Buy Century Plyboards Ltd For Target Rs.750 by Motilal Oswal Financial Services Ltd
Plywood margin may moderate in 2H In-line 2QFY27; revenue/EBITDA/PAT grew 28%/32%/46% YoY
* Century Plyboards (CPBI) reported an in-line result in 2QFY27.
* Revenue/EBITDA/PAT grew 28%/32%/46% YoY, while EBITDA margin stood at 12.9%, up ~30bp YoY and QoQ.
* Plywood segment continued to report strong results, with revenue growth of 29% YoY and EBITDA margin of 15.8%.
* MDF and Particle Board continued to drag down overall margins.
Key highlights from the management commentary
* Plywood margin may moderate in 2H owing to increased spending on marketing.
* Plywood capacity is fully utilized; recently commissioned a 60k cbm greenfield plant at Hoshiarpur, which is planned to scale up to 100k cbm within six months.
* MDF: Margin may remain under pressure till capacity addition continues in the industry; expects to achieve 20% EBITDA margin in FY29.
* Laminate segment is expected to revive strongly, aided by the launch pipeline of refreshed products and realignment of distribution channel.
* Took 2-3% price hike in plywood w.e.f. Nov’26.
* Current debt is at its peak; expects reduction in coming years using internal cash flows
* Land is acquired in Uttar Pradesh for plywood manufacturing, and MDF is still in process.
* Major capex programs beyond FY28 are not finalized yet. The plans to set up a facility in Odisha for Plywood and Particle Board are still in early stages and will start after two years.
Valuation and view
* After an in-line result in 2Q, we cut our earnings estimates by 5-8% owing to lower other income and a higher effective tax rate, while we kept revenue and EBITDA broadly unchanged.
* Over FY26-28E, we now expect CPBI to clock a CAGR of 20%/30%/43% in revenue/EBITDA/APAT.
* RoE/RoCE (pre-tax) is expected to remain muted at ~16% each in FY28 due to the ongoing heavy capex programs.
* Given CPBI’s leadership position in its key building product segments and high earnings growth expectations, we reiterate our BUY rating on CPBI with a TP of INR750, based on 30x FY28E EPS.
* Any weakness in the Plywood business poses downside risk to our call.
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