Paper Stocks on a Roll - New Stock Alert

Stock Investors Alert! Paper Stocks on a Roll, Surge To a New Level

Stocks of the paper industry set a new record high as most of the frontline paper stocks are currently trading up to 15 percent higher with the majority of them experiencing a 52 week high level in intraday trading on this Wednesday.

Star Papers Mills, Orient Paper & Industries, and Seshasayee Paper and Boards have rallied over 10 per cent on the Bombay stock exchange.

Whereas Astron Paper & Board Mill, Andhra Paper, JK Paper, Tamil Nadu Newsprint and Paper, Ruchira Papers and West Coast Papers were on the 8 per cent on the Bombay Stock Exchange

Yesterday, the S&P BSE Sensex was up to 0.20 per cent at 52,965 points hitting upper circuits. 

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

Stock Name Highest Stock Price Recorded on Intraday Trade Percentage Change Stock Price at the Time of Writing
JK Paper  237.25 8% 226.55
Seshasayee Paper & Boards 222.8 12% 211.90
Emami Paper 189.50 20% 204.70
Star Paper Mills 178 14.5% 168.35
Pudumjee Paper Products 46.50 20% 44.20
Orient Paper & Industries 33.30 13% 31.90
Malu Paper Mills 38.90 19% 39.75

For all the companies that are listed above, J&K Paper stocks stood out in gains, jumping more than 40% in the last month.

For all the companies that are listed above, J&K Paper stocks stood out in gains, jumping more than 40% in the last month.

How JK Paper is Leading Amongst All!

According to a report, JK paper has booked a net profit of Rs 135.79 crore in the quarter ended in March 2021. 

It is more than twice the number was recorded in the third quarter of FY 21. JK Paper’s consolidated net profit stood at Rs 65.94 Crores. 

This company increased its net revenue by 20.5% to Rs. 898 Crores in the 4th from Rs 745 Crores in the preceding quarter. 

According to the JK Paper, the elevated performance of its stocks results from increased production and sales volume than the previous quarter.

Although the company has yet to witness any impact of the second wave, its management team expects some sort of disturbance in the coming months.

Experts also said the demand is expected to pick up and grow by at least 11-15% in FY22 with school, colleges and office spaces likely to open and drive the demand. 

Due to the outbreak of Covid 19, the paper and paper product industry is one of the worst affected industries. Closure of education institutions, work from home by offices, 

Moreover, downcast demand also had a great impact on the prices of paper & paper products that further affected the revenues of the industry.

The long term demand of the paper industry always remains favourable as the demand increases by increasing literacy levels, growth in print media, higher government spending on the education sector, upgrading urban lifestyle and economic growth. 

As the factors are likely to be continued for an extended period, the paper industry is likely to grow at 5-8% per annum in the coming years. 

Going ahead, CRISIL expects a huge demand for printing and writing paper to grow at 1-3 per cent CAGR and reach 5.5 million tonnes by Fiscal 2025. 

As the new education policy comes into effect, a slow rise in the education spend by the government (~20% higher spend) and increased expenditure on education is likely to support demand for the P & W segment, the company once said in a report.

Highlights in the Paper Sector

As per the CRISIL Report, P&W paper demand will increase at a CAGR between 1-3%, hence, giving a 5.5 million tonnes mark within fiscal 2025.

Enrolment of students is set to increase faster, ranging between 0.5% to 1% in the coming years. 

As per the experts’ estimation, the demand for paper stocks is all set by 11-15% on a y-o-y basis in FY 23. The primary factor behind the rise of paper stocks is the possibility of reopening of schools, colleges, offices etc.

Impact on Consumers

Consumers will have to pay a tad more for buying anything from branded garments to fast-moving consumer goods (FMCG) bought through e-commerce. 

The corrugated box industry expects to increase a sharp cost in a short period and raw materials supply disruptions. 

Material Shortage

Here, the rise in prices is the main issue. On the other hand, paper mills say they do not have the material.

A paper manufacturing company once said in a letter to its customer, the firm was forced to raise prices after the paper pulp prices increased 70-100% in the last 3 months. 

The Kraft Paper Story

Paper prices, particularly kraft paper, have increased by the two factors; one is supply-side problems and the other is the availability of containers and ships. 

Kraft paper mills say the prices of domestic and imported waste paper is rising due to supply misery as a result of Covid led lockdowns and international logistics disruptions.

The Chinese Angle

China had been importing waste paper from all over the world before the ban. For instance, it includes all waste paper generated in the US, Europe and other developed nations. The waste paper was recycled to manufacture paper. 

Given the ban on wastes, Chinese paper mills were unable to get the main raw materials and they began to import the kraft paper from India. Kraft paper is recycled paper and Chinese mills use it as a fibre source to manufacture paper. 

Waste Paper Supply Issues

Companies are also facing issues regarding the availability and prices of waste paper. As the educational institutes closed due to the Covid 19 pandemic, the usage of notebooks and exercise books also declined. This has further increased the demand for paper used for writing and printing dropping.

All these things waste paper supplies. Also, China has set up new units in the US and south-east Asia to convert the waste paper into pulp and send them home. 

This has resulted in the domestic industry facing problems in sourcing waste paper and recycling it. 

The Bottom Line

As far as the long term is concerned, the demand for the Indian paper industry needs to be increased. Some of the important factors include economic growth, literacy rates, spending on education etc. 

In addition to this, print media’s growth to a new level is also something that investors need to consider. If these factors do not hamper the growth of the paper industry, the Indian paper industry is likely to expand rapidly over the next few years.

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