Century Plyboards Q1FY12 Result Update

8/6/2019 Century Plyboards Q1FY12 Result Update

http://slidepdf.com/reader/full/century-plyboards-q1fy12-result-update 1/7Emkay Global Financial Services Ltd 1

July 22, 2011

Reco

Buy

Previous Reco

BuyCMP

Rs72

Target Price

Rs84

EPS change FY11E/12E (%) NA

Target Price change (%) 12

Nifty 5,634

Sensex 18,722

Price Performance

(%) 1M 3M 6M 12M

Absolute 11 2 20 14

Rel. to Nifty 4 7 21 10

Source: Bloomberg

Relative Price Chart

50

56

62

68

74

80

Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11

Rs

-20

-10

0

10

20

30%

Century Plyboards (LHS) Rel to N if ty (RHS)

Source: Bloomberg

Stock DetailsSector Diversified

Bloomberg CPBI@IN

Equity Capital (Rs mn) 222

Face Value(Rs) 1

No of shares o/s (mn) 222

52 Week H/L 77/50

Market Cap (Rs bn/USD mn) 16/361

Daily Avg Volume (No of sh) 86168

Daily Avg Turnover (US$mn) 0.1

Shareholding Pattern (%)

Jun-11 Mar-11 Dec-10

Promoters 83.2 83.2 84.2

FII/NRI 0.1 0.1 0.1

Institutions 0.0 0.0 0.0

Private Corp 10.9 10.9 10.6

Public 5.8 5.8 5.1

Source: Capitaline

Ajit Motwani

[email protected]

+91 22 6612 1255

Chandan Asrani

[email protected]

+91 22 6612 1241

R e

s u l t U p d a t e

Century Plyboards (India) Ltd

Margins Surprise- Raise TP

n APAT a t Rs436mn, above es t d r i ven by be t t e r t han ex pec t ed

marg ins . Marg ins surpr i se (420 bps qoq) l ed by 3% qoq pr i c e

h i ke & sharp r educ t i on ( -40% qoq) i n d i scoun t s & Ad spends

n Revenues o f Rs4.15bn, up 33% yoy , above es t imat es on

acc oun t be t t e r pe r f ormance i n P&L ( revenue g row th o f 30%)

and Cement (+26% revenue g row th )

n 3X expans i on i n c ement ( 1s t gr ind ing un i t by Dec -11) near ing

com ple t ion. New CFS in ramp m ode ( revs up 280% yoy) .

P lyw ood & l am i na te expans i on t o he l p f ue l g row t h i n F Y13

n Stock t rad es a t c omp el l i ng va luat ions o f 7 .7X PER 4.8X EV/E

FY13E. De-merge r p lans on t ra ck -pote nt ia l va lue un -lock ing

t r igger - Ra ise TP to Rs84 as ro l l o ver t a rget to FY13 -BUY

Robust volume growth across business drive 30%+ topline growth

Revenues for Q1FY12 at Rs4158mn came in above estimates of Rs3773mn, up 33.6%

yoy. This revenue growth was primarily fuelled by a robust 18% volume growth in P&L

(net revenues at Rs2355mn, +30.4% yoy) and a solid 29% growth volume in cement

business (net revenue of Rs1376 mn, +26%). Cement realizations of Rs5335/t

registered a decline -3% yoy in line with soft cement prices in Eastern India. Logistics

segment continued to benefit from its CFS at Jingirapole (commissioned in June-2010)

and posted revenues of Rs183.3mn, growth of 288.7%.

Price hikes in P&L segment & lower selling exp drive above estimates EBITDA

CPIL’s EBITDA at Rs743.5 though up a muted 3.8% yoy, recovered sharply with 30.7% jump qoq, sharply ahead of estimates (Rs596 mn). The improved profitability in the P& L

segment was driven by 13% yoy (3% qoq) price hike & a sharp 40% qoq reduction in

dealer discounts & ad spends . Consequently P&L segment, which had seen major

contractions in margins in Q4FY11, registered a sharp 926 bps jump in EBIT margins to

10.6% vs estimates of 5.5%. With sharp jump in CFS revenues, logistics margins saw

operating leverage coming into play with EBIT margins improving 895 bps to

24%.Though cement revenues grew a healthy 26% yoy, EBIT margins for the segment

declined sharply by 13.8% points to 22.1% impacted by 3% price decline and sharp

increase in freight cost (on account of imposition of overloading ban effective July 10).

Overall EBITDA margins though declined 513 bps yoy to 17.9%, the same jumped 420

bps sequentially and came in better than estimates of 15.1%.

APAT at Rs436mn up 5.7% - above estimates

Interest expenses jumped 19.6% yoy while depreciation increased 17% yoy driven by

capex in the CFS division (CFS at Jingirapole commissioned in June-2010). With better

than expected operating performance, CPIL APAT for the quarter stood at Rs436mn

(+5.7%) vs estimates of Rs293mn.

Financial Snapshot (consolidated) Rs Mn

Net EBITDA AEPS EPS RoE EV/

YE-Mar Sales (Core) (%) APAT (Rs) % chg (%) P/E EBITDA P/BV

FY10 11,625 2,456 21.1 1,462 6.6 59.2 34.5 11.0 7.9 3.3

FY11P 14,289 2,492 17.4 1,546 7.0 5.8 27.8 10.4 8.1 2.6

FY12E 17,660 2,943 16.7 1,662 7.5 7.5 23.8 9.7 7.7 2.1

FY13E 25,013 4,941 19.8 1757 9.4 25.1 24.2 7.7 4.8 1.7


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Century Plyboards (India) Result Update

Emkay Research 22 July 2011 2

Quarterly Results

Rs mn Q1FY11A Q2FY11A Q3FY11A Q4FY11A Q1FY12E YoY (%) QoQ (%) FY12YTD FY11YTD YoY (%)

Revenue 3,113 3,410 3,608 4,158 4,158 33.6 0.0 4,158 3,113 33.6

Expenditure 2,396 2,722 3,126 3,589 3,415 42.5 -4.9 3,415 2,396 42.5

as % of sales 77.0 79.8 86.6 86.3 82.1 82.1 77.0

Consumption of RM 1199 1353 1350 1607 1631 36.0 1.5 1631 1199 36.0

as % of sales 38.5 39.7 37.4 38.6 39.2 39.2 38.5

Employee Cost 235 256 252 293 281 19.7 -4.1 281 235 19.7

as % of sales 7.6 7.5 7.0 7.1 6.8 6.8 7.6

Other expenditure 962 1114 1524 1689 1502 56.1 -11.1 1502 962 56.1

as % of sales 30.9 32.7 42.2 40.6 36.1 36.1 30.9

EBITDA 716 688 482 569 743 3.8 30.7 743 716 3.8

Depreciation 112 126 130 140 131 16.9 -6.3 131 112 16.9

EBIT 604 563 352 429 612 1.4 42.8 612 604 1.4

Other Income 19 34 70 (37) 30 56.8 -182.9 30 19 56.8

Interest 54 45 52 44 65 19.6 45.8 65 54 19.6

PBT 569 552 369 348 578 1.5 66.2 578 569 1.5

Total Tax 55 24 29 (167) 41 -25.5 -124.5 41 55 -25.5

Adjusted PAT 514 528 340 515 537 4.4 4.3 537 514 4.4

(Profit)/loss JV's/Ass/MI 102 108 72 69 101 101 102 -1.1

APAT after MI 413 420 268 446 436 5.7 -2.1 436 413 5.7

Extra ordinary items

Reported PAT 413 420 268 446 436 5.7 -2.1 436 413 5.7

Reported EPS 1.9 1.9 1.2 2.0 2.0 5.7 -2.1 2.0 1.9 5.7

Margins (%) (bps) (bps) (bps)

EBIDTA 23.0 20.2 13.4 13.7 17.9 -513 420 17.9 23.0 -513EBIT 19.4 16.5 9.7 10.3 14.7 -468 442 14.7 19.4 -468

EBT 18.3 16.2 10.2 8.4 13.9 -439 553 13.9 18.3 -439

PAT 13.3 12.3 7.4 10.7 10.5 -276 -23 10.5 13.3 -276

Effective Tax rate 9.6 4.4 8.0 (48.1) 7.1 -257 5515 7.1 9.6 -257





Segmental Results

Segment Revenue (Net) Q1FY11A Q2FY11A Q3FY11A Q4FY11A Q1FY12E YoY (%) QoQ (%) FY11Q FY10Q YoY (%)

(a) Plywood and Laminates 1806 2048 1971 2154 2355 30.4 9.3 2355 1806 30.4

(b) Ferro Alloys 26 204 280 260 227 770.6 -13.0 227 26 770.6

(c) Power 257 153 232 199 182 -29.4 -8.8 182 257 -29.4

(d) Others 64 102 139 284 209 227.3 -26.3 209 64 227.3

(e) Cement 1095 1053 1214 1492 1376 25.7 -7.8 1376 1095 25.7

Total Segment Revenue 3248 3560 3836 4390 4348 33.9 -0.9 4348 3248 33.9

Less : Inter Segment Rev 135 150 228 232 190 40.5 -18.2 190 135 40.5

Net revenue 3113 3410 3608 4158 4158 33.6 0.0 4158 3113 33.6

Segment Results (EBIT) Q1FY11A Q2FY11A Q3FY11A Q4FY11A Q1FY12E YoY (%) QoQ (%) FY11Q FY10Q YoY (%)

(a) Plywood and Laminates 184 177 83 34 256 38.9 642.1 256 184 38.9

(b) Ferro Alloys -11 25 53 44 24 -320.0 -46.9 24 -11 -320.0

(c) Power 73 12 19 122 20 -73.2 -84.0 20 73 -73.2

(d) Others 8 8 32 60 47 500.4 -21.1 47 8 500.4

(e) Cement 393 346 188 206 304 -22.6 47.6 304 393 -22.6

Total 647 569 375 466 650 0.4 39.3 650 647 0.4

EBIT margin (%) Q1FY11A Q2FY11A Q3FY11A Q4FY11A Q1FY12E YoY(bps) QoQ(bps) FY11Q FY10Q YoY(bps)

(a) Plywood and Laminates 10.2 8.7 4.2 1.6 10.9 67 926 10.9 10.2 67

(b) Ferro Alloys -41.2 12.4 18.9 17.1 10.4 5162 -664 10.4 -41.2 5162

(c) Power 28.4 7.8 8.1 61.3 10.8 -1764 -5052 10.8 28.4 -1764

(d) Others 12.3 7.7 22.8 21.0 22.5 1023 147 22.5 12.3 1023

(e) Cement 35.9 32.9 15.5 13.8 22.1 -1379 829 22.1 35.9 -1379

CPIL expanding capacities across key segments to sustain growth

Over last 5 years CPIL’s has been in midst of a solid growth with its topline

registering a CAGR of ~ 30% (FY11 revenues at Rs14.3 bn) and its bottomline

registering a growth of 37% (PAT of Rs1.5 bn). In order to sustain this growth CPIL

has taken a massive capex program across its key business segments of Plywood &

Cement.

Cement: CMCL, CPIL’s 70.48% cement subs idiary is all set to expand its cement

manufacturing capacity by more than 3X. Post the completion of the above capex program,

CMCL's clinker capacity would increase from current 0.79 mtpa to 2.55 mtpa while its

cement manufacturing capacity will quadruple from current 1.2 mtpa to 4.4 mtpa. The

massive expansion is nearing commission with the 1st

cement grinding unit of 1.6 mtpa like

to commission by Dec11. However due to operational delays commissioning of 2nd grindingunit project at Kahalgaon is been delayed by 3 months and now expected in Jun-12 (Mar-11

earlier)

Plywood: CPIL Plans to expand plywood and veneer capacity by 30,000 CBM at Kandla,

Gujarat which will take total plywood installed capacity from current 122,420 CBM to

152,420 CBM.

Laminates & allied products: CPIL is expanding its laminate capacity by 1.2 million

sheets from current 2.4 million sheets at existing unit in Joka, Kolkata. This will take the

total laminate installed capacity to 3.6 million sheets. The company plans to double its Pre-

Laminated Boards capacity at the existing Chennai plant from 800,000 sqm currently to

1,600,000 sqm .

Ferro alloys: Expansion is underway to increase the total capacity to 15,930MT from

current 10,620 MT by installing a 9MVA submersible arc furnace.





Project (Figures in Rs mn) TargetedCompletion

ProjectCost

Equity Debt

Cement

1.75 Mn Ton Clinkerisation Plant at Lumshnong, Meghalaya in the name of Star Cement Meghalaya Ltd.(Wholly Owned Subsidiary of the company)

Dec-11 6030 2030 4000

1.6 Mn Ton Cement Grinding unit along with 10 MW captive power project at Guwahati Jan-12 2533 783 1750

1.6 Mn Ton Cement Grinding unit along with 10 MW captive power project at Kahalgaon Jun-12 2451 751 1700Total Capex by CMCL 11014 3564 7450

Capex by Meghalaya Power, CMCL's 50% associate (63 MW CPP) Mar-12 2000 670 1330

Plywood and Laminates

Green field Expansion at Kandla, Gujarat-30,000 CBM Feb-12 300 300

Laminates expansion of 1.2 mnsheets at Kolkata Feb-12 120 120

Pre-Laminated board expansion of 800,000 SQM at Chennai Feb-12 120 120

Total 540 540

Ferro alloys

Submersile arc furnace of 9 MVA at Meghalaya plant Jan-12 200 200

CPIL to De-merge Cement and Ferro Alloys business

In order to unlock the value in its conglomerate business structure, CPIL’s management has

decided to demerge its cement and ferroy alloys business into a separate entity, ‘Star ferro

and cement ltd’ (SFCL), which would be a 100% owned subsidiary of Century Plyboards

India Ltd (CPIL). The remaining businesses including plywood, laminate, veneer and allied

products would continue to belong and managed by CPIL. The management is of the view

that this business reorganisation would realign the different verticals, simplify and

rationalise the holding structure and result in creation of more focussed entities. The

scheme of arrangement between CPIL and SFCL for demerger of cement and ferro alloys

business into a separate entity SFCL with effect from 1st April, 2011 has been approved bythe board of directors on March 28 and filed with the stock exchanges. The existing

shareholder of CPIL will be entitled to 1 equity share of SFCL for their holding of 1 share in

CPIL.

Rollover target to FY13- Raise to to Rs84-Maintain BUY

CPL is all set to capitalize on the cement demand supply gap in the NER region with its

cement capacity set to expand from current 1.2mtpa to 4.4 mtpa by Q1FY13. Further the

new plywood expansion at Gujarat and laminate expansion at Kolkata would help CPIL

sustain the growth in the core P&L business. The ramp at its new CFS at Jinjira pole at

Kolkata with a capacity of 1,20,000 TEUs is expected to further fuel its growth. The kick-

start of volume led growth in cement revenues and full scale operations of the CFS

business in FY13 will lead to accelerated growth (40% topline & 25% bottomline growth forFY13) and significant improvement in its return ratios. Stock trades at compelling valuations

of 7.7X PER 4.8X EV/E FY13E. De-merger plans on track -potential value un-locking

trigger- Raise TP to Rs84 as rollover target to FY13 –Maintain BUY.





SOTP based Valuation

Business segment Valuation Measure Rs mn Rs/share

Value of Cement business 4.4 mtpa @ EV/t 110 21780 98.0

Less: Net debt of cement business 6779 30.5

Equity value of cement business 15001 67.5

CPL' stake 70.5%

Value attributable to CPL 10573 47.6

ADD: Value of Non Cement Business

Plywood, Veneer & Laminates 5X EV/EBIDTA 4994 22.5

Ferro Alloys 4X EV/EBIDTA 934 4.2

CFS 7X EV/EBIDTA 2966 13.4

Power 2X P/B 1139 5.1

Total Value Of Non Cement Business 10033 45.2

Total Enterprise value 20606 92.7

Less: Standalone net debt* 1900 8.6

Fair Value 18706 84.2





Key Financials

Income Statement Balance Sheet

Y/E, Mar (Rs. m) FY10 FY11P FY12E FY13E Y/E, Mar (Rs. m) FY10 FY11P FY12E FY13E

Net Sales 11625 14289 17660 25013 Equity share capital 228 228 228 228

Growth (%) 11.8 22.9 23.6 41.6 Reserves & surplus 4639 6061 7500 9280

Expenditure 9169 11797 14717 20072 Networth 4867 6289 7727 9507

Cost of Materials 4659 5761 7625 9583 Minority Interest 1240 1558 1879 2200Personnel Expenses 826 1036 1148 1449 Secured Loans 3873 5418 10943 10656

Other Exp 3684 5000 5944 9040 Unsecured Loans 332 429 134 134

EBITDA 2456 2492 2943 4941 Loan Funds 4204 5847 11077 10790

Growth (%) 31.8 1.5 18.1 67.9 Deferred tax liability 14 7 7 7

EBITDA margin (%) 21.1 17.4 16.7 19.8 Total Liabilities 10325 13700 20690 22505

Depreciation 452 508 640 1481

EBIT 2004 1984 2303 3460 Gross Block 5455 6756 14899 17960

EBIT margin (%) 17.2 13.9 13.0 13.8 Less: Depreciation 1960 2494 3133 4614

Other income 296 87 130 221 Net block 3495 4262 11765 13345

Interest 252 232 224 1019 Capital WIP 365 181 1512 541

PBT 2048 1838 2209 2662 Investment 5 56 224 391

Total Tax 379 372 226 262 Current Assets 6640 8025 10081 12370

Effective tax rate (%) 18.5 20.3 10.2 9.9 Inventories 2105 2517 2642 3554

Adjusted PAT 1832 1897 1983 2078 Sundry Debtors 1286 1522 2345 3769

Growth (%) 51.8 3.6 4.5 4.8 Cash and Bank bal 495 368 1677 356

Net Margin (%) 15.4 13.2 11.1 8.2 Loans and Advances 1380 2235 2036 3311

(Profit)/loss from JV's/Ass/MI 370 351 321 321 Other Current assets 1374 1383 1381 1381

PAT after MI 1462 1546 1662 1757 Current lia & Prov 1494 2192 3143 4394

E/O items Current liabilities 1403 1877 2829 4080

Reported PAT 1462 1546 1662 2078 Provisions 91 314 314 314

Growth (%) 59.2 5.8 7.5 25.1 Net current assets 5146 5833 6938 7976

Misc. exp 2 2 2 2

Total Assets 10325 13700 20691 22506

Cash Flow Key ratios

Y/E, Mar (Rs. m) FY10 FY11P FY12E FY13E Y/E, Mar (Rs. m) FY10 FY11P FY12E FY13E

Pre-tax profit 1752 1752 2079 2441 Profitability (%)

Depreciation 452 508 640 1481 EBITDA Margin 21.1 17.4 16.7 19.8

Interest Provided 252 232 224 1019 Net Margin 15.4 13.2 11.1 8.2

Other Prov & W/O 0 -31 0 0 ROCE 24.2 17.3 14.2 17.1

Chg in working cap -358 -1038 204 -2359 ROE 34.5 27.8 23.8 24.2

Tax & other -367 59 -226 -262 RoIC 26.0 22.2 17.2 18.2

Operating cash flows 1730 1481 2920 2320 Per Share Data (Rs)

Capital expenditure -1588 -3170 -6358 -2091 EPS 6.6 7.0 7.5 9.4

Free Cash Flow 142 -1689 -3438 230 CEPS 8.6 9.2 10.4 16.0Other income 296 87 130 221 BVPS 21.9 28.3 34.8 42.8

Investments -1 -51 -168 -168 DPS 1.0 1.0 0.9 1.1

Investing Cashflow -1293 -3135 -6396 -2037 Valuations (x)

Equity Capital Raised 0 0 0 0 PER 11.0 10.4 9.7 7.7

Loans Taken / (Repaid) 138 1643 5230 -287 P/CEPS 8.4 7.8 7.0 4.5

Interest Paid -252 -232 -224 -1019 P/BV 3.3 2.6 2.1 1.7

Dividend paid (incl tax) -103 -269 -222 -298 EV / Sales 1.5 1.2 1.1 0.9

Income from investments 0 0 0 0 EV / EBITDA 7.9 8.1 7.7 4.8

Others Dividend Yield (%) 1.4 1.4 1.2 1.6

Financing Cashflow -216 1486 4784 -1604 Gear ing Ratio (x)

Net chg in cash 105 -167 1309 -1321 Net debt/ Equity 0.8 0.9 1.2 1.1

Opening cash position 390 495 368 1677 Net Debt/EBIDTA 1.5 2.2 3.1 2.1Closing cash position 495 328 1677 356 Working Cap Cycle (days) 59.5 47.2 38.1 42.7




Emkay Research 22 July 2011

Recommendation History: Century Plyboards (India) – CPBI IN

Date Reports Reco CMP Target

26/05/2011 Century Plyboards Q4FY11 Result Update Buy 65 75




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Century Plyboards Q1FY12 Result Update

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