SPECIAL REPORT CENTURY TEXTILE & INDUSTRIES LTD

Century Textiles & Industries Limited - Company Profile

Incorporated in 1897, Century Textiles & Industries Limited manufactures cotton textile products and has presence in the yarn, denim, caustic soda, sulphuric acid, salt, cement, and pulp and paper industries.

Century Textiles & Industries Limited 100 % cotton yarn unit and its denim unit are both situated in Madhya Pradesh. The cotton yarn unit has a capacity of 24,960 spindles and the denim unit produces 21 million metres of denim fabric per year.

Century Textiles & Industries Limited cement segment manufactures and markets cement and clinker products for use in water tanks, roads, bridges, dams, sea walls, turbine blocks, and residential or multi-storeyed buildings under the Birla Gold brand. Century Textiles & Industries Ltd has three cement plants at different locations, with a total cement manufacturing capacity of 7.8 million tonnes per annum.

Century’s pulp and paper plant has a capacity of 31,320 tonnes per annum, writing and printing paper capacity of 1,97,800 tonnes per annum and a capacity of 36,000 tonnes per annum for tissue paper. The Company has set up a 500- tonnes per day multilayer packaging board plant adjacent to its existing pulp and paper plant at Lalkua, Uttarakhand.

Century Textiles & Industries Limited - STOCK INFORMATION

Century Textiles & Industries Limited - STOCK FUNDAMENTALS

INVESTMENT RATIONALE

CENTURY TEXTILE has 40 acres of mill land in Worli, one of Mumbai’s most attractive real estate micro-markets. Recent transactions/PE deals in Central Mumbai have materialized at a valuation of INR1.6b-1.8b/acre. Going ahead, we believe cost savings from upcoming CPP (would meet 80% requirement) and new cement plants with better operating efficiency will enhance operating margins, though it will be difficult to completely bridge the gap with peers. We expect 19% CAGR in cement EBITDA/ton over FY14-15 to INR734.

SHAREHOLDING PATTERN

OUTLOOK AND VALUATION

While the cement business is poised for steady improvement, acute margin pressure in non-cement segments, high leverage (FY15E net debt-equity of 4.9x) and delay in real estate value unlocking would limit upside potential. CENT trades at 11.1x FY15E EBITDA. For the cement business, this implies FY15E EV of USD72/ton v/s USD64/ton for MOSL Mid Cap Cement Universe and USD111/ton for overall Cement Universe. Our SOTP-based valuation is INR460/share: (1) cement (USD75/ ton), (2) paper (1x FY15E sales), (3) textiles (0.4x FY15E sales), and (4) land (FY15E NAV). We initiate coverage with a buy rating; our target price 605 levels.

RESULTS (Quarterly )(Rs CR.)

TECHNICAL VIEW

CENTURY TEXTILE LTD is looking strong on charts. We advise to buy around 565-575 with stoploss of 545 for the targets of 590- 605 levels. RSI is also showing upside momentum in it on daily charts.

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