Century Plyboards Plywood Growth and Margin Strength Drive 1QFY27 Earnings Upgrade

Investment View and Valuation

Motilal Oswal Financial Services maintains a BUY rating on Century Plyboards following a healthy 1QFY27 beat led by the plywood business. The broker considers Century Plyboards a leader in its key building-product segments and expects strong earnings growth.

The target price is Rs 893, based on 33x FY28E P/E, versus a CMP of Rs 770. The principal downside risk identified by the broker is weakness in the plywood business.

Strong 1QFY27 Consolidated Performance

Century Plyboards reported strong 1QFY27 consolidated results, with revenue, EBITDA and PAT increasing 34 per cent, 54 per cent and 55 per cent year on year, respectively. These metrics were 17-25 per cent ahead of Motilal Oswal's estimates.

The reported results were primarily supported by plywood, which represented 55 per cent of the 1QFY27 revenue mix. MDF, laminate, particle board and CFS and others represented 21 per cent, 13 per cent, 6 per cent and 5 per cent, respectively.

Plywood Drives Growth and Margin Expansion

Plywood was the standout segment. Its 1QFY27 revenue rose 33 per cent year on year to Rs 8,546 million, while volume increased 28 per cent to 1,41,989 CBM and average realisation rose 4 per cent to Rs 60,187 per CBM.

Segment EBITDA margin reached 16.9 per cent. The report headline cites an EBIT margin of 16.5 per cent, up 190 basis points year on year and 170 basis points quarter on quarter. Management said plywood capacity utilisation is near optimal and aims to raise market share from about 10 per cent to 15 per cent over the next three to five years through 12-15 per cent segment volume CAGR.

Performance Across Other Segments

MDF's sequential decline followed a planned shutdown at one of two plants for capacity expansion. Although other segments delivered revenue growth, margins remained uneven.

Management Commentary and Operating Outlook

• Rising raw-material prices prompted 7-12 per cent price increases across segments in April 2026, alongside industry peers.
• Channel stocking in March aided volume growth, although Century Plyboards subsequently rolled back some price increases during the quarter to support volumes.
• Laminate is expected to revive through refreshed product launches and distribution-channel realignment.
• MDF continues to face high market discounts despite price hikes.
• Particle board margins are expected to improve with greater plant utilisation.
• CFS is not a core business, and Century Plyboards is seeking a strategic partner.

Capacity Expansion and Capital Expenditure

Capacity expansion remains a key growth driver but also constrains return ratios. Century Plyboards plans to add 25,000 CBM of plywood capacity in Chennai by July 2026 and further capacity at Hoshiarpur by October 2026. The company has acquired land in Uttar Pradesh for plywood manufacturing, while MDF plans remain under process.

The proposed Odisha plywood and particle-board facilities are at an early stage and are expected to start after two years. Major capex beyond FY28 has not been finalised.

Earnings Estimates and Return Ratios

Following the first-quarter revenue beat, mainly from plywood, Motilal Oswal raised its earnings forecasts by 3-6 per cent. The broker forecasts FY26-FY28 revenue, EBITDA and adjusted PAT CAGRs of 19 per cent, 32 per cent and 49 per cent, respectively.

Motilal Oswal expects return on equity and pre-tax return on capital employed to remain muted at around 17 per cent each in FY28E because of heavy ongoing capex.