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You are here : IndiaNotes >> Research & Analysis >> Companies >> Century Plyboards (India) Ltd. >> Research

Century Plyboards Q1FY18: 'Accumulate on dips' for target implying ~11% upside in 15 months

SKP Research | 09 Aug, 2017  | Follow Author | Add to my Favourites 
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Century Plyboards Ltd, India’s largest manufacturer of plywood with ~25% of organised market share and third largest manufacturer of laminates. The implementation of GST in near future, will be a game changer.

CPIL’s margins during Q1FY18 contracted by ~238 bps y-o-y to ~13.9% led by sharp decline in plywood margins due to non-availability of low priced raw material from Myanmar & Laos and lower capacity utilization in laminates division on account of labour related issues which have now been resolved. There is a shortage of veneer in the market owing to ban by the Myanmar government on cutting of trees which has been recently lifted. The company had sufficient timber to last till October 2017, while the new supplies are expected from December onwards. Also, veneer export has been banned in Laos.

Better economic growth, leaving more disposable income for discretionary lifestyle improvement, rapid  urbanisation, changing customer preference towards quality branded products particularly amongst the growing mass affluent, increasing nuclear families and Government’ thrust on “Housing for All”  coupled  with  structural  shift  towards  organised  players  post  GST implementation, strong brand equity and distribution network, efficient working capital management and raw material security auger well for the company.

We have valued the stock on the basis of P/E of 25x of FY19E EPS and recommend “Accumulate on Dips” on the stock with a target price of Rs 284/- (~11% upside) in 15 months.


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