Century Plyboards: Investors’ Presentation & Research Reports

Century Plyboards a solid home-building material play

Century Plyboards (India) Ltd. (CPL), a premier branded home-building material manufacturer, is a classic play on an expected cyclical reversion and structural theme. On the cyclical side, we believe, the company is a primary beneficiary of two reversions to the mean themes: 1) recovery in India’s housing segment, driving demand for the wood panel industry and 2) normalcy of currency volatility that impacted margins of this import-based company (Forex loss of Rs440 mn, almost 2/3rd of FY14 PBT).

Structural shift in favour of organized players; GST potential Game Changer Plywood market today is largely controlled by the unorganized sector which accounts for 75% of the market. However, driven by lower price differential and increasing preference for branded wood panel products there is a clear shift, with the organized players growing at 15.2% over FY08-13 as compared to industry growth of 6-8%. We believe that implementation of GST is a potential “Game Changer” for plywood manufacturers as further lowering differential in indirect taxes would mean acceleration in the pace of consumer shift from unorganized players to branded organized market which in turn would improve the growth trajectory for players like CPL.

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