Century Plyboards Ltd. Absolute - India News, Latest News...

August 27, 2017 Analyst: Pranav Mehta (+91-7574885494)/Dhaval Dama (+91-8128694102) Page 1 of 18

Before reading this report, you must refer to the disclaimer on the last page.

Century Plyboards Ltd. Absolute : LONG

Relative : Overweight

Annual Report Analysis Regular Coverage

Building blocks for future growth Building Materials

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Rating Information

Price (Rs) 259

Target Price (Rs) 333

Target Date 30th Sep'18

Target Set On -

Implied yrs of growth (DCF) -

Fair Value (DCF) -

Fair Value (DDM) -

Ind Benchmark BSETCD

Model Portfolio Position NA

Stock Information

Market Cap (Rs Mn) 57,587

52.61 % 28.0%

52 Wk H/L (Rs) 314/154.45

Avg Daily Volume (1yr) 300,223

Avg Daily Value (Rs Mn) 71.4

Equity Cap (Rs Mn) 222

Face Value (Rs) 1

Bloomberg Code CPBI IN

Ownership Recent 3M 12M

Promoters 72.0% 0.00% -1.34%

DII 3.6% -0.39% -0.77%

FII 13.2% 0.38% 1.41%

Public 11.2% 0.01% 0.70%

Price % 1M 3M 12M

Absolute -13.3% -0.2% 16.6%

vs. Industry -12.9% -7.4% -0.9%

Greenply 1.6% -5.4% 1.9%

Greenlam -3.8% 15.3% 25.7%

Consolidated Quarterly EPS forecast

Rs/Share 1Q 2Q 3Q 4Q

EPS (17A) 1.9 2.3 1.8 2.6

EPS (18E) 1.5 1.9 2.4 3.2

We analysed Century Plyboards’ (CPBI) FY17 Annual Report and key takeaways are:

CPBI posted revenue/EBITDA/PAT growth of 11%/13%/13% for FY17 led by higher

contribution from commercial veneer and laminate divisions, even as the

plywood division posted flat growth due to demonetization and subdued real

estate activity during FY17.

Plywood sale volumes/revenues have grown at a 7%/10% CAGR over FY13-FY17

while laminate sale volumes/revenues at a 16%/18% CAGR over the same period.

Average capacity utilization for the plywood division in FY17 stood at 84% vs. 94%

in FY16 due to capacity expansion at the company’s Guwahati unit. Average

capacity utilization for the laminates division improved from 89% in FY16 to 103%

in FY17.

GST implementation is expected to reduce the pricing differential between

branded and unbranded plywood products by 10-20%. In laminates, the pricing

differential has reduced by ~10% due to a lower tax rate (18% under GST vs. 28%

earlier).

Company currently has 1,800 dealers across India. About 90% of CPBI’s sales are

derived through nation-wide retail channels.

CPBI has incurred Rs 759mn (4.7% of sales) on Advertisement & Promotions in

FY17 vs. Rs 629mn (4.3% of sales) in FY16.

CPBI’s new MDF plant in Punjab is expected to start commercial operations by

1HFY18-end. Management expects the plant to operate at 60% utilization in

FY18. The new particle board plant has already stated operations in FY17 and

generated revenues of Rs 165mn during the year.

CPBI has lined up a capex of Rs 2.9bn over the next two years, which includes

increasing its laminate capacity by 50% in FY18. We expect CPBI to post revenue/EBITDA CAGR of 21%/21% over FY17-FY20E with revenue

ramp-up coming from the new MDF and laminate capacities. We currently have a LONG

rating on the stock with Sep’18 TP of Rs 333.

Change in Estimates

No change in estimates

Consolidated Financials

Rs. Mn FY17A FY18E FY19E FY20E

Sales 18,187 21,567 27,419 32,225

EBITDA 3,321 3,670 4,865 5,838

Depreciation 593 778 1,010 1,058

Interest Expense

302 421 475 389

Other Income 25 125 151 158

Reported PAT 1,881 2,098 2,871 3,271

Recurring PAT 1,905 2,104 2,871 3,271

Total Equity 7,149 8,845 11,181 13,782

Gross Debt 6,114 7,832 6,812 5,258

Cash 672 387 450 282

Rs Per Share FY17A FY18E FY19E FY20E

Earnings 8.6 9.5 12.9 14.7

Book Value 32 40 50 62

Dividends 1.0 1.5 2.0 2.5

FCFF -2.7 -5.9 9.1 10.6

P/E (x) 31.0 28.0 20.5 18.0

P/B (x) 8.2 6.7 5.3 4.3

EV/EBITDA (x) 20.0 18.7 13.9 11.3

ROE (%) 31% 26% 29% 26%

Core ROIC (%) 19% 16% 18% 18%

EBITDA Margin (%) 18% 17% 18% 18%

Net Margin (%) 10% 10% 10% 10%

Century Plyboards Annual Report Analysis Absolute – LONG Relative – Overweight


Chairman’s message – key takeaways

During FY17, CPBI encountered downstream sluggishness marked by poor offtake

from the country’s real estate sector, and the impact of demonetization that

pushed back purchases by one quarter. Additionally, a number of unorganized

manufacturers in the country priced their products approximately 40% lower

than CPBI products, by the virtue of being largely outside the tax net.

CPBI recognized that when the competitive environment became increasingly

challenging, it would be impossible to pass on cost increases. Hence, it decided

to improve profits internally by (a) investing in process engineering that brought

down costs and enhanced per person productivity, (b) commissioning

manufacturing facilities in tax-efficient locations, (c) commissioning peeling

facilities in international geographies to reduce costs, and (d) launching

premium products that resulted in faster cash generation.

The company’s tax rate currently remains one of the lowest in India’s interior

infrastructure products sector, while its capacity utilization (including some of

its oldest facilities) is amongst the highest in the sector.

Demonetization catalyzed the shift of transactions from cash to the digital mode

and from weak brands to established ones. GST rollout from Jul’17 is expected

to accelerate the shift from unorganized to organized brands. CPBI is

attractively placed to capitalize on this shift because it (a) possesses one of the

widest portfolios of interior infrastructure products, ranging from mid-priced to

premium across application types, (b) has capacities that provide attractive

economies of scale, (c) has a pan-India manufacturing footprint, and

(iv)possesses an aggressive product pipeline across the foreseeable future.

CPBI expects to generate incremental revenues of Rs 7bn-10bn during FY18 and

additional Rs 5bn in FY19.

GST to lead to a paradigm shift in India’s organized panel product market

Currently, India’s interior infrastructure products industry comprises more than

3,300 plywood units, of which >2,500 are exempt from duties and more than 700

units are partially exempt.

Before GST, products manufactured by India’s organized plywood brands were

subject to VAT, excise duty and CST, making them costlier than the unorganized

sector. After GST implementation, organized manufacturers would be able to

undertake brownfield expansions more readily, offer superior products at even

more affordable prices and optimize logistics costs arising out of a reshuffling of

warehouses.

Pre-GST, the excise duty turnover exemption limit was Rs 15mn, and a majority

of unorganized players kept their turnover lower than this limit to avoid excise

duty payments. Under GST, the exemption limit has been reduced to Rs 2mn,

brining almost all smaller unorganized players under the tax net. This implies

that the price differential between organized and unorganized players should

decline by 10-20%, accelerating the shift to organized players. Prices of cheap

plywood prices are likely to rise by 5-7%, bringing them at par with MDF prices;

this in turn would increase MDF penetration and benefit all branded players.

With exemption limits declining, unorganized players will need to rely solely on

bank financing and would no longer be able to access credit for purchasing

plantation timber. As costs rise, a number of inefficient plants could shut

operations. On the other hand, idle capacities of organized players could

progressively come on-stream to address emerging demand.

To capitalize on this shift, the company is strengthening its trade relationships

and commissioning warehousing hubs in Guwahati (to service North Eastern

India), Kolkata (to service Eastern India), Chennai (to service Southern India),

Roorkee, Karnal (to service Northern India) and Nagpur (to service Western

India), enhancing logistical effectiveness.

Wood panel industry

Consumption of Indian panel products has grown at a 15-20% CAGR for the

organized segment as compared to overall industry growth of 5-7% over the past

few years.

Plywood division

Currently, plywood constitutes almost Rs 180-185bn or ~63% of the entire wood

panel market. Organized players account for 25% of the plywood segment.

Over the last 5 years, the plywood industry has posted a CAGR of 6-7%.

Organized players have grown at above 12-13% as they continued to gain market

share from unorganized players.



The shift from the unorganized to organized is expected to continue as: (a)

organized players continue to invest in brand building (2.5-3% of revenue) and

create awareness on product quality, (b) organized players have volume and

supply chain advantages, and offer product innovation, a wider choice and

warranty, (c) the price differential between organized and unorganized players

is expected to drop post GST implementation, thereby inducing customers to buy

branded products at a slight premium, and (d) GST would ease the movement of

goods for organized players (as they comply with all interstate regulations) and

reduce lead time to markets considerably.

Over the past decade, increase in real estate prices (cost of ownership of a

house) has far outstripped the rise in retail prices of plywood. Thus, the cost of

plywood or MDF is now less than 1% the cost of a house, compared with 2-3% a

decade ago, making them more affordable.

Currently, 15-16% of overall plywood demand in India is replacement demand,

which is lower than 35-40% in developed countries. The company expects

replacement demand to contribute ~20% of overall plywood demand by FY20.

As per industry sources, Indian plywood makers have begun to import logs from

Papua New Guinea, Solomon Island, Malaysia, Vietnam, Cambodia, Gabon,

Liberia and Cameroon in the face of increasingly stringent environmental

regulations.

According to ITTO’ s Sep’16 Tropical Timber Market Report, more than four

Indian plywood companies are considering setting up plants for the production of

veneer in Gabon, which has become an attractive investment destination for the

wood industry in recent years.

Exhibit 1: Market size of various wood panel products (Rs bn)

Particulars 2011 2012 2013 2014 2015 2016 2017

Plywood 96 107 120 132 150 180 180

Decorative Veneers 11 12 13 14 16 18 20

Laminate 36 39 41 44 46 48 50

MDF 9 11 12 13 14 15 16

Particleboard 16 18 21 23 26 27 29

Source: Company Annual reports & various industry reports

Laminates division

Total market size of laminates and decorative veneer in India is Rs 70bn.

Unorganized players formed about 30% of the market in 2015 vs. 40% in 2013,

reflecting a clear and gradual shift towards the organized market.

In FY17, growth of the laminate market in India remained <10% while the

company‘s laminates business registered a volume/value growth of around

16%/14%. Value-added and premium quality products drove business in this

segment.

Unorganized players offer lower-priced laminate products in the range of

0.6-0.8mm thickness and are used as liners inside furniture items.

There is a huge export market for Indian laminate manufacturers. Exports

contributed 5% to CPBI’s revenues in FY17.

CPBI is a market leader in the lucrative 1.0mm laminate category with >60% of

the company’s capacity addressing this segment.

The company was the first to introduce deep-texture laminates with 1mm width

to provide a wood-like finish. It is also one of the market leaders in the niche

gloss laminates market, where it commands a premium over regular laminates.

CPBI is increasing its capacity by 50% in FY18 at a capex of Rs 625mn.

CPBI is among a handful of players offering textured (up to 1mm) laminates and

high gloss laminates. The company has 650+ design SKUs.

CFS division

FY17 saw traffic congestion at the Kolkata port owing to geopolitical tensions

between India and Nepal. This resulted in diversion of the Kolkata-bound cargo

to Haldia. The port authority took time to divert the cargo to CFS, which slowed

cargo movement to and from the port.

The company consciously decided to curtail cargo handling to service its existing

clients better, enabling it to report a 3.7% growth in revenues.

CPBI has also introduced a software to facilitate 100% digitization that would

provide real-time information to customers. It installed GPS devices to track

trailer movements, and provided handheld devices to team members to access

data remotely from any location at any point.



The company is executing an expansion project on surplus land available at its

existing facility.

The Kolkata dock system reported steady growth in cargo volumes during FY17.

In Mar’17, container throughput crossed 600,000 twenty-foot equivalent units –

an all-time high. In FY16, the port had handled ~578,000 twenty-foot equivalent

units. Kolkata Port Trust (KoPT) rose to the sixth position in FY17 vs. seventh

position in FY16 in terms of cargo handling among India’s major ports.

Cargo handling in FY18 is set to touch 636,000 twenty-foot equivalent units.

MDF industry

MDF demand is driven by increasing preference for ready-made modular

furniture, modular kitchens and ready-to-move offices/retail outlets, among

others. MDFs can also be used in shelves, decorative moldings, doors, furniture

and laminated flooring.

The market size of the Indian MDF segment has been pegged at Rs 16bn.

Around 70% share of this market is accounted for by organized players and 30%

by imports. Globally, MDF constitutes ~65% of total panel products compared to

~4% in India, with plywood constituting the rest.

Key highlights for FY17

CPBI currently has a market share of 25% in India’s organized plywood market.

The company currently has 31 marketing offices covering over 630 cities and

townships, addressing 1,800 dealers and nearly 16,500 retailers. It also has 40

depots spread across the country.

In plywood, CPBI has increased its plywood capacity by 42% to 2.1mn cbm over

the last six years. Its existing capacity is ~60% higher than its closest rival and

capacity utilization was at ~85% in FY17. It is commissioning another facility in

Punjab to address any incremental demand.

In laminates, CPBI is the third-largest player in India’s organized segment. The

company is scaling up its existing capacity of 4.8mn sheets by 50% in FY18. It

currently has 650 SKUs and adds around 100 designs every year, thereby

addressing both the largest segment (1.0 mm laminates) and value-added

segments (textured and exterior laminates).

In FY17, CPBI commissioned its 54,000cbm particle board manufacturing facility

at a capex of Rs 600mn at Chennai; ~50% of the raw material requirement was

accessed from a captive unit in the plant’s vicinity and the rest from third-party

units located in the hinterland. The plant can generate Rs 1bn of revenues at

peak capacity utilization.

CPBI is in the process of commissioning India’s largest MDF unit in Punjab with a

capacity of 0.198mn cbm. The plant is expected to start commercial production

by H1FY18. Management expects to generate revenues of Rs 1.5bn by FY18-end.

On the marketing side, CPBI has established displays across retail outlets, a

critical influencing factor when the consumer is faced with me-too products. It

has also strengthened product showcasing through in-shop/out-shop activities.

In laminates, offtake is catalyzed by the frequency of catalogue renewal. While

the industry practice is to introduce new catalogues every second year, CPBI has

started introducing four catalogues a year, which have been well received by

dealers.

The company has launched new products like fiber cement boards and PVC

boards to create a presence in the non-wooden segment. These products find

applications in wall cladding, outdoor decking, creating mezzanine floors and

external wall decoration, among others. The fiber cement building products

comprise around 20% of India’s building material market. The company reported

revenues of Rs 150mn from both these products, and has also launched molded

panel doors.

Currently, the fiber cement boards and PVC boards are imported but once the

company achieves critical mass, it will move to direct manufacturing.

Working capital turnover improved from 70 days in FY16 to 65 days in FY17.

CPBI achieved a capacity utilization of 103% in Laminates in FY17 vs. 89 % in

FY16 while in Plywood, capacity utilization stood at 84% vs. 90% in FY16.

About 90% of CPBI’s sales are derived through nation-wide retail channels. It has

a widespread portfolio catering to 78% of demand from the plywood market.



Total capex incurred for the MDF plant till FY17-end was Rs 2.8bn. Management

expects the plant to reach 60% capacity utilization in FY18 itself, given that

almost 40% of India’s MDF requirement is still imported. Going forward, the

company will use its MDF produce to make doors, pre-laminated boards and

wooden flooring.

Average increase in salary of non-managerial employees was 11% while the

average increase in salary of managerial employees was 117%.

Currently, CPBI sources 5% of its veneer from Myanmar and Laos. It is now

looking for other alternative species of plywood like Beech from Europe, MLH

(Mixed Light Hardwood) from Solomon Islands and Papua (New Guinea).

Exhibit 2: Plywood division performance

Volume (in ‘000 cbm) 2013 2014 2015 2016 2017

Plywood 150 172 192 189 197

Commercial Veneer 35 44 36 44 45

Deco Ply 5 5 6 9 9

Sales (Rs mn)

Plywood 6,653 7,600 9,216 9,028 9,581

Commercial Veneer 950 1,314 1,372 1,569 1,844

Deco Ply 658 734 883 1,138 1,185

Avg. Realization (Rs/cbm)

Plywood 44,327 44,070 47,938 47,738 48,518

Commercial Veneer 27,112 30,190 38,611 35,602 40,536

Deco Ply 141,747 136,457 141,949 130,475 135,302

Exhibit 3: Laminate division performance

Particulars 2014 2015 2016 2017

Laminates Volume (in mn sheets) 2,913 3,601 4,260 4,925

Pre-laminates (in mn sqm) 1,090 1,302 1,031 904

Exteria Grade Laminates (nos.) 2,692 11,274 7,693 9,781

Sales (in Rs mn)

Laminates 1,863 2,446 2,930 3,242

Pre-laminates 488 420 371 333

Exteria Grade Laminates 17 69 52 61

Avg. Realization

Laminates (Rs/sheet) 639 679 688 658

Pre-laminates (Rs/sqm) 447 323 360 369

Exteria Grade Laminates (Rs/sheet) 6,166 6,103 6,759 6,247

Exhibit 4: CFS division performance

CFS 2014 2015 2016 2017

Volume (in TEUs) 53 73 82 80

Revenues (Rs mn) 543 703 837 876

Average realization (Rs/TEU) 10,262 9,694 10,204 10,930

Exhibit 5: Capacity utilization across the 3 divisions

Capacity Utilization 2014 2015 2016 2017

Plywood 82% 92% 94% 84%

Laminates 81% 75% 89% 103%

CFS 34% 46% 53% 51%

Exhibit 6: CPBI has been steadily increasing its sales force and dealer base to enhance

penetration in tier 2/3 cities

1,106 1,204

1,424 1,505

1,600

1,800

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2012 2013 2014 2015 2016 2017

Dealer Base



Exhibit 7: Share of laminates in the overall revenue & EBITDA mix has been steadily

rising as the company continues to focus aggressively on this segment

Exhibit 8: A&P as a percentage of sales has been increasing as the company continues

to focus on brand development and increasing visibility

289

445

705

789 822 841

0

100

200

300

400

500

600

700

800

900

2012 2013 2014 2015 2016 2017

Sales Force Nos.

79% 79% 77% 73% 76% 74% 71% 72%

16% 16% 18% 19% 19% 19% 20% 21%

3% 4% 5% 5% 4% 5% 5% 5%

2% 1% 1% 3% 2% 3% 3% 2%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2010 2011 2012 2013 2014 2015 2016 2017

Plywood & Allied Products Laminate & Allied Products CFS Others

65% 61% 62% 56%

75% 75% 69% 70%

19% 19% 19%

21%

10% 13% 18% 19%

16% 20% 19% 23% 14% 12% 13% 11%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2010 2011 2012 2013 2014 2015 2016 2017

Plywood & Allied Products Laminate & Allied Products CFS

199 301 329

484

339

658 663

792

2.9%

3.6%

3.1%

4.5%

2.8%

4.4% 4.3%

4.7%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

0

200

400

600

800

2010 2011 2012 2013 2014 2015 2016 2017

Advertisement & Promotion (Rs mn) as % of Sales



Exhibit 9: WC cycle has improved since last 2 years due to an increase in payable days

55 57 60 63 69

71 82 76 66 60

43 35 27 38

57

84

104 110

91

72

0

20

40

60

80

100

120

0

50

100

150

200

250

300

2013 2014 2015 2016 2017

Receivable Days Inventory Days Payable Days Cash Conversion Cycle



Exhibit10: Segmental Breakup

Segment Info 2009 2010 2011 2012 2013 2014 2015 2016 2017

Revenue 7,382 8,238 9,621 12,204 12,267 13,851 16,821 17,733 19,291

-Plywood & Veneer 4,945 5,923 6,577 8,551 9,045 10,495 12,458 12,615 13,561

-Laminates 1,276 1,207 1,392 1,973 2,316 2,587 3,213 3,623 4,123

-Logistics 12 204 338 547 592 547 708 860 884

-Others including Adhesives 171 130 111 129 315 223 442 564 438

-MDF 71 34

-Plain Particle Board 0 252

EBIT 352 663 797 1,118 994 1,273 2,286 2,567 2,822

-Plywood & Veneer 37 362 373 691 615 1,069 1,867 1,830 2,144

-Laminates 54 101 111 210 192 81 230 442 519

-Logistics -14 78 76 189 216 155 218 278 235

-Others including Adhesives 19 8 15 20 -29 -32 -28 17 -77

-MDF 4 -2

-Plain Particle Board 0 -69

EBITM (%) 5% 8% 8% 9% 8% 9% 14% 14% 15%

-Plywood & Veneer 1% 6% 6% 8% 7% 10% 15% 15% 16%

-Laminates 4% 8% 8% 11% 8% 3% 7% 12% 13%

-Logistics -117% 38% 22% 35% 36% 28% 31% 32% 27%

-Others including Adhesives 11% 6% 13% 16% -9% -14% -6% 3% -18%

-MDF 6% -5%

-Plain Particle Board -28%

Segment Assets 4,288 5,330 6,291 7,824 8,382 9,171 10,465 11,419 15,547

-Plywood & Veneer 1,896 2,484 2,786 3,800 4,372 5,473 6,469 6,191 6,923

-Laminates 722 772 973 1,314 1,649 1,804 1,903 1,835 2,015

-Logistics 372 725 822 788 749 665 635 633 579


-MDF 0 428 2,887



-Plain Particle Board 0 528 586

-Unallocated 596 708 1,046 1,161 1,455 1,090 1,378 1,651 2,436

Segment Liabilities 2,600 3,042 3,507 4,692 5,885 6,257 6,292 6,169 8,461

-Plywood & Veneer 415 805 718 595 868 772 891 1,199 1,526

-Laminates 99 92 258 396 185 182 202 267 412

-Logistics 4 39 49 48 58 45 50 56 84


-MDF 0 0 241


-Unallocated 2,043 2,061 2,380 3,570 4,771 5,220 5,100 4,593 6,113

Capex 380 438 419 613 709 442 487 1,120 2,972

-Plywood & Veneer 65 94 135 299 444 313 284 304 270

-Laminates 14 13 80 156 216 119 69 87 98

-Logistics 294 328 160 53 49 10 54 92 64


-MDF 0 192 2,258


-Unallocated 81 3 131

Depreciation 169 189 242 265 267 332 448 437 523

-Plywood & Veneer 70 80 93 95 105 142 200 221 189

-Laminates 36 32 34 44 83 109 134 110 102

-Logistics 10 32 73 81 76 75 106 101 109


-MDF 0 0

-Plain Particle Board 0 121



Exhibit 11A: Raw-material breakup at standalone level

Particulars (Rs mn) 2010 2011 2012 2013 2014 2015 2016 2017

Sales 7,079 8,771 11,183 11,312 12,840 15,648 16,357 17,825

Raw Material Cost 3,481 4,569 5,688 5,951 6,388 7,019 6,338 6,010

y/y growth

31% 24% 5% 7% 10% -10% -5%

% of Sales 49% 52% 51% 53% 50% 45% 39% 34%

Timber Log 1,815 2,105 2,310 2,745 2,916 2,658 2,325 1,179

y/y growth

16% 10% 19% 6% -9% -13% -49%

% of Sales 26% 24% 21% 24% 23% 17% 14% 13%

Veneer 707 1,019 1,634 1,452 1,551 1,943 1,766 2,216

y/y growth

44% 60% -11% 7% 25% -9% 25%

% of Sales 10% 12% 15% 13% 12% 12% 11% 10%

Chemicals 424 678 775 810 924 1,211 994 1,122

y/y growth

60% 14% 5% 14% 31% -18% 13%

% of Sales 6% 8% 7% 7% 7% 8% 6% 5%

Paper 362 436 538 688 758 1,001 1,081 1,250

y/y growth

21% 23% 28% 10% 32% 8% 16%

% of Sales 5% 5% 5% 6% 6% 6% 7% 6%

Particle Board 59 104 208 255 240 206 172 188

y/y growth

76% 101% 22% -6% -14% -16% 9%

% of Sales 1% 1% 2% 2% 2% 1% 1% 1%

Others 114 227 223 - - - - 54

% of Sales 2% 3% 2% 0% 0% 0% 0% 0%

Exhibit 11B: Raw-material breakup at consolidated level

Particulars (Rs mn) 2011 2012 2013 2014 2015 2016 2017

Sales 13,601 16,674 11,817 13,477 15,884 16,409 18,187

Raw Material Cost 4,710 6,762 6,368 6,952 7,281 6,855 7,037

Timber Log 2,241 2,521 2,950 3,166 2,658 3,087 1,179

y/y growth

12% 17% 7% -16% 16% -62%

% of Sales 16% 15% 25% 23% 17% 19% 6%

Veneer 1,194 1,753 1,608 1,754 2,142 1,463 3,244

y/y growth

47% -8% 9% 22% -32% 122%

% of Sales 9% 11% 14% 13% 13% 9% 18%

Chemicals 734 820 868 991 1,274 1,053 1,122



y/y growth

12% 6% 14% 29% -17% 7%

% of Sales 5% 5% 7% 7% 8% 6% 6%

Paper 436 538 688 758 1,001 1,081 1,250

y/y growth

23% 28% 10% 32% 8% 16%

% of Sales 3% 3% 6% 6% 6% 7% 7%

Particle Board 104 208 255 240 206 172 188

y/y growth

101% 22% -6% -14% -16% 9%

% of Sales 1% 1% 2% 2% 1% 1% 1%

Others - 921 - 44 - - 54

% of Sales 0% 0% 0% 0% 0% 0% 0%

Exhibit 12A: Breakup of other expenses at standalone level


Power & Fuel 334 422 515 243 270 311 301 374

y/y growth

26% 22% -53% 11% 15% -3% 24%

% of Sales 5% 5% 5% 2% 2% 2% 2% 2%

Transport and Freight 223 304 404 405 515 602 642 707

y/y growth

36% 33% 0% 27% 17% 7% 10%

% of Sales 3% 3% 4% 4% 4% 4% 4% 4%

Sales Commission 25 45 64 75 72 106 116 111

y/y growth

77% 43% 17% -4% 47% 10% -4%

% of Sales 0% 1% 1% 1% 1% 1% 1% 1%

AD, Promotion + Communication Exp. 199 301 329 484 339 658 663 792

y/y growth

51% 9% 47% -30% 94% 1% 19%

% of Sales 3% 3% 3% 4% 3% 4% 4% 4%

Rent Rates and Taxes 62 77 112 129 160 165 165 192

y/y growth

24% 45% 15% 24% 3% 0% 16%

% of Sales 1% 1% 1% 1% 1% 1% 1% 1%

Repairs &Maintenance 86 96 111 112 135 135 145 128

y/y growth

11% 16% 1% 20% 0% 8% -12%

% of Sales 1% 1% 1% 1% 1% 1% 1% 1%

Others 712 1,008 452 469 730 728 779 852

y/y growth

42% -55% 4% 56% 0% 7% 9%

% of Sales 10% 11% 4% 4% 6% 5% 5% 5%

Total 1,643 2,255 1,989 1,917 2,221 2,706 2,811 3,156



y/y growth

37% -12% -4% 16% 22% 4% 12%

% of Sales 23% 26% 18% 17% 17% 17% 17% 18%

Exhibit 12B: Breakup of other expenses at consolidated level

Particulars (Rs mn) 2013 2014 2015 2016 2017

Power & Fuel 269 312 353 345 427

y/y growth

16% 13% -2% 24%

% of Sales 2% 2% 2% 2% 2%

Transport and Freight 409 522 602 645 720

y/y growth

28% 15% 7% 12%

% of Sales 3% 4% 4% 4% 4%

Sales Commission 75 72 106 116 119

y/y growth

-4% 47% 10% 3%

% of Sales 1% 1% 1% 1% 1%

AD, Promotion + Communication Exp. 508 372 693 668 799

y/y growth

-27% 87% -4% 20%

% of Sales 4% 3% 4% 4% 4%

Rent Rates and Taxes 134 185 191 186 217

y/y growth

38% 3% -3% 17%

% of Sales 1% 1% 1% 1% 1%

Repairs & Maintenance 115 142 146 161 145

y/y growth

23% 2% 10% -10%

% of Sales 1% 1% 1% 1% 1%

Others 488 849 800 841 959

y/y growth

74% -6% 5% 14%

% of Sales 4% 6% 5% 5% 5%

Total 2,000 2,455 2,891 2,961 3,386

y/y growth

23% 18% 2% 14%

% of Sales 17% 18% 18% 18% 19%



Exhibit 13: Major revenue derived from domestic market

Geographical Segment 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Revenue

India 6,122 7,154 7,806 9,019 11,564 11,722 13,284 16,132 16,753 18,306

Exports 213 228 241 302 341 512 542 660 949 898

Segment Assets

India 3,788 3,682 4,566 5,205 6,607 6,797 7,986 8,941 9,523 12,901

Exports 20 10 57 41 56 130 95 146 245 210

Exhibit 14: Domestic vs. imported mix in raw material & purchases

Particulars (in %) 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Imported 60% 71% 71% 61% 50% 67% 73% 65% 71% 65%

Domestic 40% 29% 29% 39% 50% 33% 27% 35% 29% 35%

Exhibit 15: Foreign exchange outgo

FX Outgo (Rs mn) 2010 2011 2012 2013 2014 2015 2016 2017

Raw Material 2,040 2,513 3,193 3,903 4,417 3,745 3,662 2,868

Purchases 60 45 224 430 294 785 851 1,055

Fixed Assets 62 16 26 112 59 44 333 1,212

Stores & Spares 7 10 6 30 7 5 6 48

Travelling Expenses 3 3 4 4 7 18 8 12

Others 33 42 72 104 93 56 53 276

Total 2,204 2,629 3,524 4,583 4,877 4,653 4,914 5,471



Exhibit 16: Non-cash working capital breakup at a consolidated level- higher payable days led to improved cash conversion cycle

Particulars 2010 2011 2012 2013 2014 2015 2016 2017

Receivable Days 55 50 54 55 57 60 63 69

Inventory Days 77 71 64 71 82 76 66 60

Payable Days 69 64 47 43 35 27 38 57

Cash Conversion Cycle 62 57 72 84 104 110 91 72

Exhibit 17: Breakup of consolidated cash-flows – OCF remained flat yoy due to muted operational performance


Operating cash flow before WC change 2,631 2,917 2,823 1,309 1,623 2,701 3,052 3,170

Tax Paid 335 363 365 105 117 337 468 429

Changes in Working Capital -310 -701 -1,239 -600 -1,168 -877 344 -536

Operating Cash Flow 1,986 1,853 1,219 604 338 1,488 2,928 2,205

Capex -1,455 -3,144 -4,466 -1,570 -644 68 -1,498 -3,047

Others -223 -54 296 -10 -62 60 109 3

Investing Cash Flow -1,678 -3,198 -4,169 -1,581 -706 128 -1,389 -3,044

Change in debt 152 1,651 4,641 1,967 372 -650 -461 1,409

Change in Equity 0 0 0 -5 0 0 20 15

Others -474 -334 -1,306 -419 -653 -927 -1,084 -302

Financing Cash Flow -323 1,317 3,335 1,543 -281 -1,577 -1,525 1,122



Exhibit 18: Particulars of forward contract entered against unhedged foreign currency exposures


Foreign Currency Term Loans 271 45 665 791 730 559 610 931

Buyer's Credit 930 1,424 2,277 2,788 2,139 1,538 1,819 2,134

Trade Receivables 57 41 56 130 95 148 235 199

Trade Payables 544 471 407 281 170 198 219 365

Trade Advances - - - - - 292 551 693

Exhibit 19: Contingent liabilities breakup

Commitments & Contingent Liabilities 2010 2011 2012 2013 2014 2015 2016 2017

BG & Bill discounted 93 126 57 191 262 128 146 166

Letter of Credits 95 209 310 592 563 387 414 626

Export Obligation against EPCG License Scheme 6 2 7 11 13 32 39 32

Claims 69 117 103 156 260 174 199 302

Capital Contracts 89 27 140 49 30 874 1,606 1,142



Equirus Securities

Research Analysts Sector/Industry Email

Equity Sales E-mail

Abhishek Shindadkar IT Services [email protected] 91-22-43320643 Vishad Turakhia [email protected] 91-22-43320633

Ashutosh Tiwari Auto, Metals & Mining [email protected] 91-79-61909517 Subham Sinha [email protected] 91-22-43320631

Depesh Kashyap Mid-Caps [email protected] 91-79-61909528 Sweta Sheth [email protected] 91-22-43320634

Devam Modi Power & Infrastructure [email protected] 91-79-61909516 Viral Desai [email protected] 91-22-43320635

Dhaval Dama FMCG, Mid-Caps [email protected] 91-79-61909518 Binoy Dharia [email protected] 91-22-43320632

Manoj Gori Consumer Durables [email protected] 91-79-61909523 Dealing Room E-mail

Maulik Patel Oil and Gas [email protected] 91-79-61909519 Ashish Shah [email protected] 91-22-43320662

Praful Bohra Pharmaceuticals [email protected] 91-79-61909532 IleshSavla [email protected] 91-22-43320666

Rohan Mandora Banking & Financial Services [email protected] 91-79-61909529 Manoj Kejriwal [email protected] 91-22-43320663

Associates E-mail Dharmesh Mehta [email protected] 91-22-43320661

Ankit Choudhary [email protected] 91-79-61909533 Sandip Amrutiya [email protected] 91-22-43320660

Ashdeep Kaur [email protected] 91-79-61909527 Compliance Officer E-mail

Bharat Celly [email protected] 91-79-61909524 Jay Soni [email protected] 91-79-61909561

Harshit Patel [email protected] 91-79-61909522

Meet Chande [email protected] 91-79-61909513

Parva Soni [email protected] 91-79-61909521

Pranav Mehta [email protected] 91-79-61909514

Ronak Soni [email protected] 91-79-61909525

Samkit Shah [email protected] 91-79-61909520

Shreepal Doshi [email protected] 91-79-61909541

Vikas Jain [email protected] 91-79-61909531

Rating & Coverage Definitions: Absolute Rating • LONG : Over the investment horizon, ATR >= Ke for companies with Free Float market cap > Rs 5 billion and ATR >= 20% for rest of the companies • ADD: ATR >= 5% but less than Ke over investment horizon • REDUCE: ATR >= negative 10% but <5% over investment horizon • SHORT: ATR < negative 10% over investment horizon Relative Rating • OVERWEIGHT: Likely to outperform the benchmark by at least 5% over investment horizon • BENCHMARK: likely to perform in line with the benchmark • UNDERWEIGHT: likely to under-perform the benchmark by at least 5% over investment horizon Investment Horizon Investment Horizon is set at a minimum 3 months to maximum 18 months with target date falling on last day of a calendar quarter. Lite vs. Regular Coverage vs. Spot Coverage We aim to keep our rating and estimates updated at least once a quarter for Regular Coverage stocks. Generally, we would have access to the company and we would maintain detailed financial model for Regular coverage companies. We intend to publish updates on Lite coverage stocks only an opportunistic basis and subject to our ability to contact the management. Our rating and estimates for Lite coverage stocks may not be current. Spot coverage is meant for one-off coverage of a specific company and in such cases, earnings forecast and target price are optional. Spot coverage is meant to stimulate discussion rather than provide a research opinion.

Registered Office:

Equirus Securities Private Limited

Unit No. 1201, 12th Floor, C Wing, Marathon Futurex,

N M Joshi Marg, Lower Parel,

Mumbai-400013.

Tel. No: +91 – (0)22 – 4332 0600

Fax No: +91- (0)22 – 4332 0601

Corporate Office:

3rd floor, House No. 9,

Magnet Corporate Park, Near Zydus Hospital, B/H Intas Sola Bridge,

S.G. Highway Ahmedabad-380054

Gujarat

Tel. No: +91 (0)79 - 6190 9550

mailto:[email protected]



























Fax No: +91 (0)79 – 6190 9560

© 2017 Equirus Securities Private Limited. All rights reserved. For Private Circulation only. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Equirus Securities Private Limited

Analyst Certification

We, Pranav Mehta/DhavalDama, authors to this report, hereby certify that all of the views expressed in this report accurately reflect our personal views about the subject company or companies and its or their

securities. We also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.

Disclosures

Equirus Securities Private Limited (ESPL) having Corporate Identification Number U65993MH2007PTC176044 is registered in India with Securities and Exchange Board of India (SEBI) as a trading member on the

Capital Market (Reg. No. INB231301731), Futures & Options Segment (Reg. No.INF231301731) of the National Stock Exchange of India Ltd. (NSE) and on Cash Segment (Reg. No.INB011301737) of Bombay Stock

Exchange Limited (BSE).ESPL is also registered with SEBI as Research Analyst under SEBI (Research Analyst) Regulations, 2014 (Reg. No. INH000001154), as a Portfolio Manager under SEBI (Portfolio Managers

Regulations, 1993 (Reg. No.INP000005216) and as a Depository Participant of the Central Depository Services (India) Limited (Reg. No.IN-DP-324-2017). There are no disciplinary actions taken by any regulatory

authority against ESPL. ESPL is a subsidiary of Equirus Capital Pvt. Ltd. (ECPL) which is registered with SEBI as Category I Merchant Banker and provides investment banking services including but not limited to

merchant banking services, private equity, mergers & acquisitions and structured finance.

As ESPL and its associates are engaged in various financial services business, it might have: - (a) received compensation (except in connection with the preparation of this report) from the subject company for

investment banking or merchant banking or brokerage services in the past twelve months;(b) managed or co-managed public offering of securities for the subject company in the past twelve months; or (c) have

received a mandate from the subject company; or (d) might have other financial, business or other interests in entities including the subject company (ies) mentioned in this Report. ESPL & its associates, their

directors and employees may from time to time have positions or options in the company and buy or sell the securities of the company (ies) mentioned herein. ESPL and its associates collectively do not own (in

their proprietary position) 1% or more of the equity securities of the subject company mentioned in the report as the last day of the month preceding the publication of the research report. ESPL or its Analyst or

Associates did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ESPL nor

Research Analysts have any material conflict of interest at the time of publication of this report. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or

brokerage service transactions. ESPL has not been engaged in market making activity for the subject company.

The Research Analyst engaged in preparation of this Report:-

(a) has not received any compensation from the subject company in the past twelve months; (b) has not managed or co-managed public offering of securities for the subject company in the past twelve months;

(c) has not received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months; (d) has not received any compensation for products

or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months; (e) has not received any compensation or other benefits from the

subject company or third party in connection with the research report; (f) might have served as an officer, director or employee of the subject company; (g) is not engaged in market making activity for the

subject company.

This document is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution,

publication, availability or use would be contrary to law, regulation or which would subject ESPL and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein

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This document has been prepared solely for information purpose and does not constitute a solicitation to any person to buy, sell or subscribe any security. ESPL or its affiliates are not soliciting any action based

on this report. The information and opinions contained herein is from publicly available data or based on information obtained in good faith from sources believed to be reliable but ESPL provides no guarantee as

to its accuracy or completeness. The information contained herein is as on date of this report, and is subject to change or modification and any such changes could impact our interpretation of relevant

information contained herein. While we would endeavour to update the information herein on reasonable basis, ESPL and its affiliates, their directors and employees are under no obligation to update or keep the

information current. Also there may be regulatory, compliance, or other reasons that may prevent ESPL and its group companies from doing so. This document is prepared for assistance only and is not intended

to be and must not alone be taken as the basis for an investment decision. Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an



investment in the securities of companies referred to in this document including the merits and risks involved. This document is intended for general circulation and does not take into account the specific

investment objectives, financial situation or particular needs of any particular person. ESPL and its group companies, employees, directors and agents accept no liability, and disclaim all responsibility, for the

consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. ESPL/its affiliates do and seek to do business with

companies covered in its research report. Thus, investors should be aware that the firm may have conflict of interest.

A graph of daily closing prices of securities is available at http://www.nseindia.com/ChartApp/install/charts/mainpage.jsp and www.bseindia.com (Choose a company from the list on the browser and select the

“three years” period in the price chart).

Disclosure of Interest statement for the subject Company Yes/No If Yes, nature of such interest

Research Analyst’ or Relatives’ financial interest No

Research Analyst’ or Relatives’ actual/beneficial ownership of 1% or more No

Research Analyst’ or Relatives’ material conflict of interest No

Disclaimer for U.S. Persons

ESPL/its affiliates are not a registered broker–dealer under the U.S. Securities Exchange Act of 1934, as amended (the“1934 act”) and under applicable state laws in the United States. In addition Equirus is not a

registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the “Acts”), and under applicable state laws in the United States.

Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by Equirus, including the products and services described herein are not available to or intended

for U.S. persons. The information contained in this Report is not intended for any person who is a resident of the United States of America or a resident of any jurisdiction, the laws of which imposes prohibition

on soliciting the securities business in that jurisdiction without going through the registration requirements and/ or prohibit the use of any information contained in this report. This Report and its respective

contents do not constitute an offer or invitation to purchase or subscribe for any securities or solicitation of any investments or investment services and/or shall not be considered as an advertisement tool. "U.S.

Persons" are generally defined as a natural person, residing in the United States or any entity organized or incorporated under the laws of the United States. US Citizens living abroad may also be deemed "US

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