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Capacity Expansion continues Amid Stable Demand

CPBI has refrained from providing FY27 guidance due to geopolitical uncertainties and volatile raw material conditions. CPBI undertook a price hike of 7%/15% in plywood/MDF segment respectively. Plywood plants are currently operating at near full utilization, leading the company to undertake ~30% capacity expansion in FY27 through a combination of brownfield additions across existing facilities and the commissioning of the Hoshiarpur plant, while the Chennai expansion is expected to be completed by Jul’26. MDF utilization currently stands at ~80–85%, with the company undertaking debottlenecking at the South MDF plant to add ~60k–70k CBM capacity by end-Q1FY27. We expect overall Revenue/EBITDA/PAT CAGR of 14.4%/20.9%/27.4% with Plywood/Laminate/MDF volume CAGR of 12.0%/12.1%/17.1%. We upward revise our earnings estimates for FY27/FY28 by 1.6%/1.3% and downgrade our rating to ‘Accumulate’ from ‘BUY’ due to recent run up in the stock prices, with TP of Rs 862, valuing at 35x Mar’28E.

Q4FY26 financial performance:

Revenue of Rs 14.9bn up 24.5% YoY). Plywood/Laminate/MDF/Particle boards (contributed 53.0%/13.3%/23.9%/4.6%) revenue at Rs 7.9bn/2.0bn/3.6bn/0.7bn (+17.9%/16.4%/+31.5%/+108.3% YoY), was above our est. of Rs 7.5bn/1.9bn/3.1bn/0.6bn respectively. Gross margin expanded by ~150bps YoY to 48.3%, (PLe: 48.5%). EBITDA stood at Rs2.0bn up ~48% YoY (PLe: Rs1.6bn). EBITDA margin expanded by ~210bps YoY to 13.3% (Ple: 12.0%). EBITDA margin of Plywood/Laminate/MDF/Particle board was 15.4%/11.7%/9.9%/-5.8 (~- 50bps/+1070bps/-70bps/+1110bps YoY). PBT grew by 56.6% YoY to 1.3bn, (PLe: Rs 890mn). Adj. PAT stood at Rs 794mn up 49.4% YoY, (PLe: Rs 666mn).

Conference Call Highlights:

* Management refrained from providing FY27 guidance due to geopolitical uncertainties and volatile raw material conditions, particularly rising phenol, melamine and imported chemical costs amid ongoing supply chain disruptions.

* Plywood plants are operating at near full utilization (~99%), prompting the company to undertake both brownfield and greenfield expansions. The company plans ~30% plywood capacity expansion in FY27, with ~20% coming from brownfield expansion across existing plants and the balance from the Hoshiarpur plant, which is expected to commence operations by Oct’26.

* Chennai plywood expansion is expected to be completed by Jul’26, adding ~25,000–30,000 CBM capacity. Meanwhile, the UP-plywood project has been delayed due to land acquisition issues and is now expected to be operational by Q1FY29. The company has also initiated land procurement in Odisha for future plywood and panel expansion opportunities.

* Management highlighted its strategy to gradually reduce outsourced plywood production, particularly Sainik MR, and increase in-house manufacturing to maintain quality consistency.

* Despite recent price hikes, plywood demand remained healthy with strong secondary sales trends. The company implemented ~7% price hikes in Apr’26 to offset higher timber freight and imported chemical costs, while timber prices remained broadly stable during FY26.

* MDF utilization currently stands at ~80–85% of rated capacity, with management indicating that effective utilization can increase to ~85–90% depending on product mix. The company is undertaking debottlenecking/brownfield expansion at the South MDF plant, which is expected to add ~60,000–70,000 CBM annual capacity by end-Q1FY27.

* Management highlighted that MDF growth during the quarter was supported by year-end channel stocking, continued expansion of the distribution network in South India, and deeper penetration among carpenters and retailers.

* On margins, MDF witnessed slight QoQ pressure due to chemical supply disruptions, elevated input costs and one-time advertising and branding spends. To offset rising chemical and freight costs, the company implemented ~15% price hikes, though management indicated that current hikes barely cover the increase in raw material inflation and it remains too early to assess sustainability.

* The laminates segment witnessed a turnaround during FY26 after remaining subdued over the past 1–2 years. Margin recovery was driven by better capacity utilization, improved product mix, operational efficiencies and corrections in go-to-market (GTM) strategy.

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