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Strong performance; healthy outlook…

Century Plyboard’s (CPIL) Q3FY21 performance was highlighted by strong plywood growth coupled with robust MDF division growth and balance sheet strengthening (now a net cash company). The topline was up 9.9% YoY to | 654.4 crore. MDF revenue grew 20.6% YoY to | 116.5 crore while plywood revenues grew 10.6% YoY to | 357 crore. EBITDA margin expanded 280 bps YoY to 18.6% on adjusted basis (10.4 percentage points on reported basis as base quarter had impairment loss), on account of operating leverage. Overall, reported PAT was up 2.4x YoY to | 65.9 crore, given the healthy operating performance and impairment in bases quarter. Adjusted PAT was up 40% YoY.

MDF division continues robust growth trajectory

MDF division revenue growth of ~20.4% YoY was a function of volume growth of 18.4% YoY to 49,207 CBM along with realisations growth of 1.9% YoY to | 23,663/CBM. MDF EBITDA margin expanded 180 bps YoY to 27.7% backed by comparatively higher capacity utilisation and benefits arising from price hike (~10% during Q3FY21). The management has indicated towards stronger demand arising in the MDF segment due to a) higher acceptance in domestic market and b) lower imports with improved demand in respective geographies and higher shipping costs. CIPL is undertaking brownfield expansion of the MDF board unit in Hoshiarpur, Punjab (expanding capacity by 400 CBM/day) at an estimated capex is | 200 crore, which will be completed in 12 months. Apart from this, the company is also evaluating south based locations for greenfield expansion of 700 CBM/day capacity at an outlay of ~| 450 crore, by March, 2024.

Strong recovery of plywood division

CPIL’s overall plywood division volumes grew 12.5% YoY to 71,977 CBM on account of 17% YoY growth in plywood while Decoply/commercial veneer declined 12.1%, 41.6% YoY, respectively Plywood EBITDA margins were up 270 bps YoY at 15.1%. The laminates division volumes were up 3% YoY to 15,91,300 units. Revenue from this segment was up 5.8% YoY to | 119 crore. The company expects growth in plywood to continue at healthy double digits led d by a) pent-up demand, b) benefits arising due to introduction of ViroKill technology and c) market share gain with increasing advertisement and marketing activities.

Valuation & Outlook

CPIL’s results are robust with both key divisions of MDF and plywood back to growth trajectory. We are also impressed by a sharp improvement in balance sheet wherein CPIL is now a debt free company. The near to medium term growth outlook commentary remains positive. We roll over our valuations to FY23E and maintain BUY, with a revised target price of | 355/share (24x FY22E EPS) vs. | 230/share earlier.

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