Buy Century Plyboards Ltd for the Target Rs 893 by Motilal Oswal Financial Services Ltd
Plywood segment continues to support performance
* Revenue/EBITDA/PAT jumped 34%/54%/55% YoY in 1QFY27 and were 17- 25% ahead of our estimates.
* Plywood segment continued to surprise positively with robust revenue growth of 32% YoY and a strong EBIT margin of 16.5% (up 190bp YoY and 170bp QoQ).
* Revenue in Laminate/MDF/Particle Board segments also grew by a healthy 15%/29%/157% YoY. However, segment margins remained tepid, which management expects to revive with increased capacity utilization.
Key highlights from the management commentary
* A significant increase in RM prices pushed CPBI to increase product prices across segments by 7-12% in Apr’26, along with other industry players. This led to channel stocking in March and drove strong volume growth across segments. However, the company had to roll back price hikes during the quarter in some cases to boost volumes.
* Plywood - Capacity utilization is near the optimal level. CPBI aims to improve its Plywood market share from ~10% currently to 15% in the next 3-5 years by delivering a CAGR of 12-15% in segment volume.
* Laminate segment is expected to revive strongly, aided by the launch pipeline of refreshed products and realignment of distribution channel.
* MDF segment reported a QoQ decline in revenue due to a planned shutdown at one of the two plants for capacity expansion. The company is adding capacities at its existing plants as well as new plants. High discounts prevail in the market despite hefty price hikes.
* Particle Board margin is expected to increase with better plant utilization.
* CFS is not a core business and CPBI is looking for a strategic partner.
* Capex: CPBI is expanding plywood capacities at multiple locations. A 25k cbm capacity at Chennai is expected by Jul’26, followed by an addition at Hoshiarpur in Oct’26. Major capex programs beyond FY28 are not finalized yet. Land is acquired in Uttar Pradesh for Plywood manufacturing, and MDF is still in process. 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 a healthy beat in 1Q, we increase our earnings forecast by 3-6% owing to better-than-expected revenue, mainly in the plywood segment. We now expect CPBI to clock a CAGR of 19%/32%/49% in revenue/EBITDA/APAT over FY26-28. RoE/RoCE (pre-tax) is expected to remain muted at ~17% 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 INR893, based on 33x FY28E P/E. Any weakness in the Plywood business poses downside risk to our call
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