West Coast Paper Mills Ltd.

Transcription

1 INDUSTRY Paper & Paper Products No. of Shares (Crore) 6.6 Face value (Rs) 2 Mkt. Cap (Rs. Crore) Price (24/11/2017) Book Value (Rs) P/BV 1.90 BSE Code NSE Code WSTCSTPAPR Bloomberg WCPM IN Reuters WSTC.BO Avg. Monthly Volume W H/L (Rs) / Further to our Research report dated December 8th 2016, wherein we had recommended a BUY at the then price of Rs , the share price had reached its all time high to Rs increased by ~66% after the second quarter results for the FY18. The company has been steadily moving towards new highs with strong financial outlook. Huge demand is expected for paper in next few years and WCPM s initiatives towards use of modern technology and producing different grades of papers will see a rerating for the stock in the near future. At the current market price of Rs per share, further BUY is recommended with a medium to long term view. Recommendation BUY Particulars (Rs. Crs) Q2FY18 Q2FY17 Var % H1FY18 H1FY17 Var % FY16 FY17 Net Sales PBIDT (Excl OI) Profit After Tax PBIDTM (%) PATM (%) EPS (Rs.) Numbers are Standalone Company Background (WCPM) is one of the oldest and among the top five paper manufacturers in India. WCPM, incorporated in 1955 is the flagship company of S.K. Bangur group. WCPM mainly operates in two business segments, Paper products and Telecommunication Cables. The Company is engaged in manufacturing paper, paperboard and coated duplex board and operates six versatile machines with an installed capacity of 3,20,000 ton per annum at Dandeli. It also manufactures optical fiber cables with an installed capacity of 83,500 Km at Mysore. It has set up 6 Wind Mills totaling to 1.75MW capacity in Tamilnadu for power generation. WCPM has derived 96% of its revenue from Paper/ Paperboard and Duplex Board business and 4% from Cable business in FY Investment Rationale India is the fastest growing paper market in the world with CAGR of 6 to 6.5% in next 5 years mainly due to India s projected GDP growth, the renewed thrust on universal education through Sarva Shiksha Abhiyan & Right to Education, rise in organized retail and urbanization. Thus, paper demand is expected to rise from 16 million TPA to about 20 million TPA by in our country with the per capita consumption of around 13 Kg to 17 kg. For the period of FY12-16, its topline and bottomline grew at a CAGR of ~5% and ~63% respectively. In Q2FY18 WCPM s standalone net sales declined by ~11% to Rs crore, EBIDT increased by ~5% to Rs crore and PAT increased significantly by ~88% to Rs crore from Rs crore as compared to the same quarter previous year. This is mainly due to increase in production and sales of Paper and Paperboard coupled with decrease in input cost of mainly Wood/Chips. From the last several years, the company has been able to reduce its Debt, which is clearly reflected in its Debt/Equity ratio. As on March 31, 2017, its Debt/Equity ratio stood at 0.79x. Total debt of the company reduced from Rs. 1, crore in FY13 to Rs crore in FY17. In order to ensure long term availability of raw material, WCPM has focused on captive plantations projects and social forestry where it has cultivated 49,425 acres of land within a radius of Km from Dandeli, as to enhance the availability of pulpwood. Availability of raw material has always been a matter of concern for the paper industry. WCPM imported 4.42 lakhs MT wood chips during FY17 majorly from South Africa and it enjoys an edge over other mills due to proximity to Goa s port, which is just 150 km away from the plant located at Dandeli and is also well connected through railway line. WCPM studies various alternate raw materials in order to cope with the ever increasing demand for paper. The Elemental Chlorine Free (ECF) Bleached surface sized paper is manufactured through online process monitoring with environmentally benign and quality control systems to meet the international standards with the help of technology infusion. In Q2FY18, WCPM has undertaken restoration of boiler and rebuilding of one of its machine which is near to completion. This will help the Company in smooth, efficient and productive output and stand in better situation in the competitive industry. Recommendation - WCPM is continuously focusing on improving operating efficiencies, minimizing cost and optimum capacity utilisation along with good demand outlook. WCPM is currently manufacturing close to full capacity and operating margins have improved to 19.96% in H1FY18. There is no default in its repayment of loans and interest. It further plans to become debt free in next two years and expects 5% hike in paper products. Moreover its expansion plan in OFC segment will improve numbers in future. At the CMP of Rs. 207, the stock trades at 6 times FY19 EPS. Hence, we recommend a BUY on the stock with a Price Target of Rs. 276 with an upside potential of ~33% from the current level with an investment horizon of 9-12 months. 1

2 Revenue, EBIDTA and PAT Yearly Trend Debt/Equity, Interest Coverage, Current Ratio & Debt/MCap Shareholding Pattern 2

3 Financials Standalone Quarterly (Value in Rs. Crs) Q2FY18 Q2FY17 Var % H1FY18 H1FY17 Var% Net Sales Total Expenditure PBIDT (Excl OI) Other Income Operating Profit Interest PBDT Depreciation Tax Profit After Tax EPS (Rs.) Standalone Income Statement (Value in Rs. Crs) FY13 FY14 FY15 FY16 FY17 Net Sales Total Expenditure PBIDT (Excl OI) Other Income Operating Profit Interest PBDT Depreciation Tax Profit After Tax EPS (Rs.)

4 Standalone Balance Sheet (Value in Rs. Crs) Description FY13 FY14 FY15 FY16 FY17 EQUITY AND LIABILITIES Share Capital Share Warrants & Outstandings Total Reserves Shareholder's Funds Minority Interest Long-Term Borrowings Secured Loans Unsecured Loans Deferred Tax Assets / Liabilities Other Long Term Liabilities Long Term Trade Payables Long Term Provisions Total Non-Current Liabilities Current Liabilities Trade Payables Other Current Liabilities Short Term Borrowings Short Term Provisions Total Current Liabilities Total Liabilities ASSETS Non-Current Assets Gross Block Less: Accumulated Depreciation Net Block Capital Work in Progress Non Current Investments Long Term Loans & Advances Other Non Current Assets Total Non-Current Assets Current Assets Loans & Advances Currents Investments Inventories Sundry Debtors Cash and Bank Other Current Assets Short Term Loans and Advances Total Current Assets Net Current Assets (Including Current Investments) Total Current Assets Excluding Current Investments Total Assets

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