Century Ply Industries Limited: Q1FY24 Concall KTAs

Sharp cut in volume guidance, margin guidance maintained | Demand has been weak in
all segments in Q1 | Timber prices rose in June, further it increased by 5% in July-23.
Although, chemical prices have reduced | Broadly, expansion plan is on track.

Guidance, pricing, demand and cost trends

 FY24 growth guidance: Ply volume growth guidance is reduce to 6-7% vs 13% earlier
due to weak Q1. MDF volume growth guidance is cut to 20% vs 30% earlier owing to
deferment of Hoshiarpur plant stabilisation and muted demand. Similarly, laminates
volume growth guidance is reduced to 12-15% vs 25% earlier owing to delay in
commissioning of plant and sup-par demand. Co maintained margins guidance for all
segments.

FY24 guidance Volume growth % Value growth % EBITDA margin %

Plywood 6-7 8-10 13-14
MDF 20 Above 20 22-25
Laminates 12-15 12-15 13-15
Particleboard Flat Flat/de-growth 20

 Price: It took price increase in ply in July-23. It has further plans to take some price hike
in ply division to absorb increasing raw material prices.
 Demand: Demand has been weak in all segments in Q1. Due to heavy rain, demand
traction has not change much in Q2 so far. Increase in series of interest rate has led to
people spending less on interior. However, management is hopeful, eventually, demand
will pick up.
 Raw material: Timber prices rose in June, and further increased by 5% in July-23. During
next few months this trend will continue. Chemicals prices have reduced, which is
helping to contain increasing raw material prices. It is also importing timber from last
few months.

Segmental commentary:

 Plywood:
 Ply has performed well in challenging market situation in Q1. Commercial veneer use is
to feed plywood division requirement (only lower grades are sold).
 Laminate:
 Incurred higher expenses for launching new range of laminates (Sainik laminates)
designed by Manish Malhotra. In Q1, INR 40mn is one-time non-recurring expense and
INR 10-15mn will be recurring expense owing to higher ad and employee expense.
 Currently, contribution from export is above 30%. As export share has increased, so
realisation has declined (domestic realisation is higher than export). Going forward,
domestic share is expected to increase, which will lead to improvement in realisation.
 MDF:
 Margin reduced in this segment due to higher timber prices in Q1.
 It targets to gradually increase value added product (VAP) sales from 34% to 40% in a
year time. Therefore, 34% of sales goes to consumer and remaining MDF sales is to OEM
directly/indirectly. Higher VAP will help to protect margin.
 About 25-30K CBM is monthly MDF import run-rate in India (mainly in south). The
global price increase taken in MDF is holding up currently
 Right now, Century has minimal sales in south markets. It will pick up once new MDF
plant is commissioned.
 Particle board:
 Revenue and margin are under pressure. Going forward, management expects recovery
in both revenue and margin.
 Earlier continuous-press was just with Associate Decor. Now, Merino, Greenlam and
Century all are installing conti press, as it helps to produce different size products, lower
cost of production by 8-10%. Although, it comes at the expense of higher Capex.
 Century also exporting particle board too basis demand.

Project update
 Capex guidance: FY24/25E: ~INR 11/4bn
 Ply capex: Capacity will increase by 80K CBM by FY25E (15-20 K CBM/60 K CBM by
debottlenecking/ Hoshiarpur). Hoshiarpur capacity is expected by Q1FY25.
 MDF capex: MDF brownfield expansion 350 CBM/day in Punjab became operational in
Mar-23. It is stabilised from July-23. The Greenfield MDF plant in AP of 950 CBM/day is
expected by early Q4FY24 (Capex INR 7bn).
 Laminate capex: The Greenfield laminate expansion in AP is expected to be
commissioned in two phases, first phase (0.855mn sheet) and second phase (2mn sheets).
First phase is expected by Q3FY24. Its capex for both phase is INR 2bn. Phase 1 focus
will be export focused (large size tiles), it will add 14*6 and 10*4 size laminates in
Company’s product category.
 Particle board capex: The Greenfield particle board (Chennai) capacity of 800 CBM/day
is expected by FY25 end (Capex INR 5.5bn vs INR 5bn earlier). Focus of this plant will be
pre-laminated (value added product).

Other highlights
 Anti-dumping duty: No progress on anti-dumping duty. Commerce ministry has
approved it. Now, it is stuck at finance ministry approval. Now, company is not taking
much effort to get this approval.
 PLI scheme: Govt. is considering PLI in furniture industry, it will be game changer for
MDF and particle board industry, if implemented.