Paper stock surge rapidly amid college, office reopening expectations

By Angel Broking | Published on 9th July 2021 | 52

Paper stock surge rapidly amid college, office reopening expectations

Pandemic-related restrictions have impacted the paper and products industry severely.

With the closure of educational institutes and the increasing adoption of work from home, there has been a significant drop in paper demand. Accordingly, this affected the prices of paper and paper products, which subsequently impacted the industry’s earnings.

Nevertheless, on July 7, paper manufacturing companies were on a roll, as their stock prices surged up to 20% on BSE, hitting upper circuits.

Furthermore, many of these stocks recorded their new 52-week highs owing to the revival of paper demand.

Let’s take a look at how paper stocks performed individually on Wednesday.

Stock Highest stock price recorded on intraday trade (in Rs.) Percentage change (approx.) Stock price at the time of writing (in Rs.)
JK Paper 237.25 8% 226.55
Pudumjee Paper Products 46.50 20% 44.20
Star Paper Mills 178 14.5% 168.35
Orient Paper & Industries 33.30 13% 31.90
Seshasayee Paper & Boards 222.8 12% 211.90
Emami Paper 189.50 20% 204.70
Malu Paper Mills 38.90 19% 39.75

Among all the companies listed here, JK Paper stocks stood out in gains, climbing more than 40% over the last month.

How JK Paper is leading from the front!

  • It has reported a consolidated net profit of Rs. 135.79 crores in the quarter ending March 2021. It is more than twice the number recorded in the 3rdquarter of FY21. During that period, JK Paper’s consolidated net profit stood at Rs. 65.94 crores.
  • This company increased its net revenue from operations by 20.5% to Rs. 898 crores in the 4th Whereas, the same stood at Rs. 745 crores in the preceding quarter.

According to JK Paper, this improved performance results from increased production and sales volume over the previous quarter.

Although this company is yet to witness any impact of the second wave, its management team expects disruption in the months that lie ahead.

Top trends in the paper sector

Here are certain estimates that are noteworthy for investors:

  • According to CRISIL’s estimates, P&W paper demand will increase at a CAGR of 1-3%, thus hitting the 5.5 million tonnes mark within fiscal 2025.
  • Enrolment of students is set to increase faster, ranging anywhere between 0.5% and 1% over the coming 3 years.
  • The increased government spending on education is likely to raise the demand for cream wove and maplitho papers.
  • As per experts’ projections, paper demand is set to increase by 11-15% on a year-over-year basis in the next fiscal year. The possible reopening of offices, schools, and colleges will be the primary factor behind this rise.

Final word

The demand outlook for the Indian paper industry appears to be quite favourable as far as the long-term is concerned.

Some of the main driving factors include improving literacy rates, increased government spending on education, and overall economic growth.

Furthermore, print media’s growth is also something that investors might want to consider.

Considering these factors will not cease to exist, the Indian paper industry will likely continue to expand rapidly over the next few years.

That said, there might be a few anomalous years, owing to this sector’s cyclical nature.

Frequently Asked Questions

What are some major issues faced by the paper industry in India?

High costs of raw materials, non-availability of high-quality fibre, and concentration of mills primarily plague this industry. Moreover, digital ubiquity is a major concern for the industry.

Which company is the largest manufacturer of paper and forest products in terms of market capitalisation?

JK Paper is the largest company in this industry. It has a market capitalisation of approximately Rs. 3,831 crores at the time of writing.

What is JK Paper’s current dividend yield?

Currently, JK Paper has a dividend yield of 1.77%.