Cement capex plans delayed further

January 23, 2012 n

Reco Accumulate CMP Rs51

Previous Reco Buy Target Price Rs60

-3.5 / -15.3 -27 5,049 16,739 n n

EBITDA at Rs650mn, above est led by better profitability of Plywood & Laminates (P& L) division. Net profit at Rs43mn, -84%, above est Robust topline growth (+22% yoy) continues driven by P&L revenue growth of 23% while cement segment registered +30% revenue growth Cement expansions in North East delayed by 6 months while 1.6mnt grinding unit at Kahalgaon faces uncertainty due to land acquisition issues. Cut FY12/13 EPS by 3.5%/15.3% De-merger of cement business also deferred to further date No positive triggers in medium term. Downgrade rating to ACCUMULATE with revised TP of Rs60( Rs82 earlier)

EPS change FY12E/13E (%) Target Price change (%) Nifty Sensex

Price Performance
(%) Absolute Rel. to Nifty
Source: Bloomberg

1M 7 (1)

3M

6M 12M (5)

(17) (30) (16) (16) (22)

Relative Price Chart

80 Rs % 30 72 20

Lower costs and better profitability from Laminates division drive operational performance above estimates
CPILs EBITDA at Rs650mn, was higher than estimates of Rs565mn, mainly driven by lower expenses and better than estimated profitability from laminates division (EBIT margins of 11.6% vs estimated 7.5%). Plywood and Laminates (P&L) EBIT at Rs187mn, +124 % yoy, was higher than estimates of Rs170mn. The improved profitability in the P& L segment was driven by reduction in dealer discounts & ad spends. Cement division revenues grew 29.6% yoy to Rs1.57bn led by robust volume growth of 20% yoy and 7.7% growth in cement realizations. Cement EBIT/t improved 1.3% yoy to Rs796/t. Overall EBITDA margins of 14.8%, came in better than estimates of 13%.

64

10

56

48

-10

40 Jan-11

Mar-11

May-11

Jul-11

Sep-11

Nov-11

-20 Jan-12

Century Plyboards (LHS)

Rel to Nifty (RHS)

Source: Bloomberg

Stock Details
Sector 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)

Robust volume growth across businesses drive 22%+ topline growth

Diversified CPBI@IN 222 1 222 77/44 11/218 36626 0.0

Revenues for Q3FY12 at Rs4395mn grew a robust 22% yoy. This revenue growth was primarily fuelled by a robust volume growth in P&L (net revenues at Rs2416mn, +23% yoy) and 20% volume growth in cement business (net revenue of Rs1573 mn, +30%). Cement realizations of Rs5450/t registered a growth of 7.7% yoy as cement prices in eastern region (100% share of CPILs dispatches) grew 16% yoy and 14% qoq. Logistics segment continued to benefit from its CFS at Jingirapole (commissioned in June-2010) and posted revenues of Rs155mn, growth of 28.3%.

Net profit above estimates

CPILs Net profit for Q3FY12 at Rs43mn, -84% yoy is above estimates of Rs25mn led by slightly higher than estimated revenues. This also includes heavy forex losses of Rs316mn as CPIL has 60 mn of forex exposure across USD, Euro and HKD which over the quarter have appreciated by 10.7%, 6% and 10.5% respectively. APAT excluding Forex loss stands at Rs359mn, above estimates of Rs305mn.Interest expenses jumped 103% yoy while depreciation increased 8.2% yoy driven by capex in the CFS division (CFS at Jingirapole commissioned in June-2010). Financial Snapshot (Consolidated)
Net EBITDA (Core) 2,456 2,492 2,677 4,146 (%) 21.1 17.4 15.5 17.8 APAT 1,462 1,546 1,517 1710 AEPS (Rs) 6.6 7.0 6.8 7.7 EPS % chg 59.2 5.8 -1.9 12.7 RoE (%) 34.5 27.8 21.9 20.7 P/E 7.7 7.3 7.4 6.6 EV/ EBITDA 5.9 6.3 6.7 4.5 P/BV 2.3 1.8 1.5 1.3

Shareholding Pattern (%)

Sep-11 Promoters FII/NRI Institutions Private Corp Public
Source: Capitaline

Jun-11 Mar-11 72.9 0.6 0.0 12.4 14.1 83.2 0.1 0.0 10.9 5.8

72.9 0.6 0.0 12.6 13.9

Rs Mn

Ajit Motwani ajit.motwani@emkayglobal.com +91 22 6612 1255 Chandan Asrani chandan.asrani@emkayglobal.com +91 22 6612 1241

YE-Mar FY10 FY11 FY12E FY13E

Sales 11,625 14,289 17,299 23,244

Emkay Global Financial Services Ltd

Result Update

Century Plyboards (India) Ltd

Century Plyboards (India) Quarterly Results

Rs mn Revenue Expenditure as % of sales Consumption of RM as % of sales Employee Cost as % of sales Other expenditure as % of sales EBITDA Depreciation EBIT Other Income Interest PBT Total Tax Adjusted PAT (Profit)/loss JV's/Ass/MI APAT after MI Extra ordinary items Reported PAT Reported EPS 268 1.2 446 2.0 436 2.0 141 0.6 43 0.2 -83.9 -83.9 -69.4 -69.4 620 2.8 Q3FY11A 3,608 3,126 86.6 1350 37.4 252 7.0 1524 42.2 482 130 421 70 52 369 29 340 72 268 Q4FY11A 4,158 3,589 86.3 1607 38.6 293 7.1 1689 40.6 569 140 392 (37) 44 348 (167) 515 69 446 Q1FY12 4,158 3,415 82.1 1631 39.2 281 6.8 1502 36.1 743 131 643 30 65 578 41 537 101 436 Q2FY12 3,913 3,318 84.8 1744 44.6 323 8.2 1252 32.0 595 137 214 23 70 144 (22) 166 25 141 Q3FY12A 4,395 3,745 85.2 1745 39.7 340 7.7 1660 37.8 650 141 190 (3) 106 84 (12) 96 53 43 -83.9 -69.4 34.8 8.2 -55.0 -104.3 102.5 -77.2 -141.9 -71.6 9.2 3.0 -11.5 -112.7 50.0 -41.6 -42.7 -41.8 8.9 32.6 34.9 5.5 29.3 0.0 YoY (%) 21.8 19.8 QoQ (%) 12.3 12.9 YTD FY12 12,466 10,478 84.1 5120 41.1 945 7.6 4414 35.4 1,988 409 1,047 51 241 806 7 799 179 620

Result Update

YTD FY11 9,936 8,049 81.0 3901 39.3 743 7.5 3405 34.3 1,887 368 1,642 123 151 1,491 109 1,382 282 1,100

YoY (%) 25.5 30.2

31.2

27.1

29.6

5.4 11.0 -36.2 -58.8 59.1 -45.9 -93.5 -42.2 -36.6 -43.6

1,100 5.0

-43.6 -43.6

Margins (%) EBIDTA EBIT EBT PAT Effective Tax rate 13.4 11.7 10.2 7.4 8.0 13.7 9.4 8.4 10.7 (48.1) 17.9 15.5 13.9 10.5 7.1 15.2 5.5 3.7 3.6 (14.9) 14.8 4.3 1.9 1.0 (14.6)

(bps) 142 -736 -832 -644 -2260

(bps) -42 -116 -177 -262 29 15.9 8.4 6.5 5.0 0.9 19.0 16.5 15.0 11.1 7.3

(bps) -304 -813 -854 -610 -640

Emkay Research

23 January 2012

Century Plyboards (India) Segmental Results

Segment Revenue (Net) (a) Plywood and Laminates (b) Ferro Alloys (c) Power (d) Others (e) Cement Total Segment Revenue Less : Inter Segment Rev Net revenue Q3FY11A 1971 280 232 139 1214 3836 228 3608 Q4FY11A 2154 260 199 284 1492 4390 232 4158 Q1FY12 2355 227 182 209 1376 4348 190 4158 Q2FY12 2384 197 152 193 1145 4073 159 3913 Q3FY12A 2416 173 203 213 1573 4579 184 4395 YoY (%) 22.6 -38.2 -12.4 53.1 29.6 19.4 -19.2 21.8

Result Update

QoQ (%) YTD FY12 YTD FY11 1.3 -12.3 33.5 10.1 37.3 12.4 15.5 12.3 7156 597 537 615 4094 12999 533 12466 5704 510 642 308 3291 10455 519 9936

YoY (%) 25.5 17.1 -16.3 100.0 24.4 24.3 2.8 25.5

Segment Results (EBIT) (a) Plywood and Laminates (b) Ferro Alloys (c) Power (d) Others (e) Cement Total

Q3FY11A 83 53 19 32 188 375

Q4FY11A 34 44 122 60 206 466

Q1FY12 256 24 20 47 304 650

Q2FY12 272 8 19 49 145 492

Q3FY12A 187 -18 -8 60 230 451

YoY (%) 124.5 -134.2 -141.0 89.6 21.9 20.3

QoQ (%) YTD FY12 YTD FY11 -31.0 -314.9 -141.3 23.2 58.8 -8.3 715 14 30 156 678 1593 445 68 104 47 928 1591

YoY (%) 60.6 -79.4 -70.6 229.0 -26.9 0.1

EBIT margin (%) (a) Plywood and Laminates (b) Ferro Alloys (c) Power (d) Others (e) Cement

Q3FY11A 4.2 18.9 8.1 22.8 15.5

Q4FY11A 1.6 17.1 61.3 21.0 13.8

Q1FY12 10.9 10.4 10.8 22.5 22.1

Q2FY12 11.4 4.3 12.2 25.2 12.6

Q3FY12A 7.8 -10.5 -3.8 28.2 14.6

YoY(bps) QoQ(bps) YTD FY12 YTD FY11 352 -2935 -1183 543 -92 -364 -1472 -1597 300 197 10.0 2.3 5.7 25.3 16.6 7.8 13.2 16.2 15.4 28.2

YoY(bps) 219 -1092 -1048 994 -1162

Cement capex plans delayed by 6 months- Kahalgaon unit facing land acquisition issues
Cement: CMCL, CPILs 70.48% cement subsidiarys capex plans to quadrapule the cement capacity( from 1.2mnt to 4.4 mnt) has gone haywire. Due to operational delays commissioning of 1.6 mnt Cement Grinding unit at Guwahati and 1.75 mnt clinkerisation plant at Lumshong, Meghalaya has been delayed by 6 months to September 2012. Post the completion of the above capex program, CMCL's clinker capacity would increase from current 0.79 mtpa to 2.55 mtpa while its cement manufacturing capacity will increase from current 1.2 mtpa to 2.8 mtpa. However the major concern is the uncertain delay in the 1.6mnt cement grinding plant project at Kahalgaon (scheduled to be commissioned by September 2012 earlier) which has hit the roadblock due to land acquisition issues. Plywood: CPIL Plans to expand plywood and veneer capacity by 30,000 CBM at Kandla, Gujarat which will take total plywood installed capacity from current 122,420 CBM to 152,420 CBM. Laminates & allied products: CPIL is expanding its laminate capacity by 1.2 million sheets from current 2.4 million sheets at existing unit in Joka, Kolkata. This will take the total laminate installed capacity to 3.6 million sheets. The company plans to double its PreLaminated Boards capacity at the existing Chennai plant from 800,000 sqm currently to 1,600,000 sqm.

Emkay Research

23 January 2012

Century Plyboards (India)

Result Update

Project (Figures in Rs mn) Cement 1.75 Mn Ton Clinkerisation Plant at Lumshnong, Meghalaya in the name of Star Cement Meghalaya Ltd. (Wholly Owned Subsidiary of the company) 1.6 Mn Ton Cement Grinding unit along with 10 MW captive power project at Guwahati 1.6 Mn Ton Cement Grinding unit along with 10 MW captive power project at Kahalgaon Total Capex by CMCL Capex by Meghalaya Power, CMCL's 50% associate (43 MW CPP) Plywood and Laminates Green field Expansion at Kandla, Gujarat-30,000 CBM Laminates expansion of 1.2 mnsheets at Kolkata Pre-Laminated board expansion of 800,000 SQM at Chennai Total

Targeted Completion

Project Cost

Equity

Debt

Sept-12 Sept-12 Uncertain

6030 2533 2451 11014

2030 783 751 3564 650

4000 1750 1700 7450 1330

Mar-12

1980

Feb-12 Feb-12 Feb-12

300 120 120 540

300 120 120 540

Delay in cement capex leads to earnings downgrade

Delays in the cement capex program have led to downgrade in our volume numbers for CMCL for FY12E/13E. Consequently we revise our earnings downward for FY12E/13E by 3.5%/18.3% and revise are price target by -27% to Rs60 (Rs82 earlier). Earnings revision
FY12 Earlier Net sales EBITDA OPM APAT EPS 16993 2694 16% 1571 7.1 Revised 17299 2677 15% 1517 6.8 change 2% -1% -38 -3.5% -3.5% Earlier 24478.2 4782.6 20% 2018.0 9.1 FY13 Revised 23244 4146 18% 1710 7.7 change -5.0% -13.3% -170 -15.3% -15.3%

Absence of triggers in medium term leads to rating downgrade

The Board of directors have decided to withdraw the scheme of arrangement between CPIL and SFCL for demerger of cement and ferro alloys business into a separate entity SFCL (which was earlier approved by the Board on March 28, 2011) and will consider a fresh scheme with a new appointed date in due course. In view of the deferment of demerger scheme and the delay in cement capex we do not see any triggers for the stock in the medium term. Consequently we downgrade our rating on the stock from Buy to Accumulate.

Emkay Research

23 January 2012

Century Plyboards (India)

Result Update

Key Financials
Income Statement
Y/E, Mar (Rs. m) Net Sales Growth (%) Expenditure Cost of Materials Personnel Expenses Other Exp EBITDA Growth (%) EBITDA margin (%) Depreciation EBIT EBIT margin (%) Other income Interest PBT Total Tax Effective tax rate (%) Adjusted PAT Growth (%) Net Margin (%) (Profit)/loss from JV's/Ass/MI PAT after MI E/O items Reported PAT Growth (%) 1462 59.2 1546 5.8 1517 -1.9 1710 12.7 FY10 11625 11.8 9169 4659 826 3684 2456 31.8 21.1 452 2004 17.2 296 252 2048 379 18.5 1832 51.8 15.4 370 1462 FY11 14289 22.9 11797 5761 1036 5000 2492 1.5 17.4 508 1984 13.9 87 232 1838 372 20.3 1897 3.6 13.2 351 1546 FY12E 17299 21.1 14622 7790 1145 5687 2677 7.4 15.5 584 2094 12.1 130 300 1924 147 7.6 1777 -6.3 10.2 261 1517 FY13E 23244 34.4 19098 9746 1368 7984 4146 54.8 17.8 1313 2832 12.2 221 972 2081 204 9.8 1877 5.6 8.0 167 1710

Balance Sheet
Y/E, Mar (Rs. m) Equity share capital Reserves & surplus Networth Minority Interest Secured Loans Unsecured Loans Loan Funds Deferred tax liability Total Liabilities Gross Block Less: Depreciation Net block Capital WIP Investment Current Assets Inventories Sundry Debtors Cash and Bank bal Loans and Advances Other Current assets Current lia & Prov Current liabilities Provisions Net current assets Misc. exp Total Assets FY10 228 4639 4867 1240 3873 332 4204 14 10325 5455 1960 3495 365 5 6640 2105 1286 495 1380 1374 1494 1403 91 5146 2 10325 FY11 228 6061 6289 1558 5418 429 5847 7 13700 6756 2494 4262 181 56 8025 2517 1522 368 2235 1383 2192 1877 314 5833 2 13700 FY12E 228 7355 7582 1818 9923 134 10057 7 19464 14899 3077 11821 41 224 9733 2765 2685 945 1957 1381 2606 2291 314 7127 2 19465 FY13E 228 8766 8994 1985 9805 134 9939 7 20925 15509 4391 11118 41 391 12415 3802 4158 152 2923 1381 3292 2978 314 9123 2 20926

Cash Flow
Y/E, Mar (Rs. m) Pre-tax profit Depreciation Interest Provided Other Prov & W/O Chg in working cap Tax & other Operating cash flows Capital expenditure Free Cash Flow Other income Investments Investing Cashflow Equity Capital Raised Loans Taken / (Repaid) Interest Paid Dividend paid (incl tax) Income from investments Others Financing Cashflow Net chg in cash Opening cash position Closing cash position -216 105 390 495 1486 -167 495 368 3688 576 368 945 -1388 -793 945 152 FY10 1752 452 252 0 -358 -367 1730 -1588 142 296 -1 -1293 0 138 -252 -103 0 FY11 1752 508 232 -31 -1038 59 1481 -3170 -1689 87 -51 -3135 0 1643 -232 -269 0 FY12E 1794 584 300 0 -717 -147 1813 -4888 -3074 130 -168 -4925 0 4210 -300 -222 0 FY13E 1860 1313 972 0 -2789 -204 1152 -610 542 221 -168 -557 0 -117 -972 -298 0

Key Ratios
Y/E, Mar Profitability (%) EBITDA Margin Net Margin ROCE ROE RoIC Per Share Data (Rs) EPS CEPS BVPS DPS Valuations (x) PER P/CEPS P/BV EV / Sales EV / EBITDA Dividend Yield (%) Gearing Ratio (x) Net debt/ Equity Net Debt/EBIDTA Working Cap Cycle (days) 0.8 1.5 59.5 0.9 2.2 47.2 1.2 3.3 60.0 1.0 2.4 73.3 7.7 5.9 2.3 1.1 5.9 2.0 7.3 5.5 1.8 1.0 6.3 2.0 7.4 5.4 1.5 0.9 6.7 1.7 6.6 3.7 1.3 0.7 4.5 2.3 6.6 8.6 21.9 1.0 7.0 9.2 28.3 1.0 6.8 9.5 34.1 0.9 7.7 13.6 40.5 1.1 21.1 15.4 24.2 34.5 26.0 17.4 13.2 17.3 27.8 22.2 15.5 10.2 13.4 21.9 15.1 17.8 8.0 15.1 20.7 14.9 FY10 FY11 FY12E FY13E

Emkay Research

23 January 2012

Century Plyboards (India)

Result Update

Recommendation History: Century Plyboards (India) CPBI IN

Date 01/11/2011 22/07/2011 26/05/2011 08/02/2011 Reports Century Plyboards Q2FY12 Result Update Century Plyboards Q1FY12 Result Update Century Plyboards Q4FY11 Result Update Century Plyboards Q3FY11 Result Update Reco Buy Buy Buy Buy CMP 59 72 65 56 Target 82 84 75 80

Recent Research Reports

Date 23/01/2012 20/01/2012 20/01/2012 06/01/2012 Reports Ultratech Cement Q3FY12 Result Update Cement Sector Update Aban Offshore Company Update GMR Infrastructure Event Update Accumulate UR 440 23 485 UR Reco Reduce CMP 1,214 Target 1,150

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Emkay Research

23 January 2012

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