Reviews

In this edition, we have reviewed Icici Bank Ltd. and Century Plyboards (I) Ltd. We suggest our reader-investors to HOLD Icici Bank Ltd. And Century Plyboards (I) Ltd.

We had recommended ICICI Bank Ltd. in Volume 36, Issue No. 25 dated November 8 to 21, 2021 under the ‘Cover Story’ segment.The recommended price for the stock was Rs802.30. We had recommended the stock on the basis of strong results, improving asset quality and growth in product portfolio. One of the biggest private sector banks in India, ICICI Bank provides retail, SME and corporate customers with a diverse range of financial products and services. The bank operates a vast network of ATMs and branches. It has been at the forefront of utilising technology and providing services through online and mobile banking. The bank operates in various sectors like retail, SME, rural banking, wholesale banking and treasury.

On the quarterly consolidated financial front, its income from interest was reported at Rs24,999.46 crore for Q4FY22, which is an increase of 12.11 per cent as compared to Rs22,299.58 crore reported for Q4FY21. The total income calculated for Q4FY22 sank by 1.68 per cent to Rs42,834.06 crore from Rs43,567.64 crore in Q4FY21. For Q4FY22, the company earned net profit of Rs7,910.35 crore as compared to net profit of Rs5,277.29 crore gained in Q4FY21. On the annual front, for FY21 the company posted interest income of Rs95,406.87 crore, which is an increase of 7 per cent as compared to Rs89,162.66 crore for FY20.

The total income for FY21 declined 2.27 per cent to Rs157,536.32 crore from Rs161,192.19 crore for FY20. For FY21, the company reported net profit of Rs25,783.83 crore compared to net profit of Rs20,219.67 crore gained in FY20. ICICI Bank witnessed leadership change in FY19

with Sanjay Bakshi as the new Managing Director and CEO and has laid out a clear focus on achieving superior ROA and ROE through strong core operating performance. ICICI Bank has strategically transformed itself into a full-fledged retail bank such that its share of retail loans has increased to 53 per cent in FY22 from 33 per cent in FY14.

The bank’s asset quality continues to be stable while its NPA levels continue to decline. The overall business growth is still stronger than the industry average. Its CASA ratio improved 250 bps YoY to 45 per cent as CASA deposits grew by more than 20 per cent YoY to Rs518,437 crore while the overall deposits surged by 14.2 per cent YoY to Rs1,064,572 crore. Overall advances increased marginally YoY by 17.06 per cent to Rs859,020 crore. The bank’s performance over the medium term will be driven by continued increases in deposits and advances, stable asset quality, sound provisioning and further decreases in gross and net NPA levels. Hence, we recommend HOLD.

We had recommended Century Plyboard (India) Ltd. in Volume 36, Issue No. 25 dated November 8 to 21, 2021 under the ‘Cover Story’ segment. The recommended price for the stock was Rs540. We had recommended the stock on the basis of robust growth, market leadership and healthy demand momentum. The company produces plywood, veneer, laminates, medium density fibre (MDF), particle boards and related goods with a diverse product portfolio. The Indian plywood industry is dominated by unorganised players, which account for around 70 per cent of the total plywood market. The company houses 12 manufacturing facilities located in strategic locations around India and abroad.

Analysing the financial performance of the company in the recent quarter, its net sales improved by 20.95 per cent from Rs745 crore in Q4FY21 to Rs901.05 crore in Q4FY22. However, the operating profit zoomed significantly by 22.07 per cent in Q4FY22 to Rs166.10 crore as compared to Q4FY21 which was Rs136.07 crore. Consequently, the company reported net profit of Rs88.76 crore in Q4FY22 from Rs86.94 crore in Q4FY21. The annual performance of the company shows positive results. Its net sales figures indicate 42.09 per cent growth to Rs3,027.02 crore from Rs2,130.36 crore. The operating profit showed an astonishing gain of 56 per cent to Rs553.92 crore in FY21 as compared to Rs352.83 crore in FY20.

The company made a net profit of Rs313.16 crore in FY21 as opposed to Rs191.22 crore in FY20. It is India’s leading plywood manufacturer with a market share of 25 per cent in the country’s organised segment of plywood production. Century Plyboard (India)’s share price has grown at 16 per cent CAGR over the past five years. It continues to report industry-leading growth with stable margins and a positive cash flow. These factors continue to drive its expansion despite a 24 per cent correction in the last two months.

Following some slowdown in January 2022 brought on by the third wave of the pandemic, the company experienced strong product demand as the business environment returned to normal. Increasing traction in the real estate industry, robust brand recall with increase in branding exercises and improved lead to sales conversion have benefited the company. Additionally, the company was able to maintain gross margin and EBITDA margin on a QoQ basis, largely driven by passing on of the input costs and better operating leverage. In addition, due to fewer days of accounts receivable, its working capital cycle decreased to 63 days from 69 days in FY21. Hence, we recommend HOLD.

(Closing price as of July 12, 2022)