Paper stocks buzzing, India is the fastest growing market in the world

While the cost of paper and paperboard is a contentious issue for the industry, it is perhaps the best time to invest in paper stocks.

09 Sep 2022 | By Dibyajyoti Sarma

Exports have tripled from 9,78,000 tonnes in 2017-18 to 2,85,7000 tonnes in 2021-22

According to a market pundit who spoke to PrintWeek, since the beginning of the Ukraine war, the shares of the major paper manufacturers in India have surged over 100%, and it looks like the market will remain bullish for the next couple of quarters.
The reasons are — a robust demand triggered by the ban on the use of plastic, supply chain constraints, and lifting of Covid-19 restrictions, among others.
Going by the numbers, between 1 February and 7 September 2022, the stock prices of Andhra Paper grew by 115%, JK Paper 88%, Seshasayee Paper 99%, Tamil Nadu Newsprint & Paper 119%, and  West Coast Paper Mills by 131%.

Going forward, paper stocks would outperform on expectation of strong Q2 and Q3 earnings supported by robust growth in the packaging sectors and demand in the writing and printing paper segment along with the K-12 education sector.

After the ban of single-use plastic, the FMCG sector is looking at paper as an alternative to plastic. The FMCG sector is the fourth largest sector in India and is expected to grow at a CAGR of 20-22% percent in the next five years. This bodes well for paper mills with 5% of flexible packaging shifting to paper-based alternatives.
Meanwhile, the declining import figures have also helped boost the demand for paper manufactured in India. According to the data from Directorate General of Commercial Intelligence and Statistics (DGCI&S), the imports of paper, newspaper, and newsprint have been declining since 2017-18.

The imports fell from 3,16,8000 tonnes in 2017-18 to 1,75,2000 tonnes in 2021-22. On the other hand, the exports have almost tripled from 9,78,000 tonnes in 2017-18 to 2,85,7000 tonnes in 2021-22.

According to Rohit Pandit, secretary general, Indian Paper Manufacturers Association (IPMA), this is because of the pandemic, supply-chain disruption, and geo-political tensions. He added that the import numbers will see a rise once these issues are shorted out. 

Pandit is bullish about the Indian paper industry, which is expected to grow by 6-7% per annum. 

Ruchira Papers’ bonus share 
On 30 August, Ruchira Papers announced bonus shares for its shareholders. In its latest exchange filing, the company said it has approved one bonus share for each 10 shares held by a shareholder whereas they have fixed 10 September as the record date for dividend payment. The company’s stock has surged from Rs 79 to Rs 147, logging around 85% rise in year-to-date time.

West Coast Paper soars
According to a report published in Business Standard on 22 August, shares of West Coast Paper Mills were trading at Rs 564.85. In the past six months, the stock price of the company has soared 137%, as against 3% rise in the benchmark Sensex. For the April-June quarter (Q1FY23), the company posted a five-fold jump in consolidated net profit at Rs 208.95-crore from Rs 39.20-crore in the previous year’s quarter. On a sequential basis, net profit of the company grew 49% from Rs 140.51-crore.

West Coast’s acquisition of Andhra Paper in October 2019 has also significantly improved the company's scale and market position, making it the fifth-largest paper manufacturer in India, with a consolidated capacity of 568,000-mtpa.

Two-fold rise in net profit for JK Paper
According to a report published on 31 July, JK Paper reported a two-fold increase in consolidated net profit at Rs 264.23-crore for the quarter ended June, helped by higher sales volume and enhanced sales realisation. The company logged a net profit of Rs 104.22-crore in the April-June period a year ago. Its revenue from operations was up two-fold at Rs 1,508.05-crore as against the low base of the pandemic-impacted corresponding quarter. It stood at Rs 720.08-crore last year. The company’s total expenses were at Rs 1,101.39-crore as compared to Rs 546.65-crore.

(Courtesy: Agencies)