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Upgrade earnings Maintain BUY

June 2, 2010

BUY
Price Rs 53 Sensex Target Price Rs 80 16,572

Price Performance
(%)

1M (12) (6)

3M 21 20

6M 12M 27 32 22 9

Absolute Rel. to Sensex


Source: Bloomberg

Century Plyboards (CPL) Q4 & FY10 numbers are ahead of our expectations on account of better than expected performance of power division and higher other income (forex gain). Revenues for the quarter stood at Rs3.25 bn (+19.3% yoy), driven by 15% growth in cement segment, 20% growth in plywood & laminates segment (P&L) and 88% growth in power segment. EBITDA at Rs 634 mn grew by 169% on account 42% growth in EBIT of power segment and EBIT of Rs50 mn in P&L segment (Q4FY09 Plywood & laminate segment reported negative EBIT of Rs72mn). Cement segment EBIT grew by 5% yoy. CPL has reported Rs 82 mn of forex gain in Q4FY10 as compared to Rs17 mn of forex loss. Consequently net profit for the quarter at Rs510mn grew by 283% yoy. We would like to highlight that cement segment in Q4FY10 has seen net realisation of Rs4938/ton implying FY10 (March 2010) exit prices of cement closer to ~Rs310/bag far higher than our FY11 expectations Rs280/bag. Consequently on account of better than expected cement realisation and better than expected profitability of the power division we are upgrading our FY11 earnings by 7% for FY11E (EPS of Rs5.8) and for FY12E by 12% (EPS of Rs9.9). CPL is all set to capitalize on the demand supply gap in the NER region with its cement capacity set to expand from current 1.2mtpa to 4.4 mtpa by mid FY12. Further its new CFS at Jingira pool at Kolkata with a capacity of 1,20,000 TEUs (current capacity of 40000 TEUs) is all set to start operation by Q2FY11. The kickstart of volume led growth in cement revenues and full scale operations of the CFS business in FY12 will lead to accelerated growth and significant improvement in its return ratios. Maintain BUY with a target of Rs80.

Stock Details
Sector Reuters Bloomberg Equity Capital (Rs mn) Face Value(Rs) No of shares o/s (mn) 52 Week H/L Market Cap (Rs bn/USD mn) Daily Avg Volume (No of sh) Daily Avg Turnover (US$mn)

Cement CNTP.BO CPBI@IN 222 1 222 63/34 12/255 341499 0.4

Revenues grow by 19.3%yoy for the quarter


Revenues for the quarter at Rs 3.2 bn have grown by an impressive 19.3%, driven by the 15.3% revenue growth in the cement segment, 20% growth in P&L segment and 88% growth in the power segment. Logistic & other segment (though a very small contributor to overall revenues) at Rs 152 mn grew by 2X. EBIDTA growth of 169%yoy for the quarter

Shareholding Pattern (%)


M10 Promoters FII/NRI Institutions Private Corp Public
Source: Capitaline

D09 85.9 0.0 1.5 8.7 3.9

S09 86.1 0.0 1.5 8.5 3.8

85.9 0.1 1.5 8.2 4.4

EBITDA at Rs 634 mn grew by 169% on account 42% growth in EBIT of power segment and EBIT of Rs50 mn in P&L segment (Q4FY10 Plywood & laminate segment reported negative EBIT of Rs72mn). However on a sequential basis P&L segment reported a 64% decline in EBIT and EBIT margins of just 2.9% (as compared to EBIT margins of 8.9% in Q3FY10) on account of bad debt write offs of Rs24.7 mn and year additional year end turnover discounts of Rs45 mn paid to dealer. Adjusting these two charges P&L segment margins would have stood close to 6.9%. Cement segment EBIT at Rs 315mn grew by 5% yoy. Net profit growth of 283% yoy for the quarter CPL has reported Rs 82 mn of forex gain in Q4FY10 as compared to Rs15 mn of forex loss. Consequently net profit for the quarter at Rs510mn grew by 283% yoy. For FY10 CPL has reported forex gain of Rs257 mn. Resultant FY10 net profit stood at Rs1.46 bn (our estimates of Rs1.16 bn) registering a growth of 155%. Financial Snapshot (consolidated) Rs Mn
AEPS APAT 572 1,456 1,298 2,202 (Rs) 2.6 6.6 5.8 9.9 EV/ EBITDA 8.7 6.6 7.0 4.0 P/BV 3.2 2.4 2.0 1.5 Div Yld (%) 0.0 1.9 1.4 1.8 RoE (%) 15.7 29.6 21.5 27.6 P/E 22.5 8.9 9.9 5.9

Ajit Motwani ajit.motwani@emkayglobal.com +91 22 6612 1255 Chandan Asrani chandan.asrani@emkayglobal.com +91 22 6612 1241

Net YEMar FY09 FY10E FY11E FY12E Sales 10,398 11,629 13,426 19,303

EBITDA (Core) 1,863 2,450 2,735 4,952 (%) 17.9 21.1 20.4 25.7

Emkay Global Financial Services Ltd

Result Update

Century Plyboards (India) Ltd

Century Plyboards (India) Ltd Cement realisation at Rs 4938/ton EBIT/ton at Rs 1236

Result Update

CMCL, CPLs 70.48 % has (reported as cement segment in consolidated results) has registered revenue growth of 15%. Though volumes for the quarter have declined by 4% yoy cement realisation have improved 20% yoy. Q4FY10 net realisation at Rs4938/ton has meant that FY10 exit prices of cement are closer to ~Rs310/bag far higher than our FY11 expectations Rs280. Quarterly Results
Particular (Rs mn) Gross sales Less:excise duty Less: Sales tax/VAT Net Sales / Income from Operations Q4FY09 2935 -22 228 2729 Q1FY10 3004 91 232 2681 Q2FY10 3256 139 280 2837 Q3FY10 3245 134 260 2851 Q4FY10 3638 155 227 3255 yoy 24% NM 0% 19% qoq 12% 16% -13% 14%

Total Expenditure Raw Material Consumed Stock Adjustment Purchase of Finished Goods Employee Expenses Other Expenses Operating Profit Other Income EBITDA Depreciation EBIT Interest PBT Tax APAT Minority Interest Net Profit after Minority Interest

2493 989 165 -31 230 1140 236 -17 219 103 116 18 98 -36 133 52 82

2022 922 39 58 173 831 659 122 781 99 682 56 626 75 550 121 429

2223 1130 -165 106 202 950 614 25 639 104 535 58 477 63 414 99 315

2332 1098 7 56 210 962 519 77 597 125 472 67 405 47 358 43 314

2621 1257 51 119 241 953 634 72 707 124 582 42 541 30 510 107 404

5% 27% -69% -483% 5% -16% 169% NM 223% 21% 402% 127% 454% -185% 283% 106% 393%

12% 14% 647% 114% 15% -1% 22% -6% 18% 0% 23% -37% 34% NM 43% 145% 29%

Margins EBIDTA PBT PAT Tax rate 8.6% 3.6% 4.9% -36.6% 24.6% 23.3% 20.5% 12.1% 21.7% 16.8% 14.6% 13.3% 18.2% 14.2% 12.5% 11.7% 19.5% 16.6% 15.7% 5.6% 10.8% 13.0% 10.8% 42.2% 1.3% 2.4% 3.1% -6.1%

Emkay Research

2 June 2010

Century Plyboards (India) Ltd


Segmental Results
Segment Revenue (Net) (Rs mn) (a) Plywood and Laminates (b) Ferro Alloys (c) Power (d) Others (e) Cement Total Segment Revenue Less : Inter Segment Revenue Segment Revenue after Inter Segment Adj Q4FY09 1447 52 121 48 1093 2760.7 31.4 2729.4 Q1FY10 1376 67 80 43 1152 2718.2 36.9 2681.3 Q2FY10 1505 56 78 124 1109 2873.2 35.1 2838.1 Q3FY10 1583 95 122 86 991 2877.2 26.3 2850.9 Q4FY10 1732 182 228 152 1260 3554.4 299.3 3255.1

Result Update

yoy 20% 249% 88% 217% 15% 28.7% 854.3% 19.3%

qoq 9% 91% 87% 76% 27% 23.5% 1039.1% 14.2%

Segment Results (EBIT) (Rs mn) (a) Plywood and Laminates (b) Ferro Alloys (c) Power (d) Others (e) Cement Total

Q4FY09 -72 -42 40 7 302 235

Q1FY10 140 -9 21 4 439 594

Q2FY10 148 -1 -3 21 369 535

Q3FY10 141 -10 46 32 214 423

Q4FY10 50 36 57 40 315 499

yoy NM NM 42% 509% 5% 113%

qoq -64% NM 26% 26% 47% 18%

EBIT margin (%) (a) Plywood and Laminates (b) Ferro Alloys (c) Power (d) Others (e) Cement

Q4FY09 -5% -80% 33% 14% 28%

Q1FY10 10% -14% 26% 10% 38%

Q2FY10 10% -1% -4% 17% 33%

Q3FY10 9% -10% 37% 37% 22%

Q4FY10 3% 20% 25% 27% 25%

yoy 8% 100% -8% 13%

qoq -6% 30% -12% -11%

Upgrading earnings
As highlighted earlier CPLs 70.48% subsidiary CMCL in Q4FY10 has seen net realisation of Rs4938/ton implying FY10 (March 2010) exit prices of cement closer to ~Rs310/bag far higher than our FY11 expectations Rs280/bag. Consequently on account of better than expected cement realisation and better than expected profitability of the power division we are upgrading our FY11 earnings by 7% for FY11E (EPS of Rs5.8) and for FY12E by 12% (EPS of Rs9.9).

Earnings Revision
Rs mn Earlier FY11E Sales EBIDTA EBIDTA (%) Net Profit After Minority EPS 12887 2776 22% 1210 5.4 Revised FY11E 13426 2735 20% 1298 5.8 Change 4% -1% -1% 7% 7% Earlier FY12E 18087 4906 27% 1965 8.8 Revised FY12E 19303 4952 26% 2202 9.9 Change 7% 1% -1% 12% 12%

Emkay Research

2 June 2010

Century Plyboards (India) Ltd

Result Update

CMCL on a massive capex drive - capacity to increase more than 3X


In order to capitalize on the strong demand traction in the NE region and to maintain its market leadership position by leveraging its strong brand and distribution network, CMCL is all set to expand its cement manufacturing capacity by more than 3X. 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 quadruple from current 1.2 mtpa to 4.4 mtpa by mid FY12. Further, CMCL is likely to have captive power capacity of 80 MW as compared to the current 17 MW. CMCL on a massive capex drive
Project (Figures in Rs mn) Targeted Completion 1.75 Mn Ton Clinkerisation Plant at Lumshnong, Meghalaya in the name of Star Cement Meghalaya Ltd. (Wholly Owned Subsidiary of the company) 1.6 Mn Ton Cement Grinding unit along with 10 MW captive power project at Guwahati 1.6 Mn Ton Cement Grinding unit along with 10 MW captive power project at Kahalgaon Total Capex by CMCL Capex by Meghalaya Power, CMCL's 50% associate
Source : Company

Project Cost 6030

Equity

Debt

Current Status

11-Sep

2030

4000

Already placed the order for plant. Tender for Mechanical works for the plant has been released. Civil Contractor finalized.

11-Sep

2533

783

1750

Placed the order for the grinding unit. Tender for mechanical works for the plant has also been released. Civil Contractor finalized.

11-Sep

2451

751

1700

Placed the order for the grinding unit.

11014 11-Sep 2000

3564 670

7450 1330

CFS segment continues to grow


CPL which already operates a CFS with capacity of 40000 TEUS at Kolkata port, is all set to start operations at its new CFS at Jingira pool with a capacity of 1,20,000 TEUs by Q2FY11. We believe that with this 3 fold increase in capacity in the heavily congested Kolkata port, the CFS business could turn out to be the primary growth driver for the standalone company.

Emkay Research

2 June 2010

Century Plyboards (India) Ltd Maintain BUY

Result Update

CPL is all set to capitalize on the demand supply gap in the NER region with its cement capacity set to expand from current 1.2mtpa to 4.4 mtpa by mid FY12. Further its new CFS at Jingira pool at Kolkata with a capacity of 1,20,000 TEUs (current capacity of 40000 TEUs) is all set to start operation by Q2FY11. The kick-start of volume led growth in cement revenues and full scale operations of the CFS business in FY12 will lead to accelerated growth and significant improvement in its return ratios. Maintain BUY with a SoTP based target of Rs80. We have valued CPL's core plywood & laminates business at an EV/EBIDTA multiple of 5X and the ferro alloys business at just 3X EV/EBIDTA. We have valued CPL's CFS business at 7X EV/EBIDTA, as compared to 8X - 8.5X EV/EBIDTA valuations for its peers. We have valued CPL's 70.48% cement subsidiary, CMCL at an EV/ton of USD 110 (capital cost of setting up a cement plant).
Business segment Target EV/Ton (USD) USD = INR Capacity (FY2012) (MTPA) Value of Cement business CPL' stake Value attributable to CPL ADD: Value of Non Cement Business Plywood, Veneer & Laminates Ferro Alloys CFS Power Total Value Of Non Cement Business Total Enterprise value Less: Consolidated net debt* Fair Value 6,352 17,854 28.6 80.4 5X EV/EBIDTA 3X EV/EBIDTA 7X EV/EBIDTA 1.5X P/B 8496 4,392 624 2,474 1,005 38.2 24,206 109.0 19.8 2.8 11.1 4.5 Valuation Measure EV/ton Rs mn 110 46 4.4 22,290 70.50% 15,710 70.7 100.3 Rs/share

*Note: We have taken net standalone debt and added the 70.48% debt on CMCL debt only

Emkay Research

2 June 2010

Century Plyboards (India) Ltd


Key Financials
Income Statement Y/E, Mar (Rs. m) Net Sales Growth (%) Expenditure Decrease/(Increase) in stocks Cost of Materials Excise Duty & Cess on Stocks Manufacturing expenses Personnel Expenses Operating, Admin & Selling Exp EBITDA Growth (%) EBITDA % Depreciation EBIT EBIT % Other income Interest PBT Current tax Total Tax Effective tax rate (%) Adjusted PAT Growth (%) Net Margin (%) Reported PAT Cash Flow Y/E, Mar (Rs. m) Pre-tax profit Depreciation Interest Provided Other Prov & W/O Oper Profit before W.C chgs Chg in working cap Tax & other Operating cash flows Capital expenditure Investments Share Application Money Dividend & other Income Investing ash flows Borrowings(net) Repayment of Loans Amalgamation Expenses Proceeds from Issue of Shares Interest paid Dividend paid in tax Financing cash flows Net Increase in Cash Cash and Cash equivalents FY09 859.2 393.2 249.4 224.6 1726 -375.8 -167.6 1183.1 -1097.8 5.4 -96.0 6.5 -1181.9 1094.0 -389.8 0.0 -1.5 -244.5 -257.6 200.5 201.7 390.2 FY10 2044.2 451.1 251.6 0.0 2747 -696.9 -367.0 1683.1 -1247.0 -1.3 0.0 0.0 -1248.3 138.4 0.0 0.0 0.0 -251.6 -38.4 -151.6 283.2 673.4 FY11E 2011.4 474.5 294.1 0.0 2780 1066.3 -422.1 3424.2 -7515.0 -167.5 0.0 0.0 -7682.5 4874.0 0.0 0.0 0.0 -294.1 -190.6 4389.3 131.0 626.4 FY12E 3387.9 959.7 735.5 0.0 5083 -2183.7 -667.2 2232.2 -2564.5 -167.5 0.0 0.0 -2732.0 2429.2 0.0 0.0 0.0 -735.5 -255.1 1438.6 938.8 1565.2 FY09 10397.7 19.9 8535.1 42.6 4379.3 -14.4 0.0 710.8 3416.7 1863 -12.8 17.9 393.2 1469 14.1 29.2 293.1 859 117.4 -1.1 -0.1 572.0 -48.8 5.5 572 FY10 11629.0 11.8 9178.7 -87.6 4751.8 17.0 0.0 829.8 3667.7 2450 31.6 21.1 451.1 1999 17.2 296.6 251.6 2044 367.0 380.3 18.6 1456.0 154.5 12.2 1456 FY11E 13426.1 15.5 10690.6 66.6 5500.4 0.0 1134.1 845.2 3144.4 2735 11.6 20.4 474.5 2261 16.8 44.6 294.1 2011 422.1 422.1 21.0 1297.9 -10.9 9.6 1298 FY12E 19303.5 43.8 14351.2 73.8 6733.9 0.0 2137.7 1066.6 4339.2 4952 81.0 25.7 959.7 3993 20.7 130.9 735.5 3388 667.2 667.2 19.7 2202.2 69.7 11.3 2202 Balance Sheet Y/E, Mar (Rs. m) Equity share capital Share Capital Suspense Reserves & surplus Networth Minority Interest Secured Loans Unsecured Loans Loan Funds Deferred tax liability Total Liabilities Gross Block Less: Depreciation Net block Capital WIP Capex on New Proj Investment Current Assets Inventories Sundry Debtors Cash and Bank bal Other Current assets Loans and Advances Current lia & Prov Current liabilities Provisions Net current assets Misc. exp Total Assets Key ratios Y/E, Mar Profitability (%) EBITDA Margin Net Margin ROCE ROE Per Share Data (Rs) EPS CEPS BVPS DPS Valuations (x) PER P/CEPS P/BV EV / Sales EV / EBITDA Mcap / Sales Mcap / EBIDTA Dividend Yield (%) Gearing Ratio (x) Net debt/ Equity Total Debt/Equity 1.0 1.1 0.8 0.9 20.6 9.1 3.2 1.4 8.7 1.1 6.9 0.0 8.1 6.2 2.4 1.2 6.6 1.0 5.3 0.0 2.6 5.8 16.4 0.0 6.6 8.6 22.2 1.0 17.9 5.5 19.2 15.7 21.1 12.2 24.1 29.6 FY09 FY10 FY09 227.5 0.0 3423.3 3651 972.6 3963.3 102.4 4066 2.3 8692 4569.0 1543.8 3025 199.2 776.9 3.7 5686 1698.8 1094.7 390.2 1288.7 1213.7 1003 912.6 90.8 4683 3.9 8692 FY10 227.5 0.0 4698.0 4926 1240.3 3872.5 331.6 4204 12.8 10383 5439.0 1959.0 3480 592.2 761.0 5.0 6997 2107.1 1285.7 495.4 1373.8 1734.5 1454 1421.0 32.6 5543 1.7 10383

Result Update

FY11E 227.5 0.0 5805.4 6033 1531.6 8944.0 134.1 9078 12.8 16656 5359.4 2433.5 2926 8847.7 100.0 172.5 6690 2196.5 2136.7 626.4 108.2 1622.5 2083 2050.0 32.6 4608 1.7 16656

FY12E 227.5 0.0 7752.6 7980 2050.1 11373.2 134.1 11507 12.8 21550 16435.5 3393.2 13042 336.2 100.0 340.0 10815 2878.9 3309.1 1565.2 108.2 2953.4 3085 3052.1 32.6 7730 1.7 21550

FY11E 20.4 9.6 17.1 21.5 5.8 8.0 27.2 0.7 9.1 6.6 2.0 1.3 7.0 0.8 4.7 1.3 1.4 1.5

FY12E 25.7 11.3 21.6 27.6 9.9 14.2 35.9 1.0 5.3 3.7 1.5 0.9 4.0 0.6 2.6 1.7 1.2 1.4

Emkay Research

2 June 2010

Century Plyboards (India) Ltd

Result Update

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Emkay Research

2 June 2010