Century Plyboards (India) Ltd. share price target

ARBP: Strong quarter; OAI at Eugia-III an overhang. CPBI: In-line quarter; weak near-term outlook

Monthly Economic Buffet: Economic Round-up January 2024. SBIN: Pension one-off hurts profitability. JSTL: Progressing on expansion but valuations fair. ACEM: Healthy quarter, sustainability key; retain HOLD. ALPM: Healthy quarter; PAT beat on low tax rate. CPBI: Margin stress across segments. VSTT: Poor demand dampens performance

Century reported a weak Q1 performance owing to muted demand in Plywood and Laminates segments. The rise in timber prices hurting the margins across segments, along with a one-off expense in laminates segment for new catalogue launch. We remain positive on Century on account of its strong franchise presence, wide distribution network and wide array of SKUs, leadership position in most business segments and healthy return ratios.

Century Plyboards (CPBI) reported YoY flat consolidated revenue growth in Q1FY24. Plywood / laminates / MDF revenues grew 3.1% / (-4.7)% / 7.2% YoY with volumes being flat / flat / +5.9% YoY (4-year CAGR of 8.8% / 6.9% / 3.9%), respectively. Consolidated EBITDA margin fell 116bps YoY (-202bps QoQ) to 14.9%, primarily due to lower profitability in laminate and MDF segments, resulting in EBITDA / APAT decline of 7.0% / 5.8% YoY.

Slower-than-expected demand dampened Q1

Century Plyboards Ltd. has fared well as a leading plywood producer and supplier having a market share of 25% in the organized market on the back of excellence across product segments and winning innovations, driven by technological inducements. Century has shown robust sales recovery (Sales grew at 12% CAGR in past 5 years) and profitability growth (PAT grew at 18% CAGR in past 5 years) maintaining its market leader position on the back of continuous expansion across product segments.

Century Plyboards (CPBI) reported better than expected consolidated revenue growth of 7.1% YoY in Q4FY23 (4-year CAGR of 13%) on a high base. Plywood / laminate / MDF revenues grew 18.4% / (-7.7)% / (-1.1)% YoY with volumes growing 12.4% / (-9.7)% / (-2.8)% YoY (4-year CAGR of 12% / 2.6% / 7.2%), respectively.