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Positive on long?term plan, recommend "BUY"!

Result Synopsis

Century Plyboards Ltd (CPBIL) reported a muted quarter wherein revenue increased by 3.4%YoY & declined by 2.7%QoQ. Benign demand scenario due to festive & marriage season during first two months of Q3FY23, dented company’s performance. Plywood biz (54% revenue), reported a 10%YoY growth & remained flat QoQ. Laminates segment (18% revenue), registered a growth of 5%YoY but degrew by 10%QoQ wherein volumes declined by 15%QoQ. In engineered woods, MDF’s revenue declined by 8%YoY & increased by 6%QoQ while Particle boards revenue degrew by 8%YoY & 19%QoQ. The volumes of particle boards reported a sharp decline of 19%YoY & QoQ in Q3FY23. EBITDA margins were better than previous quarter but largely remained under pressure due to higher input cost & low volume off?take. Plywood margins came in at 12.3% Vs 14.5%/14.1% in Q3FY22/Q2FY23 respectively. Laminates EBITDA margins stood at 14.9% as compared to 12.3%/16.8% in Q3FY22/Q2FY23 respectively. MDF margins declined from 30.5%/26.9% in Q3FY22/Q2FY23 respectively to 23.2% in Q3FY23. Particle boards margins took a sharp knock of 685bps YoY & 812bps QoQ.

Demand scenario continues to remain benign, hence management revised their revenue & margin guidance. Company expects Vol/Value of plywood to come in at 15%/20%, Laminates & MDFs at 5%/15% respectively. In particle boards, management stated that revenue should grow by 15% while volumes will remain flattish YoY. Margin guidance were largely revised downwards, for plywoods 12? 14%(previously 13?15%). Laminates?  13?14% (previously 14?16%), 20?25% for engineered woods Vs 25% earlier.

Though near?term performance is expected to remain under?pressure owing to sluggish demand scenario, we remain positive on company’s long term growth plan. We have revised our FY23E/FY24E EPS estimates downwards by 12%/3% respectively & continue to value the company at P/E(x) of 32x on FY24E EPS, arriving at a target price of Rs668. Hence, we assign a BUY rating to the stock.

Result Highlights

* Revenue stood at Rs8.83Bn (better than expectations), reporting a 3.4%YoY growth but declined sequentially by 2.7%.

* EBITDA margins came in at 14.6% (vs our estimate of 14.5%) as compared to 17.6%/13.5% in Q3FY22/Q2FY23 respectively. Absolute EBITDA stood at Rs1.29Bn, degrowth of 14.3%YoY but increased by 4.6%QoQ.  

* Net profit stood at Rs 823Mn, declined 12.3%YoY and 12.8% QoQ (Vs our estimate of Rs817Mn).

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