Century Plyboards share price: Sharekhan maintains Buy rating on Century Plyboards with a revised price target of Rs 360

Century Plyboards is expected to benefit from continued strong demand for plywood, laminates and MDF, as new house construction remained buoyant and as demand for readymade furniture stayed high. The MDF and particle board capacities are running at over 100% as compared to 60-65% during January 2020. Further, the domestic furniture industry is having the government’s focus on boosting local furniture manufacturing, which is well aided by a yoy fall in furniture imports since February 2020 and a rise in exports of the same since July 2020. Key inputs such as (phenol, formaldehyde, melamine, face veneers) have risen sharply led by rise in crude prices along with higher sea freight rates (also aided by container shortages). Century Plyboards share price closed at Rs 302.6, up Rs 2.3 or 0.8% in last session. 

The sharp rise in input costs has affected the unorganised sector leading to market share gains for organised players such as Century Plyboards having a strong balance sheet (debt-free with Rs 140 cr worth of treasury assets and low working capital cycle days of 51 days). The strong domestic demand for furniture, lower imports and rising raw materials costs have led to multiple price hikes undertaken by the wood panel industry. As per industry reports, the wood panel industry has taken price hikes in the range of 5-15% in laminates and MDF with further price hikes not being ruled out.

See Zee Business Live TV Streaming Below:

Sharekhan expects Century Plyboards to benefit from a strong demand for plywood, laminates and MDF and higher realizations during Q4 FY21 and ahead. The company is optimistic on maintaining double digit volume growth in plywood and maintaining a higher OPM in laminates and MDF. The company is on an expansion spree with 400cubic metres/day MDF brownfield expansion in Punjab unit, Greenfield expansion planned in South India for MDF of 700cbm/day plus capacity and brownfield expansions in particle board, laminates and plywood through equipment re-balancing. In totality, the company would be incurring Rs 650-700 cr capex over the next two years.

The MDF brownfield expansion is expected in less than a year with peak revenue potential of Rs 400 cr.The stock is currently trading at a P/E of 27.7x and 23.1x its FY2022E and FY2023E earnings, which we believe provides further room for upside, considering its strong growth outlook and healthy balance sheet. Hence, Sharekhan have maintained Buy rating on Century Plyboards with a revised price target of Rs 360