Century Plyboards India : Q1 FY 23-24

"Century Plyboards (India) Limited Q1 FY2024 Earnings Conference Call"

August 07, 2023

ANALYST: MR. NAVIN AGRAWAL - HEAD, INSTITUTIONAL

EQUITIES - SKP SECURITIES LIMITED

MANAGEMENT: MR. SANJAY AGARWAL - MANAGING DIRECTOR &

CHIEF EXECUTIVE OFFICER - CENTURY PLYBOARDS

(INDIA) LIMITED

MR. KESHAV BHAJANKA - EXECUTIVE DIRECTOR -

CENTURY PLYBOARDS (INDIA) LIMITED

MS. NIKITA BANSAL - EXECUTIVE DIRECTOR - CENTURY

PLYBOARDS (INDIA) LIMITED

MR. ARUN JULASARIA - CHIEF FINANCIAL OFFICER -

CENTURY PLYBOARDS (INDIA) LIMITED

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Century Plyboards (India) Limited

August 07, 2023

Moderator:Good day ladies and gentlemen, welcome to the Century Plyboards (India) Limited's Q1 FY2024 Earnings Conference Call. As a reminder, all participant lines will be in the listen- only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing "*"then "0" on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Navin Agrawal - Head, Institutional Equities at SKP Securities Limited. Thank you and over to you Sir!

Navin Agarwal: Good afternoon ladies and gentlemen. It is my pleasure to welcome you to the financial results conference call on behalf of Century Plyboards and SKP Securities. We have with us Mr. Sanjay Agarwal - Managing Director and CEO along with Mr. Keshav Bhajanka - Executive Director, Ms. Nikita Bansal - Executive Director, and Mr. Arun Julasaria - Chief Financial Officer. We will have the opening remarks from Mr. Sanjay Agarwal followed by Q&A session. Thank you and over to you SanjayJi!

Sanjay Agarwal: Thank you NavinJi for hosting the concall for Century Plyboards. Good afternoon friends. Thank you everyone for taking out your valuable time for attending the Q1 FY2024 investor conference call for Century Plyboards (India) Limited. I am Sanjay Agarwal, MD & CEO of the company. I have alongside with me Mr. Keshav Bhajanka, Ms. Nikita Bansal - Executive Director, and Mr. Arun Julasaria - CFO of the company. I presume that every one of you would have gone through our numbers in detail. Let me still brief you on the key highlights for Q1 FY2024. Results for Q1 of FY2024 are in line with prevailing market scenario. On year-on-year basis we could hold up our topline. Results are not comparable quarter-on- quarter basis as fourth quarter is historically best quarter. On year-on-year basis the topline is almost maintained at Rs.882.39 Crores against Rs.881.48 Crores, blended EBITDA margin stood at 15.9% against 17.2%, profit after tax was Rs.84.11 Crores against 96.47 Crores. Despite difficult market situation plywood has done well with improvement in topline as well as EBITDA margins. On year-on-year basis the topline improved from 474.75 Crores to

488.57 Crores and EBITDA margins improved from 10.4% to 13.6%. We expected 6 to 7% volume and approximately 2.5% price hike. We expect 8 to 10% growth with sustained EBITDA margin of 13 to 14% approximately after taking care of increase of raw material prices. Increase of raw material prices in laminate for addressing need of high-end market we have partnered with celebrity designer Manish Malhotra and have launched new range designed by him. For economy market we have introduced Sainik laminates. In current quarter we incurred expenses for launching these new ranges, benefit for which will come in coming quarters.

While gross profit on year-on-year basis was almost flattish the EBITDA margins reduced from 13.4 to 10% mainly on account of aforesaid launching expenses. With introduction of

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Century Plyboards (India) Limited

August 07, 2023

new ranges for targeting specific new market segments the overall performance of laminate division will improve in coming quarters. We expect annual growth of 12 to 15% and EBITDA margin in the range of 13 to 15%. On Y-on-Y basis MDF revenue improved from

155.60 Crores to 166.77 Crores and EBITDA margins are reduced from 34.9% to 26.2%. The margins are reduced mainly due to increase in raw material prices which could not be passed on. In order to improve profitability company is focusing on value added products. The volume of premium MDF is planned to increase by 40%. We shall also be launching fire resistant MDF which apart from all other features like borer proof, termite proof of premium MDF will be ultimate MDF in terms of quality and features. Our second line at Hoshiarpur is now stabilized. With aforesaid planning we expect volume growth of 20% in coming quarters with increased share of premium product margins are likely to remain stable and take care of further increase in cost. Particle board is suffering both on revenue and profitability. On Y-O-Y basis revenue is down from 51.07 Crores to 39.46 Crores and EBITDA from 36.1% to 22.7%. We are trying to combat erosion in profitability caused by increase in raw material prices and market conditions. On Q-on-Q basis while revenue slightly increased from 37.25 Crores to 39.46 Crores, EBITDA margins improved from 18.1% to 22.7%. We expect improvements both in revenue and margins in coming quarters. The scheme of hiving off Logistic (CFS) Division to SPV is still to be finally approved by NCLT and hence effect of the scheme will be given once the scheme is approved. Scheme once approved will be retrospectively effective from appointed date of April 1, 2022. With these remarks I will open up to all the questions and answers to all the people online. Thank you.

Moderator:	Thank you very much. We have our first question from the line of Rahul Agarwal from Incred
	Capital. Please go ahead.
Rahul Agarwal:	Good evening and thanks for the opportunity. Sir two questions firstly on the capex update
	could you update us across the plants I think for plywood there is a plant expected in northern
	India expansion plant and within south the laminate and MDF that is my first question?
Keshav Bhajanka:	So basically in laminate in south India we have slightly delayed our target was to complete
	the expansion in H1, but now it is looking more likely that we will commission the line in Q3
	and this is the reason why we had to tamper our growth projections in laminates. For MDF
	our objective was to have plant operational by H2 of this year and we are more than on line
	with the same. So I think we will have commercial production for the new MDF line in the
	south within this current financial year.
Rahul Agarwal:	For the plywood expansion in Hoshiarpur?
Nikita Bansal:	The timeline for that is probably by Q1 of next year.

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	Century Plyboards (India) Limited
	August 07, 2023
Rahul Agarwal:	MDF Keshav if you could just be more specific like second half are we expecting it to happen
	in 3Q or 4Q?
Keshav Bhajanka:	I am trying to get it operational as soon as possible, but yes we should have it early in Q4.
Rahul Agarwal:	Got it and secondly on margins when I look at margins ex laminates gross margins are down
	I am assuming this is largely on account of timber and if I look at EBITDA margin ex particle
	board I think most of them are down, laminates as you explained it is more because of one-
	off expenses this quarter but just wanted to know will that sustain in terms of recurring
	expenses in the balance of the year on laminate and on plywood full year if you could help
	us with margin estimates across all segments that will be really helpful? Thank you.
Keshav Bhajanka:	In laminates you see the expenses are going to stay because we have created like the MD had
	said a new prime in Sainik Laminates which we have just launched. We have also launched
	a new catalogue with a lot of advertisement behind it with a tie-up with Mr. Manish Malhotra
	being the first such in the industry but having said that the volumes are going to be looking
	up going forward and I am sure that we will get back on track towards 13 to 15% EBITDA
	margin over the course of the year. In plywood we have guided for 13 to 15% and I think we
	are very well on track.
Rahul Agarwal:	MDF and particle board?
Keshav Bhajanka:	In MDF and particle board, MDF we have guided that we should be at 25%, we have tampered
	it to 25%, but I think that we will be able to maintain the same and in particle board we have
	given a guidance of 20% which we are aiming to achieve.
Rahul Agarwal:	One small question on the demand in last we spoke on the earnings call in May it looked like
	ply and laminates were all okay but what has really changed apart from timber going up I
	understand the delay in new expansion, but from the existing plants purely from a demand
	perspective what has really changed here?
Keshav Bhajanka:	So basically I think this interest rate increase or the series of interest rate increases are
	somewhere hit the ability to transform from house to home. What I mean is real estate sales
	are good but people are deferring the decision to do up houses perhaps because of the
	additional burden that increase in interest rates is causing and I think that has led to a little bit
	of the exuberance that were there in the economy or in the real estate segment to go away as
	far as building material products are concerned but I think this is a short term phenomenon it
	should come back on track sooner rather than later.

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Century Plyboards (India) Limited

August 07, 2023

Rahul Agarwal: I get that. Thank you so much. All the best. I will come back in the queue.

Moderator:Thank you. We have out next question from the line of Achal Lohade from JM Financial. Please go ahead.

Achal Lohade: Yes good evening. Thank you for the opportunity. Sorry if the question is repetitive. If I look at the last call May 2023 mid-May actually we were talking about say plywood 13% volume growth but now we are slashing it to 6-7%, so what I was trying to figure out is this new guidance is going to the extreme conservativeness that is why 6-7% otherwise have things really materially changed in last couple of months as much to have such a sharp cut in the volume growth guidance across the segments actually?

Nikita Bansal: So whenever we give guidance we give a guidance of value, so when we have given a guidance of 13% this time we are saying 10% and that is on overall year basis because of a muted Q1 but our effort will be to achieve 13% because we are trying to make up the shortfall that we had in Q1 compared to our expectation. I think we have done good in Q1, but our expectations were far better so in order to meet up those expectations Q2, Q3, Q4 is going to help us bridge the gap. All endeavors are on, we are already seeing positive signs, but we will have to see how the rest of the year plays out so in order to compensate the Q1 we mentioned 10% not 6-7. I think 6-7 was in terms of volume plus value so if you combine that, it is 10%.

Achal Lohade: Yes so 6-7% is the current volume growth guidance for full year while it was 13% in the last call actually for FY2024 so that is why I said substantial cut in the volume growth. If I look at laminate we had clocked about 25% volume growth we have not given volume growth guidance at least in the press release for laminates that is the reason I am asking. The same is the case with MDF 30%, two thirds is 17% volume growth, implied volume growth for FY2024 so I am just trying to figure out A obviously you said that the first quarter performance is not as good as what you were expecting but what I am trying to understand is the underlying reasons why it is because in last few quarters we have done a substantial performance compared to peers so I am just trying to figure out was that due to certain levers which are kind of exhausted and that is why this is seem to be a new normal?

Keshav Bhajanka: You seen in laminates the basic reason for this lower guidance is because we are expecting the new capacity to come on board a little earlier and that capacity is now being deferred. In MDF as well the reason for the temper expectation because our line is taking a little longer to streamline. We have faced certain issues but now the line has streamlined so that has impacted and it has deferred our ability to look at higher sales because one quarter we have suffered so I think the impact that you are talking about is predominantly due to the fact that yes there is a slight sluggishness but our capacities have also gotten slightly deferred which

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