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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
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)
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
Result Update
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
Result Update
Segment Results (EBIT) (Rs mn) (a) Plywood and Laminates (b) Ferro Alloys (c) Power (d) Others (e) Cement Total
EBIT margin (%) (a) Plywood and Laminates (b) Ferro Alloys (c) Power (d) Others (e) Cement
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
Result Update
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
3564 670
7450 1330
Emkay Research
2 June 2010
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
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
Result Update
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Emkay Research
2 June 2010