Some of the key Points from Annual Report:
• CenturyPly is India’s leading organized plywood brand with a market share of around 25% of the country’s organized sector.
• The Company offers plywood, laminates, veneers, MDF, block boards, doors, fiber cement boards and particle boards.
• The Company’s products are available across the country through 31 marketing offices covering over 630 cities and townships addressing 1,800 dealers and nearly 16,500 retailers.
Current Capacity and Future CapEx
With Government push to Housing and Infrastructure Century ply created the perfect runway for sales to strengthen over the next few years.
• Plywood – Current capacity is 2,10,000 cubic meters. Centuryply’s existing capacity is ~60% higher than its nearest competitor. Century ply’s capacity utilization was ~85% with attractive operating leverage. We are commissioning a facility in Punjab to address incipient demand.
• Laminates - Centuryply is the third-largest player in India’s organized laminate segment. Current capacity is 4.8 million and we are scaling this by 50% by September 2017.
• Particle boards - Centuryply commissioned a 54,000 cubic meters particle board manufacturing facility at a capex of INR600 million in FY17. The location was strategically chosen to be Chennai as ~50% of the raw material requirement was accessed from a captive unit in the vicinity
of the plant and the rest from third-party units located in the hinterland. The plant
can potentially generate INR1 billion worth of revenues while operating at peak capacity.
• MDF - Centuryply is in the process of commissioning India’s largest MDF unit in Punjab with a 1,98,000 cubic meters capacity. The plant is expected to be up and running by H1FY18. We are planning to manufacture value-added products such as laminated MDFs, flooring and doors, among others. Consequently, we are hopeful of generating probable revenues as high as INR1.50 billion in the first year.
At peak capacity, the particleboard and MDF units are expected to generate annual revenues in excess of INR100 crore and INR450 crore, respectively and the unit is the largest MDF capacity in the country.
Along with product capax we will commission 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.
GST - A Game Changer
The INR18,000 CR Indian plywood sector is largely dominated by unorganized players who account for more than 65% of the total plywood market.
• India has nearly 3,300 plywood units, of which around 2,500 units are exempt from paying any kind of duties or taxes; 700 units are partially-exempted. The organized sector pays 28-30% in the form of various duties and taxes. Besides, organized players also need to pay CST related to the inter-state movement of stock, making their products dearer by ~ 30-40 % compared to unorganized alternatives.
• The price difference will decline and to account for the reduction in exemption limit from INR1.5 crore to INR20 lac. Superior products quality offered by the unorganized players could propel customers to switch to organized brands.
• Besides, with exemption limits declining, unorganized players will need to rely solely
on bank financing; they 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.
• Centuryply is attractively placed; the Company expects to increase capacities at its existing facilities at a fraction of the capital cost and in quicker time, resulting in a timely, efficient and profitable address of marketplace realities.
Some Interesting Facts about Century Ply Operations:
• As India encountered demonetisation and industry players complained of revenue sluggishness, Centuryply reported a 14.8 % q-o-q growth in net revenues and almost 50% growth in PAT during Q4FY17.
• The Company achieved a plant efficiency
of > 90% to moderate overheads. The Company sourced raw materials from Laos and Myanmar, which helped moderate the overall cost of raw materials as a proportion of revenues. The Company achieved the highest per machine productivity in the industry.
• Centuryply’s per person productivity, the highest in the industry, warrants fewer people. This was achieved by streamlining processes, incentivising outperformers, best- in-class practices and regular maintenance. Here’s proof: our press was running at 93% efficiency, targeted
at 100% in 2017-18; we increased laminate output >15% without additional capex.
• We were the first Indian company to set up a peeling unit in Myanmar, a country with abundant timber resources; the objective was to secure quality raw material in a cost-efficient manner. The peeling of logs in Myanmar and sending the face veneers to India has not only helped curtail costs but also cushioned Centuryply from the risk of nationalist policies by the Myanmarese Government. Timber logs, owing to their unwieldy dimensions, occupy more space and raise transportation expenditure; face veneers are convenient and cost-effective to transport. When companies importing timber logs from Myanmar suffered a body blow following the Myanmar government’s decision ban commercial logging, Centuryply remained unaffected.
Management Outlook & Visions
The Company is promoted by first-generation entrepreneurs like Sri Sajjan Bhajanka, Sri Sanjay Agarwal, Sri Hari Prasad Agarwal and supported by Sri Vishnu Khemani and Sri Prem Kumar Bhajanka.
I believe that Centuryply stands attractively placed to capitalise on the next growth level: we expect to generate incremental revenues of INR700 to INR1,000 cr during the current financial year with another INR500 cr of revenues in 2018-19. This indicates that even as we took nearly 20 years to climb to revenues of INR500 cr, we can potentially, replicate this growth in just the next two years. It is this optimism that I intend to extend to our stakeholders. All that we achieved in the last decade was in the face of sectoral and tax challenges; what we are now likely to achieve is with the tailwind of systemic support. And that could make all the difference.