Century Plyboard results were lower than our estimates. Growth in revenues was largely led by volume gains in plywood while laminate division volumes declined on YoY basis. MDF plant volumes also declined sequentially due to pricing pressures. MDF plant had commissioned during Q3FY18 and is likely to witness improved capacity utilization going forward. The volume gain in plywood segment was offset to some extent by volume decline and pricing pressure in commercial vineer. Pricing and margin pressure continued in MDF during Q2FY19 also owing to increased competition. We believe that growth going ahead is likely to be led by volume gains in each segment.
- Revenue growth of 18.9% YoY was marginally below our estimates and margins have declined due to pressure on MDF realization and sharp decline in MDF division margins as well as forex losses. Interest costs are higher due to some proportion of forex loss being treated as borrowing cost. This led to net profits coming below our estimates.
Valuation and outlook
- At Rs 175, stock is currently trading at 21.2x/17x P/E and 12.3x/10x EV/EBITDA on FY19/20 estimates. We revise our estimates to factor in lower revenues and margins in MDF. We also revise our valuation multiple downwards to factor in continued challenges in MDF pricing as well as slower than expected compliance towards e-way implementation. We arrive at a revised price target of Rs 232 based on 23x FY20 estimated earnings (as against Rs 323 based on 27 x FY20 estimated earnings earlier). We continue to maintain BUY recommendation on Century Plyboards as we believe that with increase compliance towards e-way bill implementation, volumes in plywood and laminate are likely to witness improvement.
Shares of CENTURY PLYBOARDS (I) LTD. was last trading in BSE at Rs.165.75 as compared to the previous close of Rs. 166.75. The total number of shares traded during the day was 7685 in over 213 trades.
The stock hit an intraday high of Rs. 169.25 and intraday low of 164.75. The net turnover during the day was Rs. 1287176.