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Thursday, October 1, 2009

Sirpur Paper Mills Ltd:Future growth outlook and prospects,one of the best bet in paper sector

Scripscan:Sirpur Paper Mills Ltd

Story:Primarily paper companies over the last 2-3 years have not been attracting attention because of the large capex going into them for benchmarking, paper manufacturing cleanliness and environment standards in line with the new global benchmarks. Because of the large investments being made, investors are tending to stay away saying that we are not going to get optimal returns over a limited period of time, but I think we are finally seeing the end of the capexes, we are finally beginning to see evidence of improved returns becoming a reality after the significant capexes and I think Sirpur is interesting.We have been looking at companies with marketcaps of close to about Rs 70-80 crore, one can buy a 1,30,000 TPA company for a marketcap of just around Rs 80 crore, that is amazing. When one sees the investments translated into actions, a couple of things very distinctly are going to happen, firstly the margins are going to go up because when one has 1,30,000 tonne per annum across a fixed cost, which remains more or less static, you cover your fixed cost because you are far more efficient. Secondly they are going to make reasonable savings in terms of cost of production and thirdly their paper is now environmentally clean, they will be able to export in a much bigger way than before.Combination of these three factors are going to translate into superior earnings from 2009-2010 onwards and this is what most investors are not prepared for, which is where the bargain is. The bargain is present because most people are not looking at it.A great buy at declines

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