Century Plyboards Q2FY22 result was a strong beat led by sharp rise in sales across business all verticals. Its net sales jumped 55% YoY to Rs 8.1 billion led by higher sales from Plywood, Laminates and MDF segments. EBITDA increased by 87% YoY to Rs 1.6 billion while EBITDA margin expanded by 337bps YoY and 625bps QoQ to 19.9% despite rising prices of key inputs. Century aims to increase its revenues to Rs 50 billion by FY26 and plans to incur capex of over Rs 12 billion during the same period.
"We raise our FY22 sales/EBITDA forecasts by 28%/11% to factor stronger than expected Q2FY22 results. We introduce FY24 forecasts in this report and now value the stock at a PER of 26x FY24E (earlier 22x FY23E) EPS to derive a target price of Rs 556 (Rs 426 earlier). However, sharp increase in the stock price during last six months fairly discounts the positives. Hence, we recommend Hold rating on this stock as we await a better entry point," stated IDBI Capital Equity Research.
Key highlights and investment rationale
Strong performance across all verticals: Plywood sales increased by 66% YoY to Rs 4,457 million while segment EBITDA doubled YoY to Rs709 million. Even Laminates segment EBITDA increased by 163% YoY to Rs 366 million. MDF segment sales grew by 36% YoY to Rs1,274 million while segment EBITDA increased by 68% YoY to Rs 441 million respectively. Other smaller segments like Logistics and Particle Board also witnessed strong growth.
Capex update: The work at Century’s MDF unit in Hoshiarpur (Punjab) is in full swing. However, its greenfield MDF project in Andhra Pradesh is which got delayed due to second wave of Covid-19 is now expected to get commission by FY24.
Outlook: Although Century’s Q2FY22 results were stronger than our forecast, however, prices of key inputs are likely to impact its H2FY22 financials. With a pick-up in real estate demand, we believe there are structural tailwinds for Century’s business. However, current valuations (FY24 PER of 29x) fairly discount these positives. Hence, we maintain our Hold rating on the stock.
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