Buy Century Plyboard; target of Rs 800: Prabhudas Lilladher

Prabhudas Lilladher's research report on Century Plyboard

Century Plyboards (CPBI) has upgraded its annual guidance related EBITDA margin across its segments Plywood/Laminates/MDF to 14%/13-15%/~25% from 12-14%/12-14%/20-25%. However, company has reduced its vol. growth guidance for Plywood/Laminates/MDF to 7%/12-15%/20% from 13%/25%/30%, respectively. Plywood segment (56%rev.) continued its vol. growth and higher realization trajectory in quarter with healthy guidance, even after increased timber prices, which shows CPBI leadership in segment. Timber prices increased sharply in July-23, which will compensated with premium product mix improvement for CPBI in Plywood/MDF. MDF segment maintained its higher realisation of Rs 34,752/CBM, while margin down to 26%. Consolidated EBITDA margin contracted to 14.9% with oneoff expenses in laminates (~Rs 40mn) and lower MDF margin due to increase in rawmaterial prices, which expected to improve in coming quarters. We are maintaining our positive view considering 6.5%/13.4%/20.3% volume growth and 16.3% consolidated EBITDA margin in FY24.

Outlook

We estimate FY23- 25E Revenue/EBITDA/PAT CAGR of 13.3%/19.9%/15.1%, with Plywood /Laminates/MDF volume CAGR of 9.1%/14.2%/34.4%. We have tweaked our FY24/FY25 earnings to adjust oneoff expenses in Q1FY24 and change in vol./margins guidance by CPBI across segments. We value the stock at 35x FY25 EPS and arrive at TP of Rs800. Maintain ‘BUY’ rating.