Companies in the paper sector are posting fabulous results from last 2-3 quarters. We can look at the results of
Seshasayee Papers
Star Paper Mills
N R Agarwal Inds
I could not understand the reason for increase in Profit for companies in this sector. There is no tailwind. No technological advancement. No substantial pick-up in consumer demand. No export incentive by Govt.
What is the reason for increase in profit of paper companies?
Raw material costs are coming down and main contributor in this segment Ballarpur Industries has shut down its plants because of financial crunch. This has created a demand supply gap and improvement in margins for othercompanies.
Disco: i do not hold any stocks in paper industry
Paper companies have increased paper prices and so their margins have improved…There is no demand pull … Once the price increase stabilizes then I don’t think they will be able to sustain their good results…
B i l t a major paper producer was shut and hence
Once they come back to full production demand supply mismatch shall ease
#3QWithCNBCTV18
— Varinder Bansal (@varinder_bansal) February 10, 2017
Shreyan Ind
9M PAT at 18.55 cr Vs 2.2 cr (FY16 PAT was 8.7 cr)
M-cap 184 cr
Stock trading at nearly 7.5 times FY17e PAT
This result seems quite unusual to me. Do we have any knowledge about the capacity of BILT which is closed down?
I do not see any unusual increase in paper prices in the market.
There is a general agreement that paper industry is growing at 5-7% /annum.
Also surprising is that ITC Paper division has not shown any growth in revenue
I think Seshasayee is one of the best bets in this space, assuming monsoon is ok and water availability isnt an issue.
I saw in their FY17 AR that they are increasing capacity at their existing 2 plants from 187 TPA to 275 TPA, which is a pretty substantial expansion (47%) at a cost of 200 cr. There are some other things they are implementing at the same time within the same capex that should bring down costs.
It could be pretty well timed as well with the current upswing in product prices which should last for 1-2 yrs.
Unfortunately there is no time line given on when they expect this project to be completed.
The only info I have seen on this on the net is this Tulsian interview dtd Jan 19th where he said its may be completed in 6-8 months, which puts it within the current FY.
[Tulsian interview]
(https://www.moneycontrol.com/news/business/stocks/buy-seshasayee-paper-sp-tulsian-2486631.html)
Does anyone have any info on this?
Also I dont understand whats happening with TNPL.
They had water availability issues till end July 17 but even subsequent quarters have been pretty dire, where they should have been making large profits and doing better than the other cos in the industry given their low cost base.
There is no explanation from the co either. On top of that they have just announced another huge 2520 cr capex on plant expansion, when they still havent started getting returns on the previous recent investment.
Does anyone have any info?
Disclosure: no investment in either co.
