Tuesday, 15 August 2017

Century Plyboard - A Home Decor. Company

As children, we grew up in homes with wooden doors and windows even the sofa sets at home would be made of wood.
However, today the price of wood has spiraled so high that only a particular affluent class can afford it.
After taking possession of my flat in the NCR, the first thing that I was required to do was get the woodwork done. So I looked up a carpenter to get the wardrobes,  modular kitchen,  Beds,  etc.,done. The  first question  the carpenter asked was " what type of Ply board do you want - Century or would any other do ?"

I was not the only one. With thousands of apartments ready for possession across the NCR and lacs of new owners of homes and apartments across India, the requirement and demand for Ply board is at an all time high. The rise is demand for Ply board is suitably reflected in the share price of Ply board companies.

My carpenter's question piqued my curiosity enough for me to research deeper into the product. I realized that all these wardrobes, modular kitchen are prepared with Ply board,  MDF, Laminates. Century Ply board is manufacturer of all these Products.

**** Thus it has an advantage over the other manufacturers.

Few factors which could help Century Plyboard in future too.

GST Effect - Shift from unorganized to organized players.  When my carpenter asks you want Ply board of Century or would any other do ? First is obviously the brand value associated with Century Ply board, however, quality was probably not the only thing in his mind. It also meant that the other brands were cheaper. Pre GST , excise duty was payable by only by the organized sector. The unorganized market could easily circumvent the excise duty, hence, they were in a position to offer lower prices to customers. The launch of GST has given a the level playing field  for both organized and the unorganized sector, as the GST rate is same for both i.e 28% on Ply board & 18% on MDF & Laminates.  Currently the unorganized sector holds around 60% of the market share and any shift to the organized one would exponentially increase the top line of Century Ply board.

Capacity Expansion - Expecting this increase in demand,  Century Ply board has invested around ........ crores in capacity expansion in last few years and one of its newly built MDF plant is scheduled to be commissioned in August'17.

Government Policies- Pradhanmantri Awas Yojna, Smart city, Affordable homes - With these Govt.  Policies,  the housing sector especially home decor companies would benefit.

Housing Loan Interest Rates- We are witnessing decreasing interest rates for last 2 years & with low inflation and Government emphasis on speedy economic growth, there are all possibilities of further decrease in the interest rates. This would be another factor to boost housing sector.

Brand Value - We have already discussed the brand value of Century Ply board in the market and it has created a high quality image in the mind of customers & Carpenters. Hence any shift from unorganized to organized sector, Century Ply board would be the biggest beneficiary.

The company expects substantial growth in the revenue in the next financial year. Implementation of MDF and laminates units will give an additional revenue of around Rs350 crore and it sees huge demand for plywood, the company officials said. The company’s net sales increased by 9 per cent to Rs1,782.46 crore, and net profit rose from Rs169.8 to Rs185.6 crore in financial year 2016-17.

The total income for the fourth quarter of 2016-17 fiscal stood at Rs539.98 crore as compared to Rs483.75 crore in the same period previous year. The PAT also increased from 41.59 crore to Rs55.90 crore in the period under review.

The company said that the GST rates for Plywood is slated at 28%, which is almost at the current level of taxes. The GST rates for laminates and commercial veneer is fixed at 18%. PTI AP NRB BAL SBT
Keshav Bhajanka, ED of Century Plyboards spoke about the results of Q1 FY18 and his outlook for the company. Margins are likely to be higher but not substantially higher, he said.We are looking at a substantial volume growth for current financial year and higher volume growth in Q2 but Q3 and Q4 should see a substantial rise in volume, he added.Overall for FY18, company’s revenue growth should be in excess of 20 percent, said Bhajanka.

In Q1 FY18 Net Revenue from operations for the June quarter was Rs 438.60 crore, an increase of 8.1 per cent over corresponding period of last financial year sales of 405.75 crore, he added.There had been a hit in sales in June after tax dropped to 18 percent from 28 percent in laminates. On top of it, there was raw material problems due to GST. Moreover, interest and depreciation were also high due to investment in new plants.Under the circumtances we had satisfactory results. These (GST) are short term issues and the company is expecting to gain from the new taxation regime in the coming quarters," he said.
Currently share is trading @ 32.88 P/E and price to book value of 8.11 with market cap of rs.5800 crore with CMP in range of 260-280.Promoters also have very good shareholding in the company i.e.72%

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