| Date: |
06-04-2015 |
| Subject: |
Century Plyboards beats Myanmar timber export ban |
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Shares of Century Plyboards Ltd have jumped eightfold in the last one year as the company has been insulated from the soaring timber prices after Myanmar imposed an exports ban on timber last August to save its disappearing forests.
Century Plyboards was not affected by the ban because it had set up a semi-processed peeling facility in Myanmar last year. So, while rivals such as Greenply Industries Ltd were hit by skyrocketing timber prices, Century Plyboards could easily export timber from its Myanmar facility. The management continues to be confident of achieving a 25% revenue growth for the next two years and beating the industry growth rate of 7-8%, said India Infoline Institutional Equities in a research note dated 27 February.
However, such phenomenal gains in stock prices, which we have seen in the past year, are unlikely to be repeated as three brokerages expect earnings to grow at around 30% on average for FY16, compared with the around 121% growth seen in FY15.
Moreover, its competitor, Greenply Industries, has also set up a unit in Myanmar, recently.
Century Plyboards’ earnings growth nearly doubled for the first nine months of this financial year with an around 6 percentage points jump in margin to 16.2%. Net profit doubled to Rs.102.8 crore for the first nine months. Lower resin prices following the oil price slump, decline in logistics costs and cheaper imports from the Myanmar facility buoyed margins.
Century Plyboards has doubled its laminate capacity to 4.8 million sheets in the last one year and has also widened its product offering.
It has spread and created greenfield facilities in north, south and eastern India, and is also investing Rs.50 crore in capex to commission a 55,000 cu. m particle board plant in Chennai in the next one year, according to India Infoline Institutional Research.
The stock is trading at 29 times FY16 forward price-to-earnings multiple and may sustain at these levels if revenue growth gets a boost from the government’s focus on housing and infrastructure. Also, the implementation of goods and services tax is imperative as Century Plyboards will benefit from the shift to branded and organized companies.
Source : livemint.com
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