Century Plyboards - Weak Near-Term Prospects; Outlook Healthy: HDFC Securities

HDFC Securities Institutional Equities

We have factored in slower growth for FY24E and expect Century Plyboards India Ltd.’s volume and revenue to pick up from FY25E, driven by demand uptick and capacity ramp-up.

We estimate a 14% revenue compound annual growth rate during FY23-26E. We also trim our FY24/25E margin estimates, factoring in rising timber prices.

We have cut our earnings per share estimates for FY24/25E by 6/7% respectively. We have introduced FY26 estimates and rolled forward our valuation to 35 times Sep-25E EPS versus March 25 earlier.

We maintain our 'Buy' rating on Century with a revised target price of Rs 745/share (35 times Sep-25E EPS).

We recently interacted with the management of Century Plyboards. The management believes that FY24 will remain challenging, owing to muted domestic demand for wood panels and elevated MDF imports.

The management expects demand to accelerate from FY25 onwards. Hence, it is continuing with all its planned capacity expansions, which are mostly in the MDF and particle board segments.

It expects timber prices to continue to rise for the next 12 months due to fewer plantations compared to demand. Later next year, timber supply is expected to increase, which should moderate raw material inflation.

We like Century’s strong franchise (pan-India distribution, aggressive marketing, and a wide range of stock keeping units) and leadership presence in most wood segments. These have driven its market share gains and healthy return ratios.

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