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Century Ply’s Q2FY24 standalone EBITDA declined 7% YoY/increased 8% QoQ to Rs1.4bn, in line with our estimates. EBITDA margin slipped by 253bps YoY/54bps QoQ to 14.2%. Regarding MDF, with stabilization of the second line at Hoshiarpur, the management revised its H2FY24 growth target from 20% to 25%, given that margin is likely to remain stable/improve. The ongoing MDF & Laminates project at AP is on track for commissioning in FY24. We broadly maintain FY24E-26E EBITDA/EPS and revise Sep-24E TP to Rs820/share, post quarterly rollover, based on 32x P/E. Overall, we expect EBITDA/EPS CAGR of 19-21% over FY23-26E. We maintain our BUY rating on Century Ply, as we like its integrated business model, leadership position, strong branding and higher growth visibility, underpinned by expansion plans and a robust balance sheet.

Century Plyboards: Financial Snapshot (Consolidated)

Result Summary: Century’s Plywood EBITDA increased 7% YoY/10% QoQ to Rs730mn with EBITDA margin decline of 48bps YoY/flat QoQ, at 13.6%. Volume grew 8% YoY to 94K CBM. MDF segment EBITDA increased 32% YoY/19% QoQ to Rs521mn (including arrears in electric subsidy of Rs78mn). Adjusting for the same, EBITDA margin declined by 180bps YoY/268bps QoQ to 23.5%. MDF volume grew 19% YoY/12% QoQ to 54K CBM. EBITDA for Laminates declined 34% YoY/rose 28% QoQ to Rs201mn, with margin decline of 557bps YoY/gain of 167bps QoQ, to 11.8%. Particle-Board EBITDA declined 36% YoY/3% QoQ to Rs87mn, with margin falling by 595bps YoY/staying flat QoQ, at 22%. Consolidated FCF generation stood at a negative Rs3.6bn, post working-capital blockage of Rs1.5bn and capex spend of Rs4.4bn in H1FY24.

What we like: Upward revision in growth guidance of the MDF segment

What we do not like: Lower than expected volumes in laminate segment

Key Concall Takeaways: i) In plywood, Company maintains guidance of overall 10% revenue growth and EBITDA margin sustain at 13-14% in H2FY24. ii) In laminates, Company has introduced Sainik Laminates in the economy market. With introduction of new ranges that target specific new market segments, overall performance of the laminates division will improve in coming quarters. The management has guided for QoQ double-digit growth and improving EBITDA margin. iii) With the second line at Hoshiarpur now stabilized, the management has revised up its growth target, from 20% to 25% for H2FY24. With increase in share of premium products, margin is likely to remain stable or improve in coming quarters. iv) In Particle Boards, the management expects improvement in both, revenue and margin, in the next few quarters. v) The ongoing MDF and Laminates project at Andhra Pradesh is on track and will commence operations in FY24. Vi) Capex-spend in H1FY24 stood at Rs4.6bn and the management has guided for capex of Rs5.7bn and Rs4.5bn for H2FY24 and FY25, respectively.

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