get 48% returns by Buying Century Plywood with a target of 290 (cmp 194)

Century Plywood

About Century Plywood

Century Plyboards (Century) is a leading player in the fast growing plyboard and laminate segment, with an overall market share of around 25% of the organised plyboard market and an estimated size of Rs4,500-4,800 crore annually. 

The organised plywood and laminate segment is growing at healthy double-digit growth rates due to an improving demand environment and a shift towards branded products. 

Century with its strong brand equity, unparallel distribution network (10,000 touch points) and manufacturing presence in the timber-rich region of Myanmar is well poised to cash in on the robust growth opportunity. Š 

Century Financials

• Sales of Century increased from 1297cr in 2014 to 1570cr in 2015 a growth of 21%
• EPS of Century increased from 3.01 in 2014 to to 6 in 2015 a growth of 100% including extra ordinary item.
• The stock is trading at 28PE whereas industry p/e is 24.
• The stock is trading at 14P/BV which is little high.

Future of Sector

The introduction of the Goods and Services Tax (GST) would create a level playing field for the organised players. The unorganised players are currently out of the tax net and thus enjoy lower costs by evading taxes. 

After the introduction of GST, the tax advantage enjoyed by the unorganised players would diminish sharply and the market share of the organised players is likely increase significantly, benefiting Century. Š 

We believe Century with its top-of-the-mind brand recall is well positioned to ride the economic revival-driven recovery in demand and increase its market dominance in the plywood and laminate segments. 

A robust revenue growth and margin expansion would enable the company to deliver a strong growth ahead. We expect it to post a 31.3% earnings CAGR over FY2015- 17. 

The implementation of GST would provide a fillip to the revenue and earnings performance. In view of these positives, we maintain our Buy rating on the stock with a price target of Rs290 (valued at 25x FY2017E).

Technical of Century

Technically currently the stock is falling and you can buy it once it is on uptrend.

Buy Century at 190 with a target of 290.

**Application of GST is the most important.