Recommendation From Paper & Paper Products Sectors

This section gives a recommendation of a stock having stockmargin padding price below Rs 100 with sound fundamentals and expected to give handsome returns over a one-year time horizon

Yash Papers 

THE LITMUS (PAPER) TEST OF SUCCESS! 

HERE IS WHY
Paper industry growth
Paper packaging demand on rise
Increasing consumerism 

Yash Papers is located in Faizabad, UP. The company is known for manufacturing the best wrapping grades of papers in India. The company’s products are 100 per cent compostable and decompose within months and the product prices are cheaper than good quality plastic. The products of Yash Papers are environmentfriendly and easily recyclable. 

In spite of the global paper industry being increasingly vulnerable to the continued transition towards paperless digital media, the industry has been fairly stable over the past five years. The global industry has benefited from the significant growth in paper and pulp output across developing economies. The higher prices and strong wood product, increasing demand for paper packaging and market pulp may keep the outlook for the global paper and forest products industry stable. In India, the demand for paper has been growing at around 8 per cent per annum, which is slightly more than the GDP growth of India. This growth rate makes India one of the fastest-growing paper markets in the world. 

The company’s efficient raw material sourcing, production efficiencies, optimal product mix and disciplined financial management are its biggest business drivers, which may help the company grow sustainably. 

On the financial front, Yash Papers posted a 8.37 per cent increase in its net sales to Rs 52.86 crore in the fourth quarter of FY18 as against Rs 48.77 crore in the same quarter of the previous fiscal. The PBIDT of the company increased by 20.54 per cent to Rs 11.30 crore in the fourth quarter of FY18 as against Rs 9.38 crore in the same quarter of the previous fiscal. However, the net profit of the company declined by 90.11 per cent to Rs 0.37 crore in Q4FY18 as compared to Rs 3.75 crore in the same quarter of the previous year on the back of a decline in its other income. 

On the annual front, the net sales of the company increased by 10.78 per cent to Rs 202.96 crore in FY18 as against Rs 183.21 crore in FY17. The PBIDT of the company rose by 31.59 per cent to Rs 39.07 crore in FY18 as compared to Rs 29.69 crore in FY17. The net profit of the company grew by 60.21 per cent to Rs 12.48 crore in FY18 as against Rs 7.79 crore in FY17.

On the valuation front, the company posted a PE of 20.46x as against an industry PE of 11.39x. The company has a debt-to-equity ratio of 2.49x.

Considering the growth drivers for the company, viz., rising literacy levels, increasing organised retail and booming e-commerce in India, the company is well-positioned to tap the growth opportunities. Even as the consumerism is on the rise in India, the number of school-going children is also on the rise across the country (including rural areas) and the documentation needs are also on the rise, which will keep the demand for paper buoyant. There is an increase in the demand for paper from the packaging industry as well. We recommend our reader-investors to BUY Yash Papers .