Buy Century Plyboards; target of Rs 115: AnandRathi

AnandRathi`s research report on Century Plyboards“In the past three decades, Century Plyboards has emerged as a dominant player in the decorative plywood industry, garnering an enviable 25% share of the organised market. A consistent tilt towards the organised sector and, within that, premiumisation, augurs well for the company. Its strong brand equity (Century Ply) and well-dispersed manufacturing facilities should enable it to improve realisations as well as margins in the coming years. In pursuance of its strategy to be close to its markets, the company now has facilities in North (61,000m3), South (39,420m3) and East (72,000m3). Its recently-commissioned plant in Gujarat (31,000m3) affords it competitive edge in tapping western markets aggressively. This would be ably aided by the increase in its laminate capacity (2x) and widening of its product offerings (~100 SKUs a year).” “The company could counter the ban on timber imports from Myanmar (a key input source for the industry), as it has a 100% subsidiary there. Additionally, implementation of GST would accelerate the shift towards organised players and enable it to capitalise on its brand equity. The company has posted revenue CAGR of 12.9% for FY09-14, backed by commensurate volume growth. Stable EBIDTA margins, completion of capex and impending deleveraging would enable it to report healthy capital-efficiency ratios in the years ahead (RoE >25%, RoCE >20%). With inclement factors like strong and sustained demand growth, pricing power, and advantages in raw-material sourcing & logistics, revenue, profit and capital ratios could scale up. Hence, we initiate coverage with a Buy, assigning 14x PE to FY16e EPS and arriving at a target of Rs115,” says AnandRathi research report. 

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