Shares of Century Plyboards fell almost 3 percent to hit their fresh 52-week low of ₹466.05 apiece in intraday trade on BSE on Monday.
The stock has been under pressure in the last one year. It hit its 52-week high of ₹749 on March 23, 2022; the stock is currently down almost 38 percent from that level.
While the stock is at its 52-week low, brokerage firm ICICI Securities sees value in it. After the brokerage firm interacted with the management of Century Plyboards, it maintained a ‘buy’ call on the stock with a target price of ₹758, implying a 58 percent upside from the stock's March 17 closing of ₹479.45 on the BSE.
In a report on March 20, ICICI Securities said Century Plyboards' management indicated demand has improved quarter-on-quarter (QoQ) in the fourth quarter-to-date (Q4-TD) for plywood, remained steady for medium-density fiberboard (MDF) due to a lack of additional capacities, whereas in laminates it continues to remain tepid.
"Century Plyboards has expanded its MDF brownfield capacity by nearly 70 percent at Hoshiarpur (Punjab) which has been commissioned in early-Mar’23 and is expected to ramp up from Q1FY24 and thus aid growth for the company from this segment," said ICICI Securities.
The brokerage firm underscored that Century Plyboards has taken a price increase of about two percent in the plywood segment in the ongoing quarter (Q4FY23) due to the increased cost of timber whereas in other segments there have been no material price changes.
Timber cost remains elevated and will likely keep margins subdued in the near term, ICICI Securities said, adding that Century Plyboards faces near-term demand (due to the inflationary environment) and margin headwinds (due to the increased cost of timber).
Nevertheless, ICICI Securities likes Century Plyboards.
"We continue to like Century Plyboards for its strong growth prospects, high return ratios and healthy balance sheet and believe it will potentially be a major beneficiary of the uptick in housing demand and higher spend on home improvement post the pandemic," said ICICI Securities.
"We maintain estimates and Mar’24E target price of ₹758, set at unchanged 35 times PER FY25E. Key risks to our call: (1) Slowdown in housing demand, (2) continuing higher input prices, which may adversely affect demand and profitability," ICICI Securities added.
While the stock looks attractive for the long term, analysts are not bullish on it in the short term perspective.
Jigar S. Patel, Senior Manager of Equity Research at Anand Rathi Share and Stock Brokers, pointed out that after registering triple top on the weekly scale on September 12, 2022, the counter has been in a free fall which resulted in a 34 percent cut in price.
Patel observed that the stock recently broke its crucial support zone of ₹480 which is a matter of concern.
On the indicator front, the ADX (average directional movement index) weekly is above 20 levels along with price action which is below Alligator weekly which hints towards a bearish stance in the said counter, Patel highlighted.
"We are expecting the stock to test ₹450 level in the coming sessions. As of now, no fresh longs are advised," said Patel.
Vaishali Parekh, Vice President of Technical Research at Prabhudas Lilladher, underscored that the stock has breached below the support zone of ₹480-475 band after the consolidation period near ₹500-520 zone weakening the bias.
Parekh observed the RSI indicator is sliding steeply to go into the oversold zone and a further downward journey is expected.
The near-term support is near ₹445-450 zone and thereafter the next band is around ₹410-415 levels.
"The overall bias is weak and if any pullback happens, then the stock needs to cross ₹520-525 zone decisively for the trend to improve and sustain the upward movement," said Parekh.
According to a MintGenie poll, 15 analysts on an average have a ‘buy’ call on the stock.
Disclaimer: The views and recommendations given in this article are those of individual analysts and broking firms. These do not represent the views of MintGenie.
