The demand trend in Wood Panel Market so far has remained stable in Q2FY23 (July-September). According to ICICI Securities Ltd, recent interactions with dealers and companies in the industry indicate that sustained momentum in the residential market and higher spending on home improvements, post the pandemic, is keeping demand strong. it’s a good sign Century Plyboards (India) Limited,
“The plywood market has continued to drive demand for big market brands like Sainik due to inflationary environment, which may continue in the near future,” said ICICI’s September 9 report.
The report said that the demand in the MDF segment also remained stagnant due to the increasing acceptance of readymade furniture.
“We believe the demand for wood panel market should improve after the festive period as the drivers associated with it remain favourable,” the company said. Hence, the broking house estimates that the company will witness a revenue CAGR of 19.5% during FY 22-24 on account of expansion in the MDF segment. CAGR is the compound annual growth rate.
Meanwhile, the company has not made any price hike this quarter but will fully benefit from the price hike of ~2-7% in plywood and ~3-4% in laminate taken in Q1FY23, the report said. “Plywood margins are likely to see some pressure in the near term (but still better than the low base of Q1FY23) due to higher demand for mass products (which have lower margins), while MDF margins may see a year-on-year decline. will decline by ~120 basis points to 30.5% in FY23 due to higher raw material cost,” the report added. One basis point is 0.01%.
So far this calendar year, the stock has gained around 14%, outperforming the sector index Nifty 500, which is up 3% in the same period. ICICI Securities noted that the stock has witnessed a sharp rally of around 22% in the last three months.
The broking house believes that Century Plyboards has strong growth prospects, high return ratio and healthy balance sheet. It believes that the boom in housing demand post-pandemic and higher spending on home improvement will bring big benefits to the company. That said, there are some risks that investors should be aware of. These are: Slowdown in demand for housing and persistently high input prices, which may adversely impact demand/profitability, it warned.
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