PL Stock Report: Century Plyboard (I) (CPBI IN) - Q2FY24 Result Update – Result above est. maintain growth guidance - BUY

Century Plyboard (I) (CPBI IN) - Praveen Sahay - Research Analyst, Prabhudas Lilladher Pvt Ltd.

Rating: BUY | CMP: Rs639 | TP: Rs860

Q2FY24 Result Update – Result above est. maintain growth guidance

Century Plyboards (CPBI) has maintained annual guidance related EBITDA margin across its Plywood/Laminates/MDF segments to 13-14%/13-15%/ ~25%. Company has also maintained its revenue growth guidance for Plywood/Laminates to 10%/double digit, while increased MDF vol. growth guidance from 20% to 25%. Plywood segment (56%rev.) continued its vol. growth and higher realization trajectory in the quarter with healthy guidance, even after increased timber prices, which shows CPBI leadership in the segment. MDF segment maintained its higher realisation of Rs 35,117/CBM, while margin was at 26.5%. Consolidated EBITDA margin expanded to 14.5% with one-off subsidy in MDF, while excluding that margin it was 13.7% which is expected to improve in the coming quarters.

We are maintaining our positive view considering Revenue/EBITDA/PAT CAGR of 12.9%/18.6%/15.0%, with Plywood /Laminates/MDF volume CAGR of 7.7%/13.7%/30.7%. We have tweaked our FY24/FY25/FY26E earnings to adjust oneoff expenses in H1FY24 and change in vol./margins guidance by CPBI across segments. We value the stock at 35x Sep’25 EPS and arrive at TP of Rs860 (earlier Rs 855). Maintain ‘BUY’ rating.

Revenues up 9.7% YoY, PAT up 21.0% YoY: Rev. up 9.7% YoY to Rs9.97bn (PLe: Rs9.1bn). Plywood/Laminate/MDF/Particle boards (contributed ~55% / 17% / 20% / 4%) revenue at Rs 5.5bn/1.7bn/2.0bn/0.4bn (+11.1%/-2.5%/+25.6%/-19.0 YoY), was ahead of our estimate of Rs4.9bn/1.8bn/1.6bn/0.4bn respectively. GM expanded 180bps YoY to 48.4%, (PLe:47.0%) despite sustained input cost pressure in most of the wood panel segments. EBITDA was Rs1.4bn (PLe: Rs1.4bn) up 17.3% YoY. EBITDA margin stood at 14.5% expanded 90bps YoY (PLe: 15.9%). EBITDA margin of Plywood/Laminate/MDF was 13.5%/11.7%/26.5% (+640bps/-590bps/+120bps YoY). Laminates’ margin impacted due to aforesaid new products launching expenses, while margin improved sequentially and is expected to improve in coming quarters. MDF margins includes Rs 75mn arrears for electricity subsidy of last six years, excluding arrear margin of 22.6%. PBT grew by 21.8% YoY to Rs1.3bn (PLe: Rs 1.2bn) with higher OI & improvement in operating margin. PAT stood at Rs971mn (up 21.0% YoY, PLe: Rs 922mn). Net debt stood at Rs 1.5bn (excl. buyer credit) and debt to equity ratio stood at 0.12x in Q2FY24. The cash conversion cycle QoQ controlled to 60 days in Q2FY24, against 69 days in Q1FY24.

Concall highlights: 1) Plywood segment is expected to report 10% rev. growth with sustained EBIDTA margin of 13-14%. 2) Timber prices substantially increased in Q2FY24, while corrected by 2.2% in Q3FY24. 3) Laminate division is expected to show double digit rev. growth with improvement in EBITDA margins in coming quarters. 4) Mgmt expects 25% MDF volume growth, ~25% EBITDA margin, with increased share of premium products. 5) MDF segment includes one off arrear subsidy of Rs 75mn which was for six years, excluding that EBITDA margin was 22.6%. 6) There will be planned capex of Rs 10.3bn for H2FY24 and FY25, funded through internal accrual & borrowing. 7) Hiving off of logistic (CFS) division to the SPV is approved by NCLT. The scheme will be retrospectively effective from 1st Apr-22.

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