Century Plyboard

Century Plyboards reported Q3 FY25 results largely in line with expectations. Standalone revenue increased by 10.3% year-on-year, reaching INR 1,003 crores, while consolidated revenue grew by 20.7% year-on-year to INR 1,143 crores. The overall EBITDA margin for the company stood at 11.5% in Q3, a decline from 12.6% in Q2, primarily attributed to lower volumes during the quarter.

The Plywood segment demonstrated strong performance with a 19.2% year-on-year revenue growth in Q3, and its 9-month FY25 EBITDA margin improved to 14% from 12.1%. The Laminate segment faced revenue declines both year-on-year and quarter-on-quarter, though Q3 EBITDA was maintained at Q2 levels through marketing optimization. Standalone MDF revenue was relatively flat QoQ but grew 2.6% YoY, with EBITDA improving to 16% in Q3 due to better production efficiency. Consolidated MDF revenue grew significantly by 53% YoY and 7% QoQ, with the new Badvel plant now EBITDA positive. The Particle Board segment experienced a 3.1% YoY revenue decline and reported an EBITDA margin of 4.8% in Q3 (assuming typo for Q4), impacted by lower volumes and increased raw material costs.

The company is undertaking strategic capacity expansions, including a planned INR 150 crores new plywood plant in Hoshiarpur, which is expected to be operational in about a year. Additionally, existing plywood capacity in Kandla is being augmented by 15,000 to 20,000 CBM, with current utilization at 90-95%. The MDF South plant's current capacity is around 800 CBM per day, with plans to expand to 950-1,000 CBM per day after a press extension. Management targets 75-85% peak utilization for the new MDF plant.

Timber prices, a key raw material, have seen increases, with MDF timber costs rising 5-7% in North and 10-12% in South quarter-on-quarter. Despite this, MDF margins improved due to better production efficiencies at the new plant and benefits from higher inventory. The company has also implemented a 3-4% blended price hike pan-India for MDF in the previous quarter and a 4% price rise for plywood this year. Management expects global timber prices to normalize within 1-2 years, aligning with international prices.

The plywood industry is projected to grow at 5-7% year-on-year, and Century Plyboards aims to achieve a 15% market share in the next 4-5 years, up from the current 9%. Management anticipates market recovery in the coming months, driven by increased government spending and investment cycles. The laminate segment's underperformance is attributed to execution issues, leading to a change in leadership to drive better results. The particle board segment faces overcapacity but is targeted to achieve EBITDA and PAT breakeven by FY27.

The Bureau of Indian Standards (BIS) regulations are becoming effective for various wood panel products. For plywood, the effective date is February 28th, and for MDF, it is February 11th or 12th. While import compliance is expected by these dates, domestic implementation will be staggered for different manufacturers (big, small, micro) until August. Management notes the government's seriousness in enforcing these regulations.