that, yes, on a short term basis,
07:00 we might have to take on board some debt
07:03 which we have provision for because a lot of the capexes,
07:06 for instance, the Andhra unit or the Chennai unit
07:09 will all come into play within a space of 12 months.
07:12 The short term, there might be some debt
07:14 that we take on board.
07:16 In terms of margins, yes, margins for MDF and particle board
07:20 are likely to remain under slight pressure
07:22 for maybe a few quarters, but in plywood and laminates,
07:26 we are going to see consistency.
07:28 - So overall margins will probably see a slight dip,
07:32 not a substantial dip.
07:33 - Yes.
07:36 - Okay.
07:37 Faiqal, Keshav, lovely having you.
07:38 Thank you so much for taking the time out
07:40 and being with us and giving us some idea
07:41 about your forecast on demand
07:45 and talk to you, post your results.
07:47 - Sure, thank you so much.
07:49 (upbeat music)
07:52 (dramatic music)