CRISIL maintain fair value of Rs 73 to Century Plyboards

Century Plyboards (India) Ltd’s (Century Plyboards’) Q3FY12 revenues, up y-oy and q-o-q, were marginally above CRISIL Research’s expectations. However, raw material, interest cost and foreign exchange loss impacted the profitability of the company. We may revisit our estimates post our interaction with the management. We maintain the fundamental grade of 3/5.

Q3FY12 result analysis
• Revenues grew by 19.8% y-o-y (up 11.7% q-o-q) to Rs 4,384 mn driven by growth across key segments. Plywood and allied products revenues were up 26.1% y-o-y, while cement revenues were up by 29.6% y-o-y. The laminates and allied products revenues grew by 54.2% y-o-y.

• The y-o-y increase in raw material costs was offset by lower other expenditure (as a percentage of sales), resulting in flat EBIT margins. While the EBIT margin for the plywood business increased 280 bps y-o-y, the cement business’ margin dropped by 90 bps. We believe the higher coal costs may have resulted in margin decline in the cement business. While the laminate and logistics businesses’ margins witnessed an increase of 470 bps
and 1050 bps, respectively, the ferro alloy business and the power segment posted losses.

• Interest cost rose by 102.5% y-o-y (up 50% q-o-q), impacting the profitability of the company.

• The continued depreciation of the rupee during the quarter resulted in the company booking foreign exchange loss of Rs 316 mn.

• Tax expenses were negative Rs 12 mn on account of the creation of deferred tax asset. The tax for the period Apr-Dec 2011 has been significantly below our estimates. Minority interest declined by 26.2% y-o-y (up 115.8% q-o-q) during the quarter. Adjusted PAT increased by 34.1% yo-y (down 12.1% q-o-q).

Valuations: Current market price has strong upside
We continue to value Century Plyboards based on the sum-of-the-parts method. We maintain the fair value of Rs 73 per share. Our valuation grade is 5/5.

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