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New capacities installed, growth to accelerate from FY26E, upgrade to NEUTRAL!

Result Synopsis

CPBI registered a decent revenue growth of 13%YoY. Plywood segment (56% revenue) reported a strong revenue growth of 15%YoY (2-year CAGR 9%) wherein volumes increased by 13.4% and ASP improved by 1.3% over similar period owing to price hikes of 2% taken in June'24. Laminates (15% revenue), sales stood flattish at Rs1.54Bn wherein volumes declined by 6.5%YoY while ASP expanded by 5.7%YoY. MDFs (21% revenue), sales grew by 25.4%YoY (2-year CAGR 25%) owing to stellar 47.3%YoY volume growth and decline of 15% in realizations. Particle boards revenue degrew by 7%YoY on account of 3% decline in volumes and 4.4% degrowth in ASP over similar period.

Overall operating margins contracted to 11.1% Vs 14.9%/14% in Q1FY24/Q4FY24 respectively. Plywood/Laminates/MDF/Particle Boards EBITDA margins came in at 14.5%/10.8%/7.6%/18.8% respectively in Q1FY25 Vs 13.6%/10%/26.2%/22.7% in Q1FY24. Plywood margins were better than estimates as company cushioned the impact of higher timber cost with higher volumes and better product-mix coupled with price hike taken in June. MDF margins declined sharply owing to incremental cost due to commencement of new Andhra plant and lower ASP from the new plant. On standalone basis also, MDF margins came in at 14.1% Vs 26.2% on account of higher timber cost and competitive pricing. Similarly, particle board margins were lower due to lower volumes and price reductions along with higher timber cost.

Management maintained their topline guidance of 10%+/20%/40%/flat growth for Plywoods/Laminates/MDF/Particle boards respectively with EBITDA margins of 12- 14%/10-12%/15% (standalone basis)/15% respectively for FY25E. Consolidated MDF margins by Q4FY25E should be ~15% with Andhra plant expected to ramp-up over coming quarters.

We believe overall demand for woodpanels should improve materially from H2FY25E which will augur well for CPBI’s growth. Incrementally, with commencement of new capacities in MDFs and Laminates and Particle board plant to start by end of FY25E, we reckon healthy growth across segments. Hence, we expect overall revenue to grow by 12%/23%YoY in FY25E/FY26E respectively. We have maintained our EPS estimate for FY26E at Rs20 and given the healthy growth in plywoods, MDF prices and margins nearing-bottom, incremental growth from laminates and particle boards new plants, we have revalued the company at P/E(x) of 35x on FY26E EPS. Hence, we have upgraded the stock to NEUTRAL from REDUCE with a revised target price of Rs701.

Result Highlights

* Revenue for Q1FY25 stood at Rs10.1Bn (4% above est), a growth of 13%YoY & degrowth of 5%QoQ.

* EBITDA margins for the quarter came in at 11.1% (Vs est of 13.1%) Vs 14.9%/14.0% in Q1FY24/Q4FY24, respectively owing to an increase in input costs and employee expenses. Absolute EBITDA for the quarter decreased by 16.5%YoY & 25%QoQ to Rs1.1Bn.

* Net profit declined by 45.6%YoY & 39.5%QoQ to Rs474Mn (excl exceptional loss of Rs133Mn) in Q1FY25. The effective tax rate for the quarter was higher at 41% Vs 25%/28.4% for Q1FY24/Q4FY24 respectively.

Segmental Highlights for Q1FY25

* Plywood (56% of revenue): reported revenue growth of 14% YoY & degrowth of 7%QoQ to Rs5.7Bn. EBIT margin came in at 15.1% Vs 13.1%/12.7% in Q1FY24/Q4FY24, respectively. Absolute EBIT came in at Rs860Mn, a growth of 31.5%YoY & 11%QoQ.

* Laminates (15% of revenue): revenue stood at Rs1.5Bn, flattish YoY & a decline of 8.4%QoQ. Absolute EBIT degrew sharply by 24.4%YoY & 52%QoQ to Rs106Mn with a margin of 6.9% Vs 9%/13.1% in Q1FY24/Q4FY24, respectively.

* MDF (21% of revenue): reported a revenue growth of 25.5%YoY & 6% QoQ to Rs2.1Bn. However, EBIT declined sharply by 92%YoY & 84.5%QoQ to Rs31Mn. Consequently, EBIT margins decreased from 24.2%/10.1% in Q1FY24/Q4FY24, respectively to 1.5% in Q1FY25.

* Particle boards (4% of revenue): revenue stood at Rs367Mn, a degrowth of 7%YoY & 14%QoQ. EBIT decreased by 27%YoY & remained flattish QoQ to Rs61Mn. EBIT margin stayed contracted by 463bps YoY & expanded by 221bps QoQ to 16.8%.

* Container Freight Station Services (2% of revenue): the revenue from the CFS business of the company grew by 15%YoY & declined by 6%QoQ to Rs246Mn and EBIT came in at Rs33Mn as compared to Rs19Mn in Q1FY24 & Rs38Mn in Q4FY24. EBIT margin came in at 13.3% Vs 8.8%/14.5% in Q1FY24/Q4FY24 respectively.

* Others: revenue improved by 16%YoY & declined by 6.4%QoQ to Rs140Mn. EBIT decreased by 20%YoY & 83%QoQ to Rs9Mn. Hence, EBIT margin also contracted to 6.3% from 9.2%/35.6% in Q1FY24/Q4FY24 respectively.

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