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Century Plyboards Ltd : Decent show, H2 performance to be better; maintaining a Buy - Anand Rathi Share and Stock Brokers
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Decent show, H2 performance to be better; maintaining a Buy
Century Plyboards’ Q2 FY23 results were healthy, with adj EBITDA and PAT ahead of ARe. Revenue, adj. EBITDA and adj. PAT rose 11.7%, 6.8% and 28.7% y/y respectively to Rs9.1bn, Rs1.7bn and Rs1.3bn. Revenue growth was supported by all segments expect for containerfreight-station services. Input cost pressures continued to drag on the gross margin and hurt profitability. Adjusting for an asset write-off (Myanmar subsidiary) and a liability write-back (entry-tax provision) EBITDA and PAT grew respectively 6.8% and 28.7% y/y.
Better realisation drives revenue higher. Plywood, laminate, MDF, PB and CFS realisations improved respectively 6.7%, 7.4%, 19.2%, 33.6% and 5% y/y. Off-take was 2.5% and 7.2% y/y higher in plywood and MDF respectively, flat in laminates and lower in PB/CFS.
Margins continues to drag, H2 to look better. Input cost pressure impacted the Q2 gross margin. With easing raw material prices (chemicals) and operating leverage, H2 margins expected to trend higher.
Expansion in PB announced. The ongoing projects are progressing as planned: commissioning of the MDF brownfield facility by Q3 FY23, and the greenfield laminate and MDF projects likely by Q2 and H2 FY24 respectively. To ease capacity constraints in PB, the company will set up a 360,000 cu.mtr. plant at Rs5.5bn by Q4 FY25 with revenue potential of Rs6bn at optimum utilisation.
Encouraging demand outlook, input cost tailwind; retaining a Buy. The bright outlook, backed by continuing healthy real-estate bookings and strong demand from end-users, keeps us positive on the wood-panel category. Input cost tailwinds are expected to expand margins. The vigorous capex provides medium-term growth assurance, and the healthy balance sheet is comforting. We fine-tune our FY23e/FY24e figures and introduce FY25e. Revenue and earnings are expected to clock 17%/23% CAGRs over FY22-25. We have a Buy on it, with a higher target price of Rs778, based on 30x FY25e earnings (earlier Rs740 on 35xFY24e earnings).
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