Buy Century Plyboards Ltd For Target Rs.740 - Anand Rathi Share and Stock Brokers
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Excellent quarter, demand buoyancy continues; upgrading to a Buy
Beating our revenue/PAT estimates, Century Plyboards’ Q1 FY23 result was outstanding, though margins belied our expectation. Revenue/ EBITDA/PAT rose 94.3%/137.7%/194.3% y/y to Rs8,888m/Rs1,431m/ Rs923m. Strong traction was seen in all divisions (despite continuing input cost pressure), leading to greater offtake and better realisation y/y. Sequentially, laminate and medium-density fibreboard sales volumes and container-freight-station services were lower, while plywood realisations were down.
Diversified products with strong brand pull; healthy balance sheet.
The company is a one-stop solutions provider in wood panels due to its operations across segments and brand recall across product categories. This has helped to better growth, profitability and cash generation. The balance sheet is healthy and the vigorous capex would largely be funded from internal accruals.
Key expansion projects on track, commissioning as scheduled.
The Rs2.2bn brownfield MDF expansion at Hoshiarpur in Punjab is likely to be commissioned by end-Q2 FY23, while the Rs2bn greenfield laminate and Rs6bn MDF projects at Kadapa in Andhra Pradesh are likely to be commissioned in Q2 FY24 and H2 FY24 (through Century Panels)
CFS business to be transferred to Century Infra.
The company will receive 327.1m shares in its wholly-owned subsidiary, Century Infra, against transfer of the container freight station services business as a going concern on a slump sale basis w.e.f. 1st Apr’22
Encouraging demand outlook, input cost tailwind; upgrading to a Buy.
The bright outlook, backed by continued healthy real-estate bookings and strong demand from end-users, keep us positive on the wood-panel segment. Input cost tailwinds are expected to lift margins. The vigorous capex provides medium-term growth assurance. The healthy balance sheet is comforting. The stock looks attractively priced. We have a Buy on it, with a higher price target of Rs740 (earlier Rs721), based on 35x FY24e earnings (unchanged).
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