ICICI Direct Downgrades Century Plyboards India Buy Call to Add Call with A Target Price of Rs.750

ICICI Direct, a leading brokerage firm, has recommended buying Century Plyboards India for short terms gains in the latest report. The added call on the report has suggested a target price of Rs.750 for the company. The stock of Century Plyboards is trading identically to the Indian market, and it has shown a rapid recovery in the past few weeks from a sharp fall.

Here is a detailed breakdown of the report of ICICI Direct on Century Plyboards.

Outlook on Century Plyboards India Ltd.

Century Plyboards India (CPBI) has a diversified portfolio in providing services, and it is engaged in manufacturing plywood, veneer, medium-density fiber (MDF), particle board, allied products, and laminates. Century Plyboards is the largest player of plyboard in India and has over 25% market share in the organized plywood market.

The stock's market capitalization is Rs. 15,316 Crore, with a current market price of Rs. 690. The stock price is near its all-time highs, and according to an ICICI Direct report, the stock can cross its all-time high in coming trading sessions.

Valuation Outlook of Century Plyboards India

According to the latest report of ICICI Direct, "CPBI is a play on the growing interior infrastructure market in India. With its comprehensive product portfolio, strong brand and wide distribution reach, the company is well placed to capitalise on demand pick up in the housing sector. The company is expected to witness revenue/APAT CAGR of 19%/24% over FY22- FY24E with a strong balance sheet and impressive return ratios. We continue to like CPBI for its comprehensive product portfolio, wide distribution and strong brand name. However, we downgrade the stock from Buy to ADD post the strong rally of ~22% in the stock price over the past 3 months. Maintain estimates with an unchanged Mar'22 target price of Rs750, set at 35x PER FY24E."

Buy Call Of ICICI Direct on Century Plyboards India

"Our recent interaction with dealers and industry players indicates that in the ongoing Q2FY23 (Jul-Sep'22), demand trends remain steady in the wood panel sector led by continuous momentum in the residential market and higher spending on home improvement post the pandemic. We believe demand will continue to remain healthy going ahead (post the festival season, too) as underlying drivers are intact." says ICICI Direct reports.

However, because of the rally of the stock to the upside ICICI Direct has downgrade there buy call to add dating 9 September, 2022. Here's what brokerage firm mentioned on their report on the downgrade "We maintain estimates, but downgrade our rating from Buy to ADD post the strong rally of ~22% in the stock price over the past 3 months with an unchanged Mar'23E target price of Rs750, set at 35x PER FY24E".

ICICI Direct Century Plyboards India Call: Key Risks

According to ICICI Direct report:
•"Regulatory concerns on raw material sourcing: Wood is a key raw material for plywood and MDF manufacturing. Any regulatory restriction on the sourcing of wood or face veneer will affect the company's profitability.
•Sharp rise in raw material prices: Higher raw material prices and inability to pass these on to consumers may hurt profitability.
• Prolonged slowdown in housing market: A continuous slowdown in the housing market would hit growth prospects.
• MDF imports: Due to unexpected slowdown in global economies, there is a risk of MDF being dumped in Indian markets, thus, hampering the growth prospects of domestic manufacturers.
• Resurgence of pandemic: A resurgence of the covid pandemic will adversely affect near-term growth prospects of the company."