Buy Century Plyboards Ltd For Target Rs.459 - Yes Securities
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Result review:
* Century Plyboards Ltd (CPBL) reported revenue of Rs7,450mn (40.5% y/y & 12.9% q/q). The growth was led by stellar growth in Plywood & Laminates division (75% of total sales). Plywood sales grew by 42.2% y/y & 11.8% q/q to Rs4,056mn wherein volumes grew by 44% y/y & 7.9% q/q backed by 4% realization growth both y/y & q/q. Laminates revenues stood at Rs1,529mn (44.2% y/y & 27.4% q/q) wherein volumes increased massively by 37.9% y/y & 22% q/q and realizations grew by 3.9% y/y & 4/1% q/q.
* MDF/Particleboards/CFS (~25% sales) also registered strong y/y growth of 41.2%/29.8%/7.2% respectively and as compared to Q3FY21 sales grew by 2.2%/14.5%/5% respectively.
* Operational margins came in at 17% Vs 12.7%/18.7% in Q4FY20/Q3FY21 respectively. Plywood/Laminates (66% of total EBITDA) margins stood at 12.8%/22.6% respectively. Company reported EBITDA of Rs1,258mn (86.4% y/y & 1.7% q/q)
Our view:
* Though the second wave of COVID‐19 is likely to impact the performance in Q1FY22, we reckon demand to bounce back with re‐opening of economy. With capacity addition in MDF division, the revenues of MDF should grow by 39% over FY21‐FY23E. Laminates/Plywood are expected to report topline growth of 19.2%/19% respectively over FY21‐FY23E. Owing to which, we believe company’s total sales to increase by 21.4% over FY21‐FY23E to Rs31,376mn.
* With topping‐out of raw material prices coupled with higher operational efficiencies, CPBL’s operational margins are expected to expand to 18.5%/19.7% by FY22E/FY23E from 15.7% in FY21. This should lead to EBITDA growth of 35.8% over FY21‐FY23E.
* We continue to remain positive on company’s growth in coming years and reckon that all segments should register strong growth. We believe Revenue/EBITDA/PAT to grow by 21.4%/35.8%/46% over FY21‐FY23E. We have revised our multiple on stock from 23.5x to 25x on FY23E EPS of Rs18.3, arriving at a target price of Rs459/share translating into 10% upside from current levels. Hence, we maintain our BUY rating on the stock.
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