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Shares of Century Plyboards India Ltd have been under pressure recently, after scaling a new 52-week high of 749 in March. Concerns about persistent high raw material inflation have weighed on investor sentiment for the stock. So far in this calendar year, the stock has corrected by around 15% on the National Stock Exchange.

However, a recent dealers channel check by ICICI Securities Ltd showed that in Q1FY23 demand trends were steady across segments like plywood, laminates and MDF on continued pick-up in residential market and higher spend on home improvement post the pandemic.

The domestic brokerage house noted that the company undertook price hikes of 2-4% in the plywood segment and 3-4% in laminates during Q1FY23. This should enable the company mitigate some of the raw material price pressures and thus, help it maintain steady margins going ahead. It should be noted that the company's management had guided for 15-25% revenue growth across segments in FY23.

"We model revenue CAGR of 18% during FY22-24E aided by growth in MDF segment. We model 30 basis points improvement in margins over FY22-24E due to increased contribution of high margin MDF segment on account of commissioning of new capacities," ICICI Securities Ltd said in a report on 28 June. CAGR is short for compounded annual growth rate. One basis point is 0.01%.

The company's ongoing MDF brownfield expansion in Punjab is expected to be commissioned by October 2022 and its greenfield expansion in Andhra Pradesh is likely to go on-stream in the second half of FY24. Its greenfield laminates capacity first phase of expansion in Andhra Pradesh will commence production in Q2FY24. Note that all the announced capital expenditure is on schedule and the management plans to fund them primarily from internal accruals.

On the flipside are a slowdown in housing demand and continuing higher input prices, which may adversely affect the company's profitability, cautioned ICICI Securities report.

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