Q1 Revenue Grew 96% YoY, Buy This Multibagger Small Cap Stock For Robust 29% Returns

BOB Capital Markets, a leading brokerage firm, has published a report on Century Plyboards (India) Ltd suggesting 'buy' the stocks of the company for a target price of Rs 735 apiece. The brokerage sees a potential gain of 29% in 12 months considering the target price and the Current Market Price of the stock. The company's Q1 revenue/PAT came in at Rs 8.8bn/Rs 0.9bn led by healthy price realisations across segments (ex-plywood).

Stock Outlook & Returns

On Friday, 22 July, the stock of the company closed at Rs 572.80 apiece, witnessing a decline of 1.32% from its previous close. It was opened at Rs 583.35 apiece. The stock hit the 52-week low level at 341.80 apiece on 30 August 2021. It touched the 52 week high at Rs 749 apiece on 23 March 2022.

Last week, its share price gained 8.73%, whereas in the past 1 month it gained 14.57%, respectively. In the last 1 year, the stock gave a positive return of 34.02%. On 3 years of investments, it has given a multibagger return of 327.94%. In 5 years it gave a positive return of 99.73%.

Strong demand and favourable base spur growth

Despite weak seasonality, Century Plyboards reported standalone Q1FY23 revenue growth of 96% YoY to Rs 8.8bn, aided by a low base due to Covid. In addition, despite Q4 being the strongest quarter, the company reported only a marginal sequential decline in revenue by 1.5% QoQ, pointing to the inherent strength in demand. Volumes in the plywood/particle board segments grew 0.8%/5% QoQ while MDF/laminates declined 5.9%/6.1%. Realisations increased 1.5% QoQ in MDF, 4% in particle boards and 1.4% in laminates, whereas plywood saw a ~1% decline.

MDF continues to perform well

MDF EBITDA margin expanded 215bps YoY to 35% backed by higher capacity utilisation and price hike benefits. Management expects stronger demand traction ahead due to (a) greater acceptance of MDF in the domestic market, and (b) lower imports owing to improved demand in respective geographies and higher shipping costs. As per management, work on its 350cbm/day MDF expansion at the existing Hoshiarpur unit is in full swing and commissioning is likely by October-end. The MDF project in Andhra Pradesh is on track to come online in H2FY24 with a capacity of 950cbm/day at a capex of Rs 6bn.

Well placed to benefit from sustainable demand

The brokerage said, "We expect Century Plyboards' growth momentum to sustain over the near-to-medium term supported by (a) double-digit growth in plywood and laminates given a pickup in the housing sector alongside a gradual demand shift from unorganised to organised players, and (b) double-digit growth and sustainable margins in MDF and particle boards amid buoyant demand for readymade furniture and exports. Overall, we believe the company's EBITDA margin will expand backed by a higher MDF contribution, superior product mix, operating leverage and cost rationalisation."

The brokerage Suggests Buy for Rs 735 apiece target price

Century Plyboards is trading at 27.6x FY24E EPS compared to its 5Y median of 34.1x. "We find valuations attractive and retain our BUY rating with a Target Price at Rs 735, set at an unchanged 35x FY24E P/E multiple. In our view, CPBI's long-term growth story remains intact given its strong fundamentals, impressive return ratios and healthy balance sheet," the brokerage has said.

About - Century Plyboards (India) Limited

Century Plyboards (India) Ltd is primarily engaged in the manufacturing and sale of Plywood Laminates, Fibre boards, Decorative Veneers, Pre-laminated boards, Medium Density, Particle Board and Flush Doors and provides Container Freight Station services. The company has its manufacturing facilities near Kolkata Karnal Guwahati Hoshiarpur Kandla and Chennai. The company's Container Freight Station is located near Kolkata Port. The company was incorporated in the year January 05 1982. In the year 1997, the company was the first to introduce borer-proof plywood in India. In the year 2002, they introduced Flexoply the only flexible plywood variety.

Disclaimer

The stock has been picked from the brokerage report of BOB Capital Markets. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.