Today, we will discuss the paper industry and the best paper stocks in India.
Recently, paper stocks have made good returns for their investors. During the pandemic, the paper industry suffered a lot because schools and colleges were closed during this pandemic period. Even lot of people decline to take newspapers. Demand for paper was reduced significantly, so a storm hit the paper industry. But now situation is good for the paper industry. In this article, we will discuss what can happen in this sector in the near future and also its market leaders who run their business in this sector.
Table of Contents
Industry Overview-
Recently, good growth has been seen in this industry. This is an agro-based industry that uses waste paper pulp to make paper and paperboard, which are used in different places. Recently, the focus has been on reuse and has shifted from plastic to paper, so paper industry demand has gone up. As per analysts and experts, due to recent global events like the Russia-Ukraine war, crude prices went up and commodity prices increased. The effect on the paper industry was less compared to other industries. The impact of recent structural changes in the paper industry can still be seen. The stock prices in this industry increased a lot.
The paper industry has its contribution in packaging paper (55%), writing and printing (35%), newspaper/newsprint (6% and others (4%).
According to the article on Mint, which mentioned the reasons for the bull run in the industry, The first reason was the geopolitical reason due to which this sector is isolated. It uses paper and pulp as raw materials, whose prices have recently increased, but companies have unsold inventory. After the pandemic, paper demand increased a lot, which benefited this sector. Per capita consumption in India is very less compared to other developed countries. As per the manufacturing comment, India has 15% of the world’s population, but only 5% of the world’s paper consumption is done here.
According to a report, from 2026–27, 6-7% of compounding growth can be seen, and total paper consumption can reach 30 million tons. It is expected to be a big number.
Andhra Paper Limited-
Andhra Paper is engaged in the paper industry and produces mainly writing and printing paper. The company manufactures specialty products that are used in photos, batteries, charts, and packaging materials. The company also made products for pharma, poster printing, card lovers, etc. The company has reduced its debt from Rs. 500 crore to 59 crore in FY22. The raw material price for the company remains highly volatile. It has ranged from around 19% to 46% in the last 10 years. It will be interesting to know how this company will reduce the volatility of raw materials.
Fundamentals-
| Market Cap | 2,132 Cr |
| P/E Ratio | 3.83 |
| Industry P/E | 8.46 |
| Debt to Equity | 0.03 |
| Dividend | 2.33% |
West Coast Paper Mills limited-
West Coast Paper Mills is one of the oldest manufacturers of printing paper and packaging material in India. Its products are employed in varied use cases, from being used by publishers to being used as packaging material. West Coast Paper Mills has a total capacity of 3.2 lakh metric tons. Being backward integrated, the company is able to contain the volatility in input prices and somewhat insulate their operating margins as well. West Coast has been able to keep its revenues more stable. Even in the downfall due to COVID, the company did not lose significant revenues. Even in FY22, the company grew its revenues by 50%. In October 2019, West Coast had a majority stake in Andhra Papers Limited of around 72%.
Fundamentals-
| Market Cap | 4,891 Cr |
| P/E Ratio | 4.88 |
| Industry P/E | 8.69 |
| Debt to Equity | 0.09 |
| Dividend | 1.35% |
JK Paper Limited-
JK Paper is the 2nd largest manufacturer of paper and packaging board manufacturer in India. JK Paper has a total capacity of 7,61,000 metric tons per annum. JK Paper has a 28% market share in copier paper, a 10% market share in coated paper, and a 19% market share in packaging board manufacturing. JK Paper has funded most of its CAPEX plan via debt, which has increased the company’s debt burden on its balance sheet and affected its profitability. It will be interesting to know how the company will reduce its debt.
JK Paper Share Price Target 2023 2024 2025 2026 2030
Fundamentals-
| Market Cap | 6,746 Cr |
| P/E Ratio | 5.43 |
| Industry P/E | 8.69 |
| Debt to Equity | 0.69 |
| Dividend | 2.01% |
Century Textiles & Industries Limited-
Century Textiles & Industries Ltd. is the flagship company of the BK Birla Group. The company transformed from a single-unit textile entity in 1897 into a commercial powerhouse. The company’s revenue has increased on the back of rising capacity utilization of 4,81 lakh MTPA in both textiles and paper manufacturing segments. The net profit has been almost flat, around Rs. 45 crores, despite a 40% YoY increase in its revenue due to pricing pressure and intense competition costs.
Fundamentals-
| Market Cap | 12,137 Cr |
| P/E Ratio | 55.24 |
| Industry P/E | 8.69 |
| Debt to Equity | 0.27 |
| Dividend | 0.46% |
Seshasayee Paper and Board Limited
SPBL was incorporated in 1960 and has a good experience of over 60 years. The company has built a strong distribution network, and it has very strong goodwill in south India. Apart from domestic distribution, it exports to other countries like the USA, Sri Lanka, and a few Middle Eastern countries. The company has been repaying its debt for the last 5 years and currently stands debt-free. It is a positive point for the company. Compared to last year, in FY22, the company almost doubled its revenue to Rs. 1355 crore, but the profit hasn’t increased in proportion to the revenue.
Fundamentals-
| Market Cap | 2,306 Cr |
| P/E Ratio | 5.66 |
| Industry P/E | 8.69 |
| Debt to Equity | 0.00 |
| Dividend | 1.57% |
Orient Paper Limited-
Orient Paper was incorporated in 1939 by CK Birla Group. Orient Paper & Industries Ltd. Produces a wide range of Writing, printing, industrial and speciality paper products and boards. Orient Paper is a leading tissue paper manufacture in India. The company also has been engaged in paper manufacturing in Africa. The company has almost doubled its revenue in last financial year with good profit. Orient Paper has been given more than 80% returns in last year.
Fundamentals-
| Market Cap | 1,242 Cr |
| P/E Ratio | 9.61 |
| Industry P/E | 8.46 |
| Debt to Equity | 0.18 |
| Dividend | 1.71% |
Orient Paper share price target 2023 2024 2025 2030 2035
Conclusion-
According to an article in Money Control, India is witnessing a boom in the paper industry, mainly because of increasing exports and decreasing imports. So growth can be seen in the coming future. Due to the ban on single-use plastic in the paper industry, stock prices and raw material costs, both increased. It will be important to check how it will maintain its margin in the future.
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Disclaimer: I am not a SEBI-registered investment adviser or research analyst. The information shared is only for educational purposes. This is not an investment advice.