Jul 25, 2011, 03.28 PM IST | Source: Moneycontrol.com

Buy Century Plyboards; target of Rs 84: Emkay

Emkay Global Financial Services is bullish on Century Plyboards and has recommended buy rating on the stock with a target of Rs 84 in its July 22, 2011 research report.

Emkay Global Financial Services is bullish on Century Plyboards and has recommended buy rating on the stock with a target of Rs 84 in its July 22, 2011 research report.

Century Plyboards, revenues for Q1FY12 at Rs4158mn came in above estimates of Rs3773mn, up 33.6% yoy. This revenue growth was primarily fuelled by a robust 18% volume growth in P&L (net revenues at Rs2355mn, +30.4% yoy) and a solid 29% growth volume in cement business (net revenue of Rs1376 mn, +26%). Cement realizations of Rs5335/t registered a decline -3% yoy in line with soft cement prices in Eastern India. Logistics segment continued to benefit from its CFS at Jingirapole (commissioned in June-2010) and posted revenues of Rs183.3mn, growth of 288.7%.

CPILs EBITDA at Rs743.5 though up a muted 3.8% yoy, recovered sharply with 30.7% jump qoq, sharply ahead of estimates (Rs596 mn). The improved profitability in the P& L segment was driven by 13% yoy (3% qoq) price hike & a sharp 40% qoq reduction in dealer discounts & ad spends . Consequently P&L segment, which had seen major contractions in margins in Q4FY11, registered a sharp 926 bps jump in EBIT margins to 10.6% vs estimates of 5.5%. With sharp jump in CFS revenues, logistics margins saw operating leverage coming into play with EBIT margins improving 895 bps to 24%.Though cement revenues grew a healthy 26% yoy, EBIT margins for the segment declined sharply by 13.8% points to 22.1% impacted by 3% price decline and sharp increase in freight cost (on account of imposition of overloading ban effective July 10). Overall EBITDA margins though declined 513 bps yoy to 17.9%, the same jumped 420 bps sequentially and came in better than estimates of 15.1%.

CPL is all set to capitalize on the cement demand supply gap in the NER region with its cement capacity set to expand from current 1.2mtpa to 4.4 mtpa by Q1FY13. Further the new plywood expansion at Gujarat and laminate expansion at Kolkata would help CPIL sustain the growth in the core P&L business. The ramp at its new CFS at Jinjira pole at Kolkata with a capacity of 1,20,000 TEUs is expected to further fuel its growth. The kickstart of volume led growth in cement revenues and full scale operations of the CFS business in FY13 will lead to accelerated growth (40% topline & 25% bottomline growth for FY13) and significant improvement in its return ratios. Stock trades at compelling valuations of 7.7X PER 4.8X EV/E FY13E. De-merger plans on track -potential value un-locking trigger- Raise TP to Rs 84 as rollover target to FY13 Maintain BUY, says Emkay Global Financial Services research report.  

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