BUY Century Plyboards: AnandRathi Institutional Research

Century Plyboards - Below-par performance; lower figures, price target; retaining a Buy with a target price of Rs 202

Century Plyboards' Q3 FY16 sales grew just 1.2% yoy to Rs. 3.9bn because of the decline in the plywood business, with overall margins at 17.8%. At Rs. 416m, PAT was flat. The Laos subsidiary will set up timber processing units. Total capex over FY16-17 would be ~Rs. 3bn.

Subdued, 1.2%, revenue growth. Q3 FY16 revenue came at Rs. 3.9bn, up 1.2% yoy (7.7% below our estimate). This was because of a decline in its mainstay plywoods business (down 2% yoy), though laminates was up 8.1% yoy and logistics up 26.5% yoy. Century expects volumes to pick up in FY17, with revenue growth at ~12-15% over FY17-18.

EBITDA margin down 110bps. The Q3 EBITDA margin slipped 110bps yoy to 17.8% due to greater employee costs and other expenses. Management expects to hold the margin through more value-added products and greater sales of the Sainik brand plywood.

Profit flat. Profit came at Rs. 416m (up 0.5% yoy) due to flat revenue and margin pressures. During the quarter the tax rate was 13% (almost the same as a year ago). For 9M, PAT improved 24% yoy to Rs. 1,275m.

Business Outlook. Century will not be affected by the timber ban in Laos as it has a subsidiary in Laos. The particle-board plant will be commissioned from Jan'16. With mounting MDF demand, the company is setting up an MDF plant at Rs. 2.4bn capex, likely to start by end-CY16. The company is insistently campaigning for Sainik. The Punjab plywood plant will involve ~Rs. 0.6bn capex.

Valuations. Demand for premium products has been affected while the economy product is doing well in the market; overall, increasing demand is expected from FY17 and, on the GST implementation, capacity is likely to be fully utilized. With the Housing-for-all campaign, advertising for laminates, advantages in input sourcing from Myanmar and Laos, and expanding capacities, volumes are likely to increase. We maintain a Buy on the stock, assigning a PE of 17.5x FY18e, and arrive at a target of Rs. 202. The stock trades at a PE of 15.8x FY17e and 13.1x FY18e. Risks: Currency fluctuations, substitutes, high interest rates.

Shares of CENTURY PLYBOARDS (I) LTD.-$ was last trading in BSE at Rs.146.85 as compared to the previous close of Rs. 152.9. The total number of shares traded during the day was 25668 in over 331 trades.

The stock hit an intraday high of Rs. 153.4 and intraday low of 146. The net turnover during the day was Rs. 3846909.

Source : Equity Bulls

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