Century Plyboards: Shift from unorganized to organized to be a secular tailwind

Century Plyboards

Initiating Coverage | Sector: Building products

Century Plyboards

BSE Sensex

27,645

S&P CNX

8,318

CMP: INR185

TP: INR250 (+35%)

Buy

First Choice

Shift from unorganized to organized to be a secular tailwind

Stock Info

Bloomberg

Equity Shares (m)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

M.Cap. (INR b)

M.Cap. (USD b)

AvgVal. INRm/Vol‘000

Free float (%)

CPBI IN

222.2

262 / 62



11/21/135

46.5

0.7

120/839

26.7



Financial Snapshot (INR Million)

Y/E March

2015 2016E 2017E

Net Sales

15,884 18,223 21,179

EBITDA (%)

Adj PAT

EPS (INR)

Gr (%)

BV/Sh (INR)

RoE (%)

RoCE (%)

P/E (x)

P/BV (x)

17.0

6.7

147.2

17.5

43.7

26.0

27.6

10.6

17.2

8.2

21.8

24.0

39.3

30.0

22.7

7.7

17.3

10.0

23.0

32.0

35.8

32.9

18.5

5.8

1,490 1,814 2,230

India’s INR200b plywood market is largely unorganized (77% of the market),

with the organized market dominated by Century Plyboards (CPBI) and Greenply

Industries (MTLM) - the only two national brands.

With reduction in excise duties (from 16% to 12%), superior product quality,

brand pull led by aggressive advertising campaigns, likely implementation of

GST, we expect share of organized sector to improve.

We like CPBI for its brand leadership (25% market share), improving return ratios

(26% RoCE in FY15; expected to reach 33% by FY17), superior EPS growth outlook

(22% CAGR over FY15-17), and strong medium-term growth visibility. Initiate

with ‘Buy’ with PT of INR250.

Duopoly market with strong headroom for growth

India’s INR200b plywood market is largely unorganized – fragmented players

account for 77% of the market. Century Plyboards (CPBI) and Greenply

Industries (MTLM) dominate the organized market. They are the only pan-India

players and enjoy ~25% share each of the organized plywood market. While

the overall plywood market is growing at 5-7%, organized players are growing

at 10-15%. There is a shift from the unorganized to the organized segment

(estimated at 200bp annually), largely driven by (1) reduction in excise duty

from 16% to 8% in 2006 (currently 12%) 2) superior product quality (organized

players offer warranties and termite/borer-resistant products), (3) better

product aesthetics, and (4) brand pull (aggressive advertising campaigns).

Predominantly retail revenues; expanding distribution network

Shareholding pattern (%)

As on

Mar-15 Dec-14 Mar-14

Promoter

73.3

74.5

72.9

DII

3.3

2.8

0.0

FII

8.6

6.2

1.3

Others

14.8

16.5

25.9

FII Includes depository receipts

Stock Performance (1-year)

Around 87% of CPBI’s products are marketed through the price-inelastic retail

network and just 10% are marketed through the discount-driven institutional

network. To further its reach, CPBI has expanded its plywood dealer network

at 13% CAGR over FY12-14 from 1,106 dealers to 1,424 dealers. Further, it has

expanded its presence from metros and large cities (Top 100 towns with

population over 500,000) to Tier-1 towns (Top 500 towns with population

more than 100,000), thus widening its product reach.

Valuation and view

With brand leadership in a duopoly market coupled with minimal penetration

of organized players, we believe CPBI is well-placed to capture the strong

growth potential of India’s plywood and laminates market. Brand pull, along

with likely implementation of reforms like GST would further accelerate

growth, in our view. Given improving return ratios (26% RoCE in FY15;

expected to reach 33% by FY17), strong EPS growth (22% CAGR over FY15-17),

and strong medium-term growth visibility, we believe CPBI deserves multiples

in line with similar building product leaders. We initiate coverage with a

Buy

rating. Our target price is INR250 (25x FY17E EPS).

30 June 2015

Century Plyboards

Business overview

Century Plyboards (CPBI) operates in four key verticals:

Exhibit 1: Revenue mix

Logistics Others

Laminates

19%

Exhibit 2: EBITDA mix

Logistics

12%

Laminates

13%

Others

-1%

Plywood

74%

Plywood

74%

Source: Company, MOSL

Plywood (74% of revenues)

CPBI is India’s leading plywood company, with six manufacturing facilities – near

Kolkata in the East, near Kandla in the West, near Chennai in the South, near Delhi in

the North, near Guwahati in the North East, and near Roorkee in Central India.

Additionally, it has one unit in Myanmar for sourcing face veneer. It commands

~25% of the organized plywood market in India. It has a timber peeling capacity of

210,000 cubic meters and plywood capacity of 210,000 cubic meters. CPBI

manufactures and markets plywood in different brands like PF, Sainik, Maxima, etc.

Laminates (19% of revenues)

CPBI is one of the top-3 laminate producers in India and has a fully integrated plant

near Kolkata, with a capacity of 4.8m sheets. It has 700 SKUs in this segment and is

adding almost 100 new SKUs every year.

Logistics – container freight stations (CFS; 4% of revenues)

CPBI has East India’s largest and first privately owned CFS, located near Kolkata Port.

Spread across ~100,000 square meters, it can handle up to 160,000 TEUs.

Furniture trading and modular kitchen (3% of revenues)

CPBI entered the furniture trading business in 2012, with two pilot retail showrooms

at Kolkata and Bangalore. With all modular kitchens available in India having

durability issues, as they are made of MDF, CPBI has entered this market with a

differentiation. It uses waterproof plywood, which is more durable than MDF.

30 June 2015

Century Plyboards

Organized plywood sector to post strong growth

Impending implementation of GST to give further fillip to organized sector



India’s plywood market is pegged at INR200b, with the organized sector accounting for

a small share (~23%). Century Plyboards (CPBI) and Greenply Industries (MTLM)

dominate the organized market, with each enjoying ~25% share.

We expect a shift from unorganized to the organized sector, led by reduction in excise

duty, brand investments, better product quality and likely implementation of GST.

Post ban on exporting raw timber from Myanmar (from April 1, 2014), only processed

timber can be exported. CPBI and MTLM have put up veneer plants in Myanmar,

ensuring raw material security for them as against the unorganized sector.

With GST implementation, we expect a level playing field for organized players which

can avail input tax credits as well as benefit from free flow of goods within states. This

should drive further shift towards organized player’s products due to reduced prices.

INR200b Indian plywood market growing at 5-7% annually

India’s plywood market is pegged at INR200b, with the branded segment accounting

for a small share (~23%) and majority (~77%) of the industry serviced by the

unorganized sector. A young population (average age of 25 years), rapid

urbanization (urban population to grow from 31% to 40% by 2020), rising proportion

of nuclear households (expected decline in average household size from 4.6 to 4.1

individuals), and rising affluence and affordability are growth drivers for the

plywood industry which has been posting annual growth in the range of 5-7%.

Duopoly market with strong headroom for growth

While the overall plywood market is growing at 5-7%, organized players are growing

at 10-15%. Century Plyboards (CPBI) and Greenply Industries (MTLM) dominate the

organized market. They are the only pan-India players and enjoy ~25% share each of

the organized plywood market. There is a shift from the unorganized to the

organized segment (estimated at 200bp annually), largely driven by (1) reduction in

excise duty from 16% to 8% in 2006 (currently 12%) 2) superior product quality

(organized players offer warranties and termite/borer-resistant products), (3) better

product aesthetics, and (4) brand pull (aggressive advertising campaigns).

Exhibit 3: Plywood industry largely unorganized currently

Organized

23%

Exhibit 4: Market share of organized players

Centuy

Ply, 25%

Others, 50

Unorganize

77%

Source: Company, MOSL

Green

Ply, 25%

Source: Company, MOSL

30 June 2015

Century Plyboards

Raw material security – entry barrier favoring large organized players

In plywood manufacturing, three raw materials are used: (i) face timber (~22% of

total raw material cost) – the outermost layer, (ii) core timber (~64% of total raw

material cost) – generally, low quality timber below face timber, and (iii)

chemicals/adhesives and other raw material (~14% of overall raw material cost).

Face timber is high quality premium timber, usually imported from Myanmar,

Europe, Indonesia or Africa. Core timber is plantation timber and is available in

abundance in India; it has a life cycle of 6-7 years.

Exhibit 5: Face timber is most expensive

Chemicals,

14%

Face

veneer, 22

Exhibit 6: Parts of plywood

Core

vineer, 64%

Source: Company, MOSL

Ban on export of raw timber by Myanmar has altered supply dynamics

Myanmar, where superior quality timber is available, banned the export of raw

timber from April 1, 2014. Earlier, Indian players used to import the raw timber and

process it at their factories in India. However with ban on raw timber exports, only

processed timber from Myanmar can be imported. This move by Myanmar was

aimed at establishing a domestic wood-processing industry, which would enhance

value-addition, generate duties/taxes, and increase employment. However, for

Indian plywood manufacturers, this restricted critical raw material supplies.

In order to combat this move by the Myanmar government, CPBI and MTLM have

put up veneer plants in Myanmar, giving them access to high quality face timber;

the unorganized sector has not been able to replicate this. The unorganized players

are now largely dependent on CPBI and MTLM for their high quality raw material

needs. In this scenario, CPBI and MTLM would be able to dominate the higher

growth, quality-conscious segment, improving their brand image and margins.

A positive implication of ban on raw timber exports is in the form of lower logistics

costs on transporting processed timber. The cost of transporting raw timber from

Myanmar is very high because of its bulky nature. Once converted to veneers, the

bulk weight reduces substantially, as 30% of the moisture content in logs is

removed, and post-peeling, the weight reduces by another 30%. In veneer form, the

total bulk handling weight reduces by 50%, thus reducing logistics costs.

30 June 2015

Century Plyboards

GST – a potential game changer for organized players

Organized players were at a disadvantage historically due to high excise duty of

16%, which was reduced to 8% in 2006 and is now pegged at 12%. However, despite

lower excise duty indirect taxes in India have a cascading effect on interstate

transfers, which results in higher taxation for organized players as against

unorganized players. With GST implementation, this arbitrage will fade, creating a

level playing field for organized players. Apart from reduction in production cost due

to availability of tax credit, GST implementation will also benefit organized players in

logistics, with free flow of goods within states. We believe GST implementation will

result in a huge shift from the unorganized market to the organized market, as

consumer preference will shift towards branded products due to reduced price gap.

30 June 2015

Century Plyboards

Century Plyboards set to outpace industry growth

Key drivers: Strong brand, improving distribution, product expansions



Century Ply,

along with

Greenply

is the largest brand in the organized Indian plywood

industry. Though MTLM enjoys almost equal share, Synovate indicates much higher

brand recall for Century Ply. Sarda Ply (3 largest), is not even 1/5 the size of CPBI.

Around 90% of CPBI’s products are marketed through the retail network. Only 10% are

marketed through the discount-driven OEM network.

We expect plywood revenues to post 14% CAGR and laminate revenues to post 19%

CAGR over FY15-17, with stable margins in both divisions.

Century Plyboard – Brand of choice in the Indian plywood industry

Century Ply,

along with

Greenply

is the largest brand in the organized Indian

plywood industry. It commands 25% share in the organized market. While Greenply

Industries (MTLM) is of equal size, the third largest player, Sarda Plywood not even

1/5

its size. Its brand recall is significant, with

Century Ply

commanding top of the

mind awareness of 98% according to Synovate. CPBI invests regularly in marketing

activities, with annual ad spends at 3% of sales (4% for plywood division). We

believe CPBI has built its brand reputation, led by consistent quality, pioneering

product features like termite/borer resistance, and warranties.

Century Ply

commands ~5% pricing premium over

Greenply

and 20% pricing premium over

unorganized products.

Exhibit 7: Century Ply and Green Ply dominate the organized market

Others, 38%

Century Ply, 25%

Uniply, 3%

Kitply, 2%

Sarda

Archid, 3% Plywood, 4%

Green Ply, 25%

Source: Company, MOSL

Exhibit 8: Advertising investments average 3% annually

Ad spend (INR m)

Ad spend to sales (%)

4.1%

3.0%

2.2%

2.6%

2.5%

273

FY10

414

FY11

438

FY12

484

FY13

340

FY14

Source: Company, MOSL

30 June 2015

Century Plyboards

Celebrities part of regular brand advertisements

Exhibit 9: Aggressive marketing campaigns keep Century Ply ahead of the market

Source: Company, MOSL

Exhibit 10: Sub-brands

Source: Company, MOSL

30 June 2015

Century Plyboards

Predominantly retail revenues; expanding distribution network

Around 87% of CPBI’s products are marketed through the price-inelastic retail

network and just 10% are marketed through the discount-driven institutional

network. To further its reach, CPBI has expanded its plywood dealer network at 13%

CAGR over FY12-14 from 1,106 dealers to 1,424 dealers. Further, it has expanded its

presence from metros and large cities (Top 100 towns with population over 500k) to

Tier-1 towns (Top 500 towns with population more than 100k), thus widening its

product reach. In the smaller towns, it has been penetrating the market with its

more affordable range of products like Sainik and Maxima which are driving growth.

Currently, CPBI derives 50% if its revenues from Top 50 towns, 70% of revenues

from Top 100 towns, and ~92% of revenues from Top 500 towns. It has a total reach

of 684 towns, catering to a retail network of 10,400 outlets.

Exhibit 11: Retail sales account for 90% of Century Plyboard’s revenues

Institutional, 13%

Retail, 87%

Source: Company, MOSL

Exhibit 12: Plywood dealer network has grown at 13% over FY12-14

Plyboards

1,284

1,106

1,424

FY12

FY13

FY14

Source: Company, MOSL

Exhibit 13: CPBI has expanded its reach to Top 500 towns from Top 100 towns

Number of Towns

1,097

601

407

> 1m

500k – 1m

100k – 500k

50k - 100k

<50k

Source: Company, MOSL

30 June 2015

Century Plyboards

Expanding sales network aggressively; pan-India presence drives efficiency

CPBI has expanded its sales team at a CAGR of 39% over FY10-15, driving higher

focus on retail sales. Additionally, with its pan-India presence through 7

manufacturing units, 35 branch offices and 6 regional distributor centers, it is able to

keep costs down (especially logistics costs, since plywood is a bulky product), and

ensure swift and timely delivery to its dealers.

Exhibit 14: Sales team has been expanded at 39% CAGR over FY10-15

Sales personnel (Nos)

696

383

172

217

289

FY10

FY11

FY12

FY13

FY14

Source: Company, MOSL

Exhibit 15: Pan-India presence through 7 manufacturing units, 35 branch offices and 6 regional distributor centers

Source: Company, MOSL

30 June 2015

Century Plyboards

Expansion of affordable product range to drive deeper Tier 1/2 penetration

Initially focused on just the premium end of the market, CPBI with a view to enlarge

its addressable market, has expanded its product portfolio from premium plywood

to affordable plywood through sub-brands like

Sainik

and

Maxima,

which are ~10%

and ~16% cheaper than flagship brand – ‘Club

Prime’.

Revenue contribution from

affordable products has increased from 47% in FY13 to 53% in FY15. This has helped

tap demand from mid-segment buyers who earlier bought non-branded plywood,

and this strategy worked well especially with CPBI’s strategy of penetrating smaller

Tier 1 / 2 towns. CPBI’s

Sainik

brand is completely outsourced, thus providing scale

and growth without further capital deployment.

Exhibit 16: FY13 revenue composition

Others, 11

Architect, 3

% 710+, 1%

Win

MR, 8%

Sharon, 12

Club

Prime, 49%

Exhibit 17: FY15 revenue composition

Win

MR, 7%

Architect, 4

Others, 9%

% 710+, 5%

Sharon, 13

Club

Prime, 39%

Maxima, 8

Source: Company, MOSL

Sainik, 15%

Maxima, 0

Source: Company, MOSL

Sainik, 17%

Exhibit 18: FY13 revenue composition

Exhibit 19: FY15 revenue composition

Affordable

products, 4

Premium

products

, 53%

Affordable

products, 53

Premium

products

, 47%

Source: Company, MOSL

Exhibit 20: CPBI has a wide product portfolio catering to diverse price points

27%

Major brands and price range (indexed to Club Prime)

-10%

Architect

710+

Club Prime

Maxima

-16%

Sainik

Source: Company, MOSL

30 June 2015

Century Plyboards

Further de-risking raw material supplies through entry into Laos

CPBI is setting up a new unit through a 51%-owned SPV (49% local partner) in the

SEZ area in Laos. Currently, it has an arrangement with an existing unit in Laos with

which it has shared technical expertise and to which it has given machinery on lease.

With its own unit, CPBI would be confident of committed supplies of face veneer for

future growth. It has spent ~INR300m in capex for this unit. Over next 12 months,

Laos unit will have 8 lines running, similar to 8 lines running at Myanmar. Further,

with landed costs of face veneer from Laos being 10-15% cheaper, we believe higher

contribution from Laos could be margin accretive in the medium term.

Setting up greenfield particleboard unit at existing site of Chennai unit

CPBI is setting up a particleboard unit, which will use saw mill dust and timber

wastage generated at its Chennai unit as well as timber wastage procured from

wood-based units in the vicinity as raw material. The unit will backward integrate

with the company’s existing pre-lamination board units at Chennai. It will spend

~INR600m as capex for this unit.

Lower currency volatility to reduce forex losses

CPBI typically imports ~50% of its raw material requirements such as logs, paper and

chemicals. This makes it vulnerable to forex volatility. Over the last three years, CPBI

has incurred an estimated forex loss of ~INR1b. However, in the last one year, the

management has cut its forex liabilities (from INR3.0b to INR1.8b as on 31

March,

2015), reducing the risk of unfavorable exchange rate movements. We believe this

should reduce the risk of forex losses going forward.

Medium density fiberboard (MDF) – lack of widespread acceptance

Medium density fiberboard (MDF) is engineered wood, made from fiber obtained by

breaking down wood residuals. MDF forms 64% of total panel products globally as

against less than 3.5% in India. Plywood currently accounts for ~95% of the panel

industry in India, as housing furniture accounts for most of the demand for timber

products in India. The MDF market has grown in size (INR35b in FY14 versus INR20b

in FY08), but it has been largely been a low RoCE business for Indian manufacturers

due to high capital intensity, low margins, B2B nature of operations, as carpenters

are not equipped to work on MDF, and competition from Chinese imports. CPBI has

chosen to stay away from the MDF business. Going forward, we expect slow

transition to MDF, as durability of furniture is important to Indians, who also prefer

to employ their own carpenters – this is unlikely to change soon. Hence, we do not

see the risk of MDF impacting growth of the plywood industry.

Exhibit 21: Plywood revenues to post 14% CAGR

Revenues (INR m)

11,475

9,648

13,110

12.6%

15,236

Exhibit 22: Expect stable margins over FY15-17

EBITDA (INR m)

18.0%

Margins (%)

18.0%

1,212

FY14

FY15

FY16E

FY17E

FY14

2,067

FY15

2,360

FY16E

2,742

FY17E

Source: Company, MOSL

30 June 2015

Source: Company, MOSL

Century Plyboards

Laminates to post higher growth, but less attractive business than plywood

Laminates are used to provide an aesthetic look to plywood. There is substantial

business synergy between plywood and laminates, as they both have the same

customer base. Similarly, growth drivers for laminates are the same as plywood.

However, one key difference is that while plywood is largely an unorganized market,

the laminates market is largely organized. Also, unlike plywood, laminates do not

require timber (whose supply is restricted). The key raw materials for laminates are

paper and chemicals, which are easily available. Led by higher share of organized

players and with surplus capacities in the industry, competitive pressures ensure

that margins in the laminates business are lower than in plywood.

CPBI is the third-largest producer of laminates in India. Greenlam and Merino are

the largest players with capacities of 10m sheets each followed by CPBI with a

capacity of 4.8m sheets. Exports account for 23% of its laminate revenues. To gain

market share, CPBI has been launching niche products (example: new range of

textures) and is adding 100 new SKUs every year (700 SKUs currently). We expect

CPBI’s laminates business to post 19% CAGR over FY15-17.

Exhibit 23: Laminates revenues to post 19% CAGR

Revenues (INR m)

4,078

3,417

2,867

2,350

8.1%

Exhibit 24: Expect stable margins over FY15-17

EBITDA (INR m)

12.7%

Margins (%)

13.0%

190

FY14

FY15

FY16E

FY17E

FY14

363

FY15

444

FY16E

530

FY17E

Source: Company, MOSL

Controls 50% of CFS capacity at Kolkata port

In FY08, CPBI entered the container freight station (CFS) business in Kolkata by

winning a bid to acquire 0.1m square meters of Kolkata Port Trust land. Due to

heavy congestion at the port, the Port Trust had mandated that cargo be cleared

within a day and stored in the CFS. With total capacity of 160k TEUs across its two

CFS at Sona (40k TEUs) and Jingira Pool (120k TEUs), CPBI controls ~50% of the CFS

capacity at Kolkata Port. We expect modest 10% growth in this division (4% of

revenues), with sustenance of current margins of 46%. This business is unlikely to be

a growth driver for CPBI, going forward.

30 June 2015

Century Plyboards

Valuation and view

Market leadership, strong growth, improving return ratios to drive re-rating

With brand leadership in a duopoly market coupled with minimal penetration of

organized players, we believe CPBI is well-placed to capture the strong growth

potential of India’s plywood and laminates market. Brand pull, along with likely

implementation of reforms like GST would further accelerate growth, in our view.

Given improving return ratios (26% RoCE in FY15; expected to reach 33% by FY17),

strong EPS growth (22% CAGR over FY15-17), and strong medium-term growth

visibility, we believe CPBI deserves multiples in line with similar building product

leaders. We believe CPBI deserves a significant premium to MTLM given MTLM’s

strategy to expand MDF business which in our view is a lower sustainable RoCE

business (MTLM currently enjoys excise and tax benefits in its MDF unit which result

in higher reported RoCE, which may not sustain as the benefits expire in the future).

We initiate coverage with a

Buy

rating with a PT of INR250 (25x FY17E EPS).

Exhibit 25: Revenues to post 15% CAGR over FY15-17

Revenues (INR m)

21,179

13,477

15,884

18,223

10.4%

11.7%

Exhibit 26: Expect EBITDA margins to be stable

EBITDA (INR m)

17.0%

Margins (%)

17.2%

17.3%

11,817

1,234

FY13

FY14

FY15

FY16E

FY17E

FY13

1,582

FY14

2,703

FY15

3,126

FY16E

3,664

FY17E

Exhibit 27: PAT to post 22% CAGR over FY15-17

PAT (INR m)

2,230

1,490

552

603

1,814

Exhibit 28: RoCE to improve to 33% over FY15-17

RoCE (%)

FY13

FY14

FY15

FY16E

FY17E

FY13

FY14

FY15

FY16E

FY17E

Source: Company, MOSL

PE (x)

FY16E

22.7

16.0

26.9

32.2

37.7

32.3

RoE (%)

FY15

FY16E

43.7

39.3

23.2

22.6

27.6

16.2

31.8

25.2

Exhibit 29: Peer comparison

Company Name

Century Plyboards India Ltd

Greenply Industries Ltd

Other building product companies

Kajaria Ceramics Ltd

Astral Polytechnik Ltd

Asian Paints Ltd

Average

CMP (INR)

185

813

730

390

740

Market

Cap (INR b)

41.0

19.3

58.2

46.0

709.6

FY15

27.6

15.8

32.1

58.7

50.9

47.2

FY17E

18.5

13.2

21.2

22.9

31.2

25.1

FY17E

35.8

22.1

26.2

27.0

22.7

24.4

35.3

35.2

28.1

28.8

Source: Company, MOSL

30 June 2015

Century Plyboards

Key risks

Slowdown in real estate

CPBI’s growth is linked with the growth in both the residential as well as commercial

real estate businesses. Any slowdown can impact growth adversely.

Foreign exchange risk

CPBI is exposed to substantial foreign exchange risk, as it imports ~50% of its raw

material requirements. Adverse foreign exchange volatility or INR depreciation can

negatively impact the company’s profitability.

Product substitutes

Plywood has been the material of choice when it comes to making furniture. It is

cheaper than quality solid wood (say teak) furniture and is also easily available at

local dealers. However, alternatives to plywood like MDF (medium density

fiberboard) have gained in popularity, especially in the readymade furniture market.

Though plywood is a tougher material and lasts longer than particleboard or MDF

furniture, its higher cost (than MDF) results in the risk of product substitution.

Global warming

Increasing global warming poses a threat to the environment, globally. Stringent

norms that restrict deforestation can significantly impact raw material sourcing.

30 June 2015

Century Plyboards

Management overview

Sajjan Bhajanka, Executive Chairman

Mr Sajjan Bhajanka, Executive Chairman, is a graduate, with 45 years of industry

experience. He is responsible for overall strategic direction and handles Production,

Finance, and Treasury directly. Mr Bhajanka also presides over the Federation of

Indian Plywood and Panel Industry and the All India Veneer Manufacturers

Association. He holds 27.5% stake in CPBI.

Sanjay Agarwal, CEO and Managing Director

Mr Sanjay Agarwal, CEO and Managing Director, is a graduate, with 30 years of

industry experience. He is responsible for Sales, Marketing, IT and HR functions. He

has created the

Century Ply

brand. He holds 27.2% stake in CPBI.

Ajay Baldawa, Executive Director (Technical)

Mr Ajay Baldawa, Executive Director (Technical), is MTech from IIT, with 30 years of

plywood industry experience. He is responsible for all technical matters. He is a

member of BIS Technical Committee for Plywood.

Arun Julasaria, CFO

Mr Arun Julasaria, CFO, is an FCA and an FCS, with varied experience of over 25

years. He is responsible for Finance, Accounts, Audit, Treasury, Corporate

Structuring, and New Projects. He has been instrumental in SAP implementation at

CPBI.

Amit Gope, Head - Branding

Mr Amit Gope, Head of Branding, is an MBA (Marketing) from XIMB, with 21 years

of experience with Vodafone, Airtel and Uninor. He is responsible for Branding-

related activities.

30 June 2015

Century Plyboards

Financials and valuation

Consolidated - Income Statement

Y/E March

Total Income from Operations

Change (%)

Total Expenditure

% of Sales

EBITDA

Margin (%)

Depreciation

EBIT

Int. and Finance Charges

Other Income

PBT bef. EO Exp.

Current Tax

Deferred Tax

Tax Rate (%)

Adjusted PAT

Change (%)

Margin (%)

FY12

16,674

22.6

13,821

82.9

2,853

17.1

556

2,297

585

1,762

-6

3.7

1,426

-7.7

8.6

FY13

11,817

-29.1

10,583

89.6

1,234

10.4

280

954

404

622

7.4

552

-61.3

4.7

FY14

13,477

14.0

11,894

88.3

1,582

11.7

387

1,195

603

629

-32

-0.7

603

9.2

4.5

FY15

15,884

17.9

13,181

83.0

2,703

17.0

485

2,218

456

1,796

296

16.5

1,490

147.2

9.4

(INR Million)

FY16E

18,223

14.7

15,098

82.8

3,126

17.2

519

2,606

421

2,225

401

18.0

1,814

21.8

10.0

FY17E

21,179

16.2

17,515

82.7

3,664

17.3

578

3,086

331

2,803

561

20.0

2,230

23.0

10.5

Consolidated - Balance Sheet

Y/E March

Equity Share Capital

Total Reserves

Net Worth

Minority Interest

Deferred Liabilities

Total Loans

Capital Employed

Gross Block

Less: Accum. Deprn.

Net Fixed Assets

Curr. Assets, Loans&Adv.

Inventory

Account Receivables

Cash and Bank Balance

Loans and Advances

Curr. Liability & Prov.

Account Payables

Provisions

Net Current Assets

Deferred Tax assets

Appl. of Funds

FY12

228

7,038

7,266

1,794

10,482

19,570

7,220

3,091

4,129

10,030

3,105

1,951

685

4,289

2,331

2,303

7,699

19,571

FY13

223

2,336

2,558

5,419

8,090

4,123

1,396

2,728

6,085

2,293

1,793

1,020

980

1,268

1,166

102

4,817

8,090

FY14

223

2,708

2,931

115

5,801

8,850

4,895

1,731

3,164

6,793

3,029

2,089

387

1,289

1,389

1,063

326

5,404

8,850

FY15

223

3,671

3,894

4,706

8,662

4,997

2,216

2,782

7,890

3,322

2,683

374

1,510

2,013

1,585

428

5,877

8,663

(INR Million)

FY16E

223

5,124

5,346

3,706

9,115

5,597

2,735

2,863

8,353

3,712

2,646

183

1,812

2,105

1,591

514

6,249

9,115

FY17E

223

6,890

7,112

2,906

10,081

6,197

3,313

2,885

9,658

4,314

2,901

268

2,175

2,465

1,849

617

7,192

10,081

30 June 2015

Century Plyboards

Financials and valuation

Ratios

Y/E March

Basic (INR)

EPS

Cash EPS

BV/Share

DPS

Payout (%)

Valuation (x)

P/E

Cash P/E

P/BV

EV/Sales

EV/EBITDA

Dividend Yield (%)

FCF per share

Return Ratios (%)

RoE

RoCE

Working Capital Ratios

Asset Turnover (x)

Inventory (Days)

Debtor (Days)

Creditor (Days)

Working Cap. Turnover (Days)

Leverage Ratio (x)

Current Ratio

Interest Cover Ratio

Debt/Equity

FY12

6.3

8.7

31.9

1.0

21.1

FY13

2.5

3.7

11.5

0.3

11.8

FY14

2.7

4.4

13.2

1.0

41.8

68.3

41.6

14.0

3.4

29.4

0.5

-1.4

22.0

14.7

1.5

82.0

136

4.9

2.0

FY15

6.7

8.9

17.5

1.3

21.7

27.6

20.9

10.6

2.9

16.8

0.7

9.4

43.7

26.0

1.8

76.3

126

3.9

1.2

FY16E

8.2

10.5

24.0

1.4

19.9

22.7

17.6

7.7

2.4

14.3

0.8

7.2

39.3

30.0

2.0

74.3

121

4.0

0.7

FY17E

10.0

12.6

32.0

1.8

20.8

18.5

14.7

5.8

2.1

11.9

1.0

7.6

35.8

32.9

2.1

74.3

119

3.9

0.4

0.5

-14.3

21.0

15.8

0.9

68.0

112

154

4.3

1.4

0.1

-4.3

11.2

8.0

1.5

70.8

117

4.8

2.1

Consolidated - Cash Flow Statement

Y/E March

OP/(Loss) before Tax

Depreciation

Interest & Finance Charges

Direct Taxes Paid

(Inc)/Dec in WC

CF from Operations

(inc)/dec in FA

Free Cash Flow

CF from Investments

Issue of Shares

(Inc)/Dec in Debt

Interest Paid

Dividend Paid

CF from Fin. Activity

Inc/Dec of Cash

Opening Balance

Closing Balance

FY12

1,555

556

554

-365

-1,239

1,062

-4,466

-3,247

-4,233

4,512

-623

-478

3,335

321

364

685

FY13

623

280

395

-105

-600

592

-1,570

-966

-1,812

1,967

-419

-1

1,543

335

685

1,020

FY14

629

387

580

-117

-1,168

311

-643

-305

-690

372

-594

-59

-281

-633

1,020

387

FY15

1,796

485

456

-296

-485

1,955

137

2,092

105

-1,095

-456

-323

-2,073

-13

387

374

(INR Million)

FY16E

2,225

519

421

-401

-563

2,202

-600

1,591

-600

-1,000

-421

-361

-1,782

-191

374

183

FY17E

2,803

578

331

-561

-859

2,292

-600

1,680

-600

-800

-331

-465

-1,595

183

268

30 June 2015

This document has been prepared by Motilal Oswal Securities Limited (hereinafter referred to as Most) to provide information about the company(ies) and/sector(s), if any, covered in the report and may be distributed

Century Plyboards

by it and/or its affiliated company(ies). This report is for personal information of the selected recipient/s and does not construe to be any investment, legal or taxation advice to you. This research report does not

constitute an offer, invitation or inducement to invest in securities or other investments and Motilal Oswal Securities Limited (hereinafter referred as MOSt) is not soliciting any action based upon it. This report is not for

public distribution and has been furnished to you solely for your general information and should not be reproduced or redistributed to any other person in any form. This report does not constitute a personal

recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Before acting on any advice or recommendation in this material, investors should consider

whether it is suitable for their particular circumstances and, if necessary, seek professional advice. The price and value of the investments referred to in this material and the income from them may go down as well as

up, and investors may realize losses on any investments. Past performance is not a guide for future performance, future returns are not guaranteed and a loss of original capital may occur.

MOSt and its affiliates are a full-service, integrated investment banking, investment management, brokerage and financing group. We and our affiliates have investment banking and other business relationships with a

some companies covered by our Research Department. Our research professionals may provide input into our investment banking and other business selection processes. Investors should assume that MOSt and/or

its affiliates are seeking or will seek investment banking or other business from the company or companies that are the subject of this material and that the research professionals who were involved in preparing this

material may educate investors on investments in such business. The research professionals responsible for the preparation of this document may interact with trading desk personnel, sales personnel and other

parties for the purpose of gathering, applying and interpreting information. Our research professionals are paid on the profitability of MOSt which may include earnings from investment banking and other business.

MOSt generally prohibits its analysts, persons reporting to analysts, and members of their households from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.

Additionally, MOSt generally prohibits its analysts and persons reporting to analysts from serving as an officer, director, or advisory board member of any companies that the analysts cover. Our salespeople, traders,

and other professionals or affiliates may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein, and our proprietary

trading and investing businesses may make investment decisions that are inconsistent with the recommendations expressed herein. In reviewing these materials, you should be aware that any or all of the foregoing

among other things, may give rise to real or potential conflicts of interest. MOSt and its affiliated company(ies), their directors and employees and their relatives may; (a) from time to time, have a long or short position

in, act as principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation

or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with

respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the specific recommendations made by the analyst(s), as the recommendations

made by the analyst(s) are completely independent of the views of the affiliates of MOSt even though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report

Reports based on technical and derivative analysis center on studying charts company's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as

such, may not match with a report on a company's fundamental analysis. In addition MOST has different business segments / Divisions with independent research separated by Chinese walls catering to different set

of customers having various objectives, risk profiles, investment horizon, etc, and therefore may at times have different contrary views on stocks sectors and markets.

Unauthorized disclosure, use, dissemination or copying (either whole or partial) of this information, is prohibited. The person accessing this information specifically agrees to exempt MOSt or any of its affiliates or

employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOSt or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOSt or any of

its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays. The information contained herein is

based on publicly available data or other sources believed to be reliable. Any statements contained in this report attributed to a third party represent MOSt’s interpretation of the data, information and/or opinions

provided by that third party either publicly or through a subscription service, and such use and interpretation have not been reviewed by the third party. This Report is not intended to be a complete statement or

summary of the securities, markets or developments referred to in the document. While we would endeavor to update the information herein on reasonable basis, MOSt and/or its affiliates are under no obligation to

update the information. Also there may be regulatory, compliance, or other reasons that may prevent MOSt and/or its affiliates from doing so. MOSt or any of its affiliates or employees shall not be in any way

responsible and liable for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. MOSt or any of its affiliates or employees do not provide, at any time,

any express or implied warranty of any kind, regarding any matter pertaining to this report, including without limitation the implied warranties of merchantability, fitness for a particular purpose, and non-infringement.

The recipients of this report should rely on their own investigations.

This report is intended for distribution to institutional investors. Recipients who are not institutional investors should seek advice of their independent financial advisor prior to taking any investment decision based on

this report or for any necessary explanation of its contents.

Most and it’s associates may have managed or co-managed public offering of securities, may have received compensation for investment banking or merchant banking or brokerage services, may have received any

compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past 12 months.

Most and it’s associates have not received any compensation or other benefits from the subject company or third party in connection with the research report.

Subject Company may have been a client of Most or its associates during twelve months preceding the date of distribution of the research report

MOSt and/or its affiliates and/or employees may have interests/positions, financial or otherwise of over 1 % at the end of the month immediately preceding the date of publication of the research in the securities

mentioned in this report. To enhance transparency, MOSt has incorporated a Disclosure of Interest Statement in this document. This should, however, not be treated as endorsement of the views expressed in the

report.

Motilal Oswal Securities Limited is registered as a Research Analyst under SEBI (Research Analyst) Regulations, 2014. SEBI Reg. No. INH000000412

There are no material disciplinary action that been taken by any regulatory authority impacting equity research analysis activities

Analyst Certification

The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be

directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report. The research analysts, strategists, or research associates principally responsible for preparation

of MOSt research receive compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues

Disclosure of Interest Statement



Analyst ownership of the stock



Served as an officer, director or employee

Century Plyboards

Disclosures

A graph of daily closing prices of securities is available at www.nseindia.com and http://economictimes.indiatimes.com/markets/stocks/stock-quotes

Regional Disclosures (outside India)

For U.S.

This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use would be contrary to law,

regulation or which would subject MOSt & its group companies to registration or licensing requirements within such jurisdictions.

Motilal Oswal Securities Limited (MOSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United States. In

addition MOSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the

United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by MOSL, including the products and services described herein are not available to or

intended for U.S. persons.

This report is intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional

investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major

institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the

"Exchange Act") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOSL has entered into a chaperoning

agreement with a U.S. registered broker-dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this

chaperoning agreement.

The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, MOSIPL,

and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account.

For Singapore

Motilal Oswal Capital Markets Singapore Pte Limited is acting as an exempt financial advisor under section 23(1)(f) of the Financial Advisers Act(FAA) read with regulation 17(1)(d) of the Financial Advisors

Regulations and is a subsidiary of Motilal Oswal Securities Limited in India. This research is distributed in Singapore by Motilal Oswal Capital Markets Singapore Pte Limited and it is only directed in Singapore to

accredited investors, as defined in the Financial Advisers Regulations and the Securities and Futures Act (Chapter 289), as amended from time to time.

In respect of any matter arising from or in connection with the research you could contact the following representatives of Motilal Oswal Capital Markets Singapore Pte Limited:

Kadambari Balachandran

Email : kadambari.balachandran@motilaloswal.com

Contact : (+65) 68189233 / 65249115

Motilal Oswal Securities Ltd

30 June 2015

Motilal Oswal Tower, Level 9, Sayani Road, Prabhadevi, Mumbai 400 025

Phone: +91 22 3982 5500 E-mail: reports@motilaloswal.com