India's furniture industry will witness major changes with the entry of domestic organised and international players bringing in more automation, driving higher growth rates for the medium density fiberboard (MDF) sector, a top executive at Greenpanel Industries Ltd said on Tuesday.
"Automation will lead to higher growth rates for the MDF industry since it is a raw material produced in fully automated plants," Vishwanathan Venkatramani, chief financial officer at India's largest manufacturer of MDF said in an interview on the Reuters Trading India forum.
MDF - used widely in furniture, sports equipment and shoe heels - has lower structural defects as compared to plywood, which is produced in a labour-intensive environment, Venkatramani added. While MDF is primarily used in making furniture, other applications are also growing at a significant rate, he said.
The wood panel maker does not expect any major change in the current quarter which is normally a slow starter.
Demand is expected to pick up from July and the company is expecting a 12%-15% volume growth in fiscal year 2024 over 2023.
While plywood is facing demand constraints due to a slowdown in residential real estate, Venkatramani expects the outlook for premium plywood to improve significantly over the next two to three years. The company is projecting an 8%-10% volume growth for plywood in fiscal year 2024.
The Gurugram-based company recently reported tepid fourth-quarter earnings, due to lower margins in MDF export volumes and a cut in export realization.
Greenpanel was one of the key beneficiaries during the COVID-19 pandemic as Indians' appetite for readymade furniture grew rapidly.
This fueled the company's stock price, which rallied 26 times from May 2020 to April 2022, eclipsing the near two-fold rise in the Nifty Midcap 100 index over the same period.
Overall, analysts currently have a bullish view on the stock, with eight out of 12 rating it a 'buy', according to Refinitiv Eikon data.
(Reporting by Savio Shetty in Mumbai; editing by Eileen Soreng)