Initiating Coverage reports by Kotak on Century Ply and Green Ply

Century Plyboards (India) Ltd

PRICE: RS.170 RECOMMENDATION: BUY
TARGET PRICE: RS.230 FY17E P/E: 15.5X
Potential Upside 35 (%)

Century Plyboards is the largest plywood manufacturer with more than 30% share in the India's organized plywood sector. With an annual capacity of 209420 CBM, distributed across strategically located six plants, company caters to the customer's demand through a robust distribution network of over 1500 direct dealers. It has also expanded its laminates capacity to 4.8 mn sheets to address the surface furniture segment. With its wide product portfolio, product premiumization, increased spend on branding and advertisements and expected GST implementation by mid FY17, company is likely to benefit from shift of customer's preferences from unorganized to organized segment. We value the company at 21x P/E based on its relative comparisons with companies in the same segment or riding on consumerism. Recommend BUY with a price target of Rs 230 on FY17 estimates.

Greenply Industries Ltd

PRICE: RS.940 RECOMMENDATION: BUY
TARGET PRICE: RS.1167 FY17E P/E: 14.5X
Potential Upside 24 (%)

Greenply industries is among the largest plywood manufacturers with more than 30% share in the India's organized plywood sector. It has an annual capacity of 129600 CBM in plywood and 180000 CBM in MDF segment, distributed across strategically located plants. Company caters to the customer's demand through a robust distribution network of over 1500 direct dealers. With its wide product portfolio, asset light model for plywood, increased spend on branding and advertisements and GST implementation by mid FY17, we expect company to capitalize on shift of customer's preferences from unorganized to organized segment. We value the company at 18x P/E based on its relative comparisons with companies in the same segment or riding on consumerism. Recommend BUY with a price target of Rs.1167 on FY17 estimates.