century plyboards - kahalgaon bihar

7/29/2019 Century Plyboards - Kahalgaon Bihar

1/6Emkay Global Financial Services Ltd 1

January 23, 2012

Reco

Accumulate

Previous Reco

BuyCMP

Rs51

Target Price

Rs60

EPS change FY12E/13E (%) -3.5 / -15.3

Target Price change (%) -27

Nifty 5,049

Sensex 16,739

Price Performance

(%) 1M 3M 6M 12M

Absolute 7 (17) (30) (16)

Rel. to Nifty (1) (16) (22) (5)

Source: Bloomberg

Relative Price Chart

40

48

56

64

72

80

Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12

Rs

-20

-10

0

10

20

30%

Century Plyboards (LHS) Rel to Ni fty (RHS)

Source: Bloomberg

Stock Details

Sector Diversified

Bloomberg CPBI@IN

Equity Capital (Rs mn) 222

Face Value(Rs) 1

No of shares o/s (mn) 222

52 Week H/L 77/44

Market Cap (Rs bn/USD mn) 11/218

Daily Avg Volume (No of sh) 36626

Daily Avg Turnover (US$mn) 0.0

Shareholding Pattern (%)

Sep-11 Jun-11 Mar-11

Promoters 72.9 72.9 83.2

FII/NRI 0.6 0.6 0.1

Institutions 0.0 0.0 0.0

Private Corp 12.6 12.4 10.9

Public 13.9 14.1 5.8

Source: Capitaline

Ajit Motwani

[email protected]

+91 22 6612 1255

Chandan Asrani

[email protected]

+91 22 6612 1241

Re

sultUpdate

Century Plyboards (India) Ltd

Cement capex plans delayed further

n EBITDA at Rs650mn, above est led by better profitability of

Plywood & La minat es (P& L) division.Net profit at Rs43mn,

-84%, above est

n Robust topline growt h (+22% yoy) continues driven by P& L

revenue growth of 23% while cem ent segment registered

+30% revenue growth

n Cem ent e xpansions in North East delayed by 6 months w hile

1.6mnt grinding unit at Kahalgaon faces uncertainty due to

land acquisition issues. Cut FY12 /13 EPS by 3.5% /15.3%

n De-merger of ceme nt business also deferred to further date

No positive triggers in medium term. Downgrade rating to

ACCU MULATE w it h re vise d TP of Rs60( Rs82 earl ie r)

Lower costs and better profitability from Laminates division drive

operational performance above estimates

CPILs EBITDA at Rs650mn, was higher than estimates of Rs565mn, mainly driven by

lower expenses and better than estimated profitability from laminates division (EBIT

margins of 11.6% vs estimated 7.5%). Plywood and Laminates (P&L) EBIT at Rs187mn,

+124 % yoy, was higher than estimates of Rs170mn. The improved profitability in the

P& L segment was driven by reduction in dealer discounts & ad spends. Cement

division revenues grew 29.6% yoy to Rs1.57bn led by robust volume growth of 20% yoy

and 7.7% growth in cement realizations. Cement EBIT/t improved 1.3% yoy to Rs796/t.

Overall EBITDA margins of 14.8%, came in better than estimates of 13%.

Robust volume growth across businesses drive 22%+ topline growth

Revenues for Q3FY12 at Rs4395mn grew a robust 22% yoy. This revenue growth was

primarily fuelled by a robust volume growth in P&L (net revenues at Rs2416mn, +23%

yoy) and 20% volume growth in cement business (net revenue of Rs1573 mn, +30%).

Cement realizations of Rs5450/t registered a growth of 7.7% yoy as cement prices in

eastern region (100% share of CPILs dispatches) grew 16% yoy and 14% qoq.

Logistics segment continued to benefit from its CFS at Jingirapole (commissioned in

June-2010) and posted revenues of Rs155mn, growth of 28.3%.

Net profit above estimates

CPILs Net profit for Q3FY12 at Rs43mn, -84% yoy is above estimates of Rs25mn led

by slightly higher than estimated revenues. This also includes heavy forex losses ofRs316mn as CPIL has 60 mn of forex exposure across USD, Euro and HKD which over

the quarter have appreciated by 10.7%, 6% and 10.5% respectively. APAT excluding

Forex loss stands at Rs359mn, above estimates of Rs305mn.Interest expenses jumped

103% yoy while depreciation increased 8.2% yoy driven by capex in the CFS division

(CFS at Jingirapole commissioned in June-2010).

Financial Snapshot (Consolidated) Rs Mn

Net EBITDA AEPS EPS RoE EV/

YE-Mar Sales (Core) (%) APAT (Rs) % chg (%) P/E EBITDA P/BV

FY10 11,625 2,456 21.1 1,462 6.6 59.2 34.5 7.7 5.9 2.3

FY11 14,289 2,492 17.4 1,546 7.0 5.8 27.8 7.3 6.3 1.8

FY12E 17,299 2,677 15.5 1,517 6.8 -1.9 21.9 7.4 6.7 1.5

FY13E 23,244 4,146 17.8 1710 7.7 12.7 20.7 6.6 4.5 1.3


2/6

Century Plyboards (India) Result Update

Emkay Research 23 January 2012 2

Quarterly Results

Rs mn Q3FY11A Q4FY11A Q1FY12 Q2FY12 Q3FY12A YoY (%) QoQ (%) YTD FY12 YTD FY11 YoY (%)

Revenue 3,608 4,158 4,158 3,913 4,395 21.8 12.3 12,466 9,936 25.5

Expenditure 3,126 3,589 3,415 3,318 3,745 19.8 12.9 10,478 8,049 30.2

as % of sales 86.6 86.3 82.1 84.8 85.2 84.1 81.0

Consumption of RM 1350 1607 1631 1744 1745 29.3 0.0 5120 3901 31.2

as % of sales 37.4 38.6 39.2 44.6 39.7 41.1 39.3

Employee Cost 252 293 281 323 340 34.9 5.5 945 743 27.1

as % of sales 7.0 7.1 6.8 8.2 7.7 7.6 7.5

Other expenditure 1524 1689 1502 1252 1660 8.9 32.6 4414 3405 29.6

as % of sales 42.2 40.6 36.1 32.0 37.8 35.4 34.3

EBITDA 482 569 743 595 650 34.8 9.2 1,988 1,887 5.4

Depreciation 130 140 131 137 141 8.2 3.0 409 368 11.0

EBIT 421 392 643 214 190 -55.0 -11.5 1,047 1,642 -36.2

Other Income 70 (37) 30 23 (3) -104.3 -112.7 51 123 -58.8

Interest 52 44 65 70 106 102.5 50.0 241 151 59.1

PBT 369 348 578 144 84 -77.2 -41.6 806 1,491 -45.9

Total Tax 29 (167) 41 (22) (12) -141.9 -42.7 7 109 -93.5

Adjusted PAT 340 515 537 166 96 -71.6 -41.8 799 1,382 -42.2

(Profit)/loss JV's/Ass/MI 72 69 101 25 53 179 282 -36.6

APAT after MI 268 446 436 141 43 -83.9 -69.4 620 1,100 -43.6

Extra ordinary items

Reported PAT 268 446 436 141 43 -83.9 -69.4 620 1,100 -43.6

Reported EPS 1.2 2.0 2.0 0.6 0.2 -83.9 -69.4 2.8 5.0 -43.6

Margins (%) (bps) (bps) (bps)

EBIDTA 13.4 13.7 17.9 15.2 14.8 142 -42 15.9 19.0 -304

EBIT 11.7 9.4 15.5 5.5 4.3 -736 -116 8.4 16.5 -813

EBT 10.2 8.4 13.9 3.7 1.9 -832 -177 6.5 15.0 -854

PAT 7.4 10.7 10.5 3.6 1.0 -644 -262 5.0 11.1 -610

Effective Tax rate 8.0 (48.1) 7.1 (14.9) (14.6) -2260 29 0.9 7.3 -640


3/6



Segmental Results

Segment Revenue (Net) Q3FY11A Q4FY11A Q1FY12 Q2FY12 Q3FY12A YoY (%) QoQ (%) YTD FY12 YTD FY11 YoY (%)

(a) Plywood and Laminates 1971 2154 2355 2384 2416 22.6 1.3 7156 5704 25.5

(b) Ferro Alloys 280 260 227 197 173 -38.2 -12.3 597 510 17.1

(c) Power 232 199 182 152 203 -12.4 33.5 537 642 -16.3

(d) Others 139 284 209 193 213 53.1 10.1 615 308 100.0

(e) Cement 1214 1492 1376 1145 1573 29.6 37.3 4094 3291 24.4

Total Segment Revenue 3836 4390 4348 4073 4579 19.4 12.4 12999 10455 24.3

Less : Inter Segment Rev 228 232 190 159 184 -19.2 15.5 533 519 2.8

Net revenue 3608 4158 4158 3913 4395 21.8 12.3 12466 9936 25.5

Segment Results (EBIT) Q3FY11A Q4FY11A Q1FY12 Q2FY12 Q3FY12A YoY (%) QoQ (%) YTD FY12 YTD FY11 YoY (%)

(a) Plywood and Laminates 83 34 256 272 187 124.5 -31.0 715 445 60.6

(b) Ferro Alloys 53 44 24 8 -18 -134.2 -314.9 14 68 -79.4

(c) Power 19 122 20 19 -8 -141.0 -141.3 30 104 -70.6

(d) Others 32 60 47 49 60 89.6 23.2 156 47 229.0

(e) Cement 188 206 304 145 230 21.9 58.8 678 928 -26.9

Total 375 466 650 492 451 20.3 -8.3 1593 1591 0.1

EBIT margin (%) Q3FY11A Q4FY11A Q1FY12 Q2FY12 Q3FY12A YoY(bps) QoQ(bps) YTD FY12 YTD FY11 YoY(bps)

(a) Plywood and Laminates 4.2 1.6 10.9 11.4 7.8 352 -364 10.0 7.8 219

(b) Ferro Alloys 18.9 17.1 10.4 4.3 -10.5 -2935 -1472 2.3 13.2 -1092

(c) Power 8.1 61.3 10.8 12.2 -3.8 -1183 -1597 5.7 16.2 -1048

(d) Others 22.8 21.0 22.5 25.2 28.2 543 300 25.3 15.4 994

(e) Cement 15.5 13.8 22.1 12.6 14.6 -92 197 16.6 28.2 -1162

Cement capex plans delayed by 6 months- Kahalgaon unit facing land

acquisition issues

Cement: CMCL, CPILs 70.48% cement subsidiarys capex plans to quadrapule the cement

capacity( from 1.2mnt to 4.4 mnt) has gone haywire. Due to operational delays

commissioning of 1.6 mnt Cement Grinding unit at Guwahati and 1.75 mnt clinkerisation

plant at Lumshong, Meghalaya has been delayed by 6 months to September 2012. Post the

completion of the above capex program, CMCL's clinker capacity would increase from

current 0.79 mtpa to 2.55 mtpa while its cement manufacturing capacity will increase from

current 1.2 mtpa to 2.8 mtpa.

However the major concern is the uncertain delay in the 1.6mnt cement grinding

plant project at Kahalgaon (scheduled to be commissioned by September 2012

earlier) which has hit the roadblock due to land acquisition issues.

Plywood: CPIL Plans to expand plywood and veneer capacity by 30,000 CBM at Kandla,

Gujarat which will take total plywood installed capacity from current 122,420 CBM to

152,420 CBM.

Laminates & allied products: CPIL is expanding its laminate capacity by 1.2 million

sheets from current 2.4 million sheets at existing unit in Joka, Kolkata. This will take the

total laminate installed capacity to 3.6 million sheets. The company plans to double its Pre-

Laminated Boards capacity at the existing Chennai plant from 800,000 sqm currently to

1,600,000 sqm.


4/6



Project (Figures in Rs mn)Targeted

CompletionProject

CostEquity Debt

Cement

1.75 Mn Ton Clinkerisation Plant at Lumshnong, Meghalaya in the name of Star Cement Meghalaya Ltd.(Wholly Owned Subsidiary of the company)

Sept-12 6030 2030 4000

1.6 Mn Ton Cement Grinding unit along with 10 MW captive power project at Guwahati Sept-12 2533 783 1750

1.6 Mn Ton Cement Grinding unit along with 10 MW captive power project at Kahalgaon Uncertain 2451 751 1700

Total Capex by CMCL 11014 3564 7450

Capex by Meghalaya Power, CMCL's 50% associate (43 MW CPP) Mar-12 1980 650 1330

Plywood and Laminates

Green field Expansion at Kandla, Gujarat-30,000 CBM Feb-12 300 300

Laminates expansion of 1.2 mnsheets at Kolkata Feb-12 120 120

Pre-Laminated board expansion of 800,000 SQM at Chennai Feb-12 120 120

Total 540 540

Delay in cement capex leads to earnings downgrade

Delays in the cement capex program have led to downgrade in our volume numbers for

CMCL for FY12E/13E. Consequently we revise our earnings downward for FY12E/13E by

3.5%/18.3% and revise are price target by -27% to Rs60 (Rs82 earlier).

Earnings revision

FY12 FY13

Earlier Revised change Earlier Revised change

Net sales 16993 17299 2% 24478.2 23244 -5.0%

EBITDA 2694 2677 -1% 4782.6 4146 -13.3%

OPM 16% 15% -38 20% 18% -170

APAT 1571 1517 -3.5% 2018.0 1710 -15.3%

EPS 7.1 6.8 -3.5% 9.1 7.7 -15.3%

Absence of triggers in medium term leads to rating downgrade

The Board of directors have decided to withdraw the scheme of arrangement between CPIL

and SFCL for demerger of cement and ferro alloys business into a separate entity SFCL

(which was earlier approved by the Board on March 28, 2011) and will consider a fresh

scheme with a new appointed date in due course.

In view of the deferment of demerger scheme and the delay in cement capex we do not see

any triggers for the stock in the medium term. Consequently we downgrade our rating on

the stock from Buy to Accumulate.


5/6



Key Financials

Income Statement Balance Sheet

Y/E, Mar (Rs. m) FY10 FY11 FY12E FY13E Y/E, Mar (Rs. m) FY10 FY11 FY12E FY13E

Net Sales 11625 14289 17299 23244 Equity share capital 228 228 228 228

Growth (%) 11.8 22.9 21.1 34.4 Reserves & surplus 4639 6061 7355 8766

Expenditure 9169 11797 14622 19098 Networth 4867 6289 7582 8994

Cost of Materials 4659 5761 7790 9746 Minority Interest 1240 1558 1818 1985

Personnel Expenses 826 1036 1145 1368 Secured Loans 3873 5418 9923 9805

Other Exp 3684 5000 5687 7984 Unsecured Loans 332 429 134 134

EBITDA 2456 2492 2677 4146 Loan Funds 4204 5847 10057 9939

Growth (%) 31.8 1.5 7.4 54.8 Deferred tax liability 14 7 7 7

EBITDA margin (%) 21.1 17.4 15.5 17.8 Total Liabilities 10325 13700 19464 20925

Depreciation 452 508 584 1313 Gross Block 5455 6756 14899 15509

EBIT 2004 1984 2094 2832 Less: Depreciation 1960 2494 3077 4391

EBIT margin (%) 17.2 13.9 12.1 12.2 Net block 3495 4262 11821 11118

Other income 296 87 130 221 Capital WIP 365 181 41 41

Interest 252 232 300 972 Investment 5 56 224 391

PBT 2048 1838 1924 2081 Current Assets 6640 8025 9733 12415Total Tax 379 372 147 204 Inventories 2105 2517 2765 3802

Effective tax rate (%) 18.5 20.3 7.6 9.8 Sundry Debtors 1286 1522 2685 4158

Adjusted PAT 1832 1897 1777 1877 Cash and Bank bal 495 368 945 152

Growth (%) 51.8 3.6 -6.3 5.6 Loans and Advances 1380 2235 1957 2923

Net Margin (%) 15.4 13.2 10.2 8.0 Other Current assets 1374 1383 1381 1381

(Profit)/loss from JV's/Ass/MI 370 351 261 167 Current lia & Prov 1494 2192 2606 3292

PAT after MI 1462 1546 1517 1710 Current liabilities 1403 1877 2291 2978

E/O items Provisions 91 314 314 314

Reported PAT 1462 1546 1517 1710 Net current assets 5146 5833 7127 9123

Growth (%) 59.2 5.8 -1.9 12.7 Misc. exp 2 2 2 2

Total Assets 10325 13700 19465 20926

Cash Flow Key Ratios

Y/E, Mar (Rs. m) FY10 FY11 FY12E FY13E Y/E, Mar FY10 FY11 FY12E FY13E

Pre-tax profit 1752 1752 1794 1860 Profitability (%)

Depreciation 452 508 584 1313 EBITDA Margin 21.1 17.4 15.5 17.8

Interest Provided 252 232 300 972 Net Margin 15.4 13.2 10.2 8.0

Other Prov & W/O 0 -31 0 0 ROCE 24.2 17.3 13.4 15.1

Chg in working cap -358 -1038 -717 -2789 ROE 34.5 27.8 21.9 20.7

Tax & other -367 59 -147 -204 RoIC 26.0 22.2 15.1 14.9

Operating cash flows 1730 1481 1813 1152 Per Share Data (Rs)

Capital expenditure -1588 -3170 -4888 -610 EPS 6.6 7.0 6.8 7.7

Free Cash Flow 142 -1689 -3074 542 CEPS 8.6 9.2 9.5 13.6Other income 296 87 130 221 BVPS 21.9 28.3 34.1 40.5

Investments -1 -51 -168 -168 DPS 1.0 1.0 0.9 1.1

Investing Cashflow -1293 -3135 -4925 -557 Valuations (x)

Equity Capital Raised 0 0 0 0 PER 7.7 7.3 7.4 6.6

Loans Taken / (Repaid) 138 1643 4210 -117 P/CEPS 5.9 5.5 5.4 3.7

Interest Paid -252 -232 -300 -972 P/BV 2.3 1.8 1.5 1.3

Dividend paid (incl tax) -103 -269 -222 -298 EV / Sales 1.1 1.0 0.9 0.7

Income from investments 0 0 0 0 EV / EBITDA 5.9 6.3 6.7 4.5

Others Dividend Yield (%) 2.0 2.0 1.7 2.3

Financing Cashflow -216 1486 3688 -1388 Gearing Ratio (x)

Net chg in cash 105 -167 576 -793 Net debt/ Equity 0.8 0.9 1.2 1.0

Opening cash position 390 495 368 945 Net Debt/EBIDTA 1.5 2.2 3.3 2.4

Closing cash position 495 368 945 152 Working Cap Cycle (days) 59.5 47.2 60.0 73.3


6/6



Recommendation History: Century Plyboards (India) CPBI IN

Date Reports Reco CMP Target

01/11/2011 Century Plyboards Q2FY12 Result Update Buy 59 82




Recent Research Reports

Date Reports Reco CMP Target

23/01/2012 Ultratech Cement Q3FY12 Result Update Reduce 1,214 1,150

20/01/2012 Cement Sector Update

20/01/2012 Aban Offshore Company Update Accumulate 440 485

06/01/2012 GMR Infrastructure Event Update UR 23 UR

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