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Result Synopsis

Century Plyboards Ltd (CPBI), reported highest-ever topline of Rs11.84Bn, a growth of 19%YoY. However, operating margins contracted to multi-year low at 9.4% owing to elevated timber cost and higher operating cost of newly commenced laminates and MDF plant. Further, higher depreciation & finance cost weighed on net profit.

Plywood, the core-segment of CPBI displayed stellar performance. Company’s plywood biz (57% revenue; 86% EBITDA), reported topline growth of 21%YoY driven by 19% volume growth (2-year volume CAGR stood at 13%) & 1.5% improvement in ASP. EBITDA margins remained resilient at 15.2% Vs 13.5%/14.5% in Q2FY24/Q1FY25 respectively. In Laminates (14% revenue; 7% EBITDA), standalone volumes declined by 10%YoY while ASP improved by 2%YoY which led to revenue degrowth of 8%YoY. Standalone margins contracted to 7.1% Vs 11.7%/13% in Q2FY24/Q1FY25 respectively. On a consolidated basis, volumes degrew by 9%YoY (2-year volume CAGR stood at -2%) and revenue degrew by 6%YoY. EBITDA margins contracted steeply to 4.7% Vs 11.7%/10.8% in Q2FY24/Q1FY25 respectively due to commencement of new plant and higher promotional spends. MDF biz (24% revenue; 6% EBITDA), revenue grew by 36.5%YoY wherein volumes grew massively by 75%YoY (2-year volume CAGR stood at 44%) while ASP contracted by 22%YoY to Rs28,513/cbm. Operating margins came in at 2.5% Vs 26.5%/7.6% in Q2FY24/Q1FY25 respectively due to higher timber cost and elevated competition. On standalone basis, MDF revenue remained flattish YoY at Rs1.91Bn driven by volume growth of 16%YoY and ASP declined to Rs30,493/cbm. For particle boards, revenue increased by 4%YoY wherein volumes grew by 8%YoY & ASP declined by 5% over similar period. Margins came in at 5% as compared to 22.6%/18.8% in Q2FY24/Q1FY25 respectively.

Management Guidance

Management revised their annual guidance owing to tepid H1FY25. Hence, company expects Plywood/Laminates/MDF/Particle boards to grow by 12%/10%/40%+/flattish for H2FY25 and margins should come in at 12-14%/10-12% (standalone)/15% (standalone)/12-14% respectively.

Our View

We have largely maintained our estimates for plywood division however, we have revised our margin estimated downwards for Laminates, MDFs and Particle boards which has led to our FY25E/FY26E EPS cuts of 32.5%/13% respectively. Though topline growth for each segment is likely to be strong wherein Plywood/Laminates/MDF/Particle boards are expected to report 15%/17%/32%/16% respectively, we expect margins to remain under check owing to elevated timber cost & initial operating cost.

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