Q1FY24 Review: Century Plyboards (I): Muted quarter; near term challenges persist

8 Aug 2023 , 01:26 PM

Century Plyboards (CPBI) reported a miss in Q1FY24 largely driven by weakness in the plywood segment. Management has scaled down its FY24 growth guidance in key segments of Plywood and Laminates, although it maintained the margin guidance across segments despite steady timber price increase and rising supply from imports/domestic competition. CPBI’s capex projects remain broadly on track. Analysts of IIFL Capital Services cut CPBI’s EPS estimates by 6-9% for FY24/25 on lower volume assumptions, but remain positive over the medium term especially when timber prices will start cooling off. BUY with a revised TP of Rs695.

Muted Q1 performance:

CPBI reported a miss across revenue/ebitda /PAT as flat plywood/ laminate segment volume growth YoY led to a flat consolidated revenue YoY. Consolidated margins of 14.9% were lower YoY/QoQ. Laminate margins came in sharply lower QoQ due to one-off expense for launching new product range (high end & Sainik). In the MDF segment, realisations were flat YoY while margins came in lower at 26% (YoY at 35%). MDF segment was also impacted negatively as the brownfield expansion at Hoshiarpur is taking longer to stabilise. Particle Board margins at 22.7% sharply down YoY, but up QoQ. 

Near term outlook weak on Plywood: 

Mgmt has cut its revenue growth guidance for Plywood and Laminate segment to ~10% YoY (including ~2.5% planned price hike) & 15% respectively vs 15% & 25% respectively guided earlier. This cut is largely on the back of muted Q1 performance, demand sluggishness in the near term for Plywood and delay in capacity coming on board for the laminates segment. However, the mgmt has retained the margins guidance largely across segments. Further, CPBI in partnership with celebrity designer has launched a new range of laminates designed for the high-end market. 

Cut FY24/25 estimates by 6-9%; retain BUY: 

Mgmt shared that its key capex projects remain broadly on track; Plywood/ laminate capex could get pushed out by a quarter. Analysts of IIFL Capital Services cut their volume assumptions for Plywood and Laminates growth considering the near term weakness, and cut FY24-25 EPS estimates by 6-9%. They now build >12% earnings Cagr over FY23-25, the stock trades at ~30x FY25; retain BUY.