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http://content.icicidirect.com/mailimages/ICICIdirect_TamilNaduNewsprint_Update.pdf
L o n g t e r m i n v e s t o r - e c o f r i e n d l y p l a y e r …
Tamil Nadu Newsprint (TNPL) is one of the leading bagasse based ecofriendly paper manufacturers. With operations in two main segments
W&P paper and newsprint, it has the distinct advantage of being able to
shift between production of newsprint and W&P paper. It has recently
increased its capacity by 155000 tonnes per annum (TPA) and became the
third largest player in the industry with a total capacity of 400000 TPA.
With the government providing a greater thrust to education, demand for
creamwove paper (W&P segment) has remained steady. We believe,
TNPL being a government owned company, will be the primary
beneficiary of government spending on education. The company has a
good track record of rewarding investors with regular dividends.
Capacity addition to drive topline growth
Installation of paper machine III in January 2011 would certainly boost the
revenue growth, going forward, as the company has consistently
operated at over 100% rate with its existing capacity. Apart from this
addition, the company has also announced plans to set up a 30,000 TPA
capacity for manufacturing tissue paper, which is expected to be
commissioned by 2014.
Operates at healthy margins due to cheaper raw material mix…
TNPL uses bagasse as its main raw material, which comprises almost
50% of total raw material requirement. Bagasse is significantly cheaper
than imported pulp, though low in terms of yield of paper per tonne. Due
to this, the company operates at healthy margins vs. its peer group.
…returns ratios to remain subdued due to higher depreciation and interest
cost
The company has been able to maintain RoE in the range of 14-16% in
the past three or four years. However, with installation of new capacity
(155,000 TPA) from January 2011, its interest and depreciation costs have
increased substantially. With demand remaining flat along with higher
capacity, its return ratios have been impacted adversely during 9MFY12.
Valuations
At the CMP of | 96, the stock is discounting its FY11 and FY12E EPS
(annualised) by 4.5x and 7.5x, respectively. This is marginally higher than
its historical average of 6.0x due to a decline in FY12E earnings. On P/BV,
it is available at 0.7x FY11 and on EV/EBITDA, at 7.3x FY11 earnings.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
http://content.icicidirect.com/mailimages/ICICIdirect_TamilNaduNewsprint_Update.pdf
L o n g t e r m i n v e s t o r - e c o f r i e n d l y p l a y e r …
Tamil Nadu Newsprint (TNPL) is one of the leading bagasse based ecofriendly paper manufacturers. With operations in two main segments
W&P paper and newsprint, it has the distinct advantage of being able to
shift between production of newsprint and W&P paper. It has recently
increased its capacity by 155000 tonnes per annum (TPA) and became the
third largest player in the industry with a total capacity of 400000 TPA.
With the government providing a greater thrust to education, demand for
creamwove paper (W&P segment) has remained steady. We believe,
TNPL being a government owned company, will be the primary
beneficiary of government spending on education. The company has a
good track record of rewarding investors with regular dividends.
Capacity addition to drive topline growth
Installation of paper machine III in January 2011 would certainly boost the
revenue growth, going forward, as the company has consistently
operated at over 100% rate with its existing capacity. Apart from this
addition, the company has also announced plans to set up a 30,000 TPA
capacity for manufacturing tissue paper, which is expected to be
commissioned by 2014.
Operates at healthy margins due to cheaper raw material mix…
TNPL uses bagasse as its main raw material, which comprises almost
50% of total raw material requirement. Bagasse is significantly cheaper
than imported pulp, though low in terms of yield of paper per tonne. Due
to this, the company operates at healthy margins vs. its peer group.
…returns ratios to remain subdued due to higher depreciation and interest
cost
The company has been able to maintain RoE in the range of 14-16% in
the past three or four years. However, with installation of new capacity
(155,000 TPA) from January 2011, its interest and depreciation costs have
increased substantially. With demand remaining flat along with higher
capacity, its return ratios have been impacted adversely during 9MFY12.
Valuations
At the CMP of | 96, the stock is discounting its FY11 and FY12E EPS
(annualised) by 4.5x and 7.5x, respectively. This is marginally higher than
its historical average of 6.0x due to a decline in FY12E earnings. On P/BV,
it is available at 0.7x FY11 and on EV/EBITDA, at 7.3x FY11 earnings.
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