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Strong performance again…

Century Plyboard’s (CPIL) Q4FY21 performance was highlighted by robust growth across segments, aided by demand recovery amid a benign base. Topline was up 40.9% YoY to | 738.6 crore, with overall decline in FY21 at a meagre 7% YoY. MDF, plywood, laminate revenues grew 41.2%, 43%, 44.2% YoY to | 119.1 crore, | 399.2 crore, | 152.9 crore, respectively. EBITDA margin was up 380 bps YoY to 17.2% on account of operating leverage. Overall, reported PAT was up 115% YoY to | 83.2 crore, given the healthy operating performance.

Strong growth in plywood, laminates division

CPIL’s overall plywood division volumes for Q4 grew 39.1% YoY to 77,489 CBM on account of 44.1% YoY growth in plywood and 6.7% growth in Decoply while commercial veneer declined 23.3% YoY. Plywood EBITDA margins were up 470 bps YoY at 12.8%. Laminates division volumes were up 37.9% YoY to 19,30,535 units. Revenue from this segment was up 45.4% YoY to | 150.7 crore. We expect ~15% CAGR in FY21-23 in plywood revenues to | 1477.4 crore, led by a) pent-up demand, b) benefits arising due to ViroKill technology and c) market share gain. For laminates, we bake in ~15% revenues CAGR over FY21-23 to | 541 crore.

MDF division continues robust growth trajectory

MDF division revenue growth of ~41.2% YoY in Q4 was driven by volume growth of 23.6% YoY to 45,949 CBM along with realisation growth of 14% YoY to | 25,896/CBM. MDF EBITDA margin expanded 150 bps YoY to 26.8% backed by comparatively higher capacity utilisation and benefits arising from price hike. 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 of | 220 crore, which will be completed by Q1FY23. Apart from this, the company is also looking for greenfield expansion of 700 CBM/day capacity at an outlay of ~| 450 crore, at Andhra Pradesh. We expect 33.5% CAGR in FY21-23 in MDF revenues to | 641 crore.

Valuation & Outlook

CPIL’s results are robust with both key divisions of MDF and plywood witnessing a growth trajectory. We are also impressed by sharp improvement in balance sheet wherein CPIL is now a debt free company. The medium term growth outlook commentary remains positive with capacity expansion in place to capitalise on the opportunity. We maintain BUY rating with a revised target price of | 490/share (32x FY23E EPS, earlier TP | 355/share). Higher multiple is for superior growth trajectory ahead.

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