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Monday, November 16, 2009

Rama Pulp & Papers Ltd:Future growth prospects and outlook,buy/sell/hold,analysis and recomendation

Scripscan:Rama Pulp & Papers Ltd

Story:Rama Pulp & Papers Limited (RPPL) is a certified ISO 9001-2000 Company, engaged in manufacturing various types of papers mainly cultural and speciality grades. RPPL has firmly positioned itself among prominent paper manufacturing groups based in India.Rama Pulp and paper is a mid sized player in the Indian paper industry. The company currently operates with a capacity of 21,000 tpa with the capability to manufacture various paper varieties like writing-printing and carbon base paper, poster and wrapping paper,napken grade tissue paper etc. RPPL is expanding its capacity to 30,000 MTs. p.a. The company has a strong distribution network that enables it to market its products in various regions.Today RPPL has grown from strength to strength with its diversified product mix andstrategic marketing plan. With further expansion programs on hand, RPPL is now looking ahead to meet the emerging challenges both in domestic as well as overseas market.Keeping in view to take the company to the next level, company is planning to acquire an existing Industrial Chemical Unit to produce various industrial grades of chemicals, especially Sulfonated products like Sulfur Dioxide, Sulfur Trioxide etc.This new venture will give the company a new lease of life.As the paper industry requires lot of steam and power, the high pressure steam being vented out of the manufacturing process of these chemicals can be used for running the steam based power plant and then the extracted steam will be used for manufacturing of paper. Hence, the paper mill will self sufficient for its requirement of energy like steam and power. The will make the company very high on its bottom line.RPPL has a strong product mix that would enable it to cater to the demands of various customer segments. The new value added products introduced by the company are well accepted by the dealers as well as the end users, which ultimately gave a forward thrust to the company to emerge as a key player in this segment. The Carbon base paper being manufactured by the company has a market share of more than 50%, which places the company among the top players in this segment.The company is exporting its products to a very reputed chain of departmental stores like WALLMART and its specialty grade paper is very well accepted globally.The demand of paper as a whole is in a growing spree. The demand of paper is directly linked to the literacy of a particular country and in India, with implementation of educational policy, the literacy rate is growing and paper consumption is also in upward. Therefore, a steady growth in the demand of paper, especially writing printing,newsprint etc., is expected.RPPL is expected to register robust growth in revenues and earnings going forward. It is currently quoting at compelling valuations of 1.8x and 1.6x FY11E and FY12E earnings. Capacity expansion and growing demand for paper from various segments like education, industrial and specialty, in addition to its inorganic growth in Sulfonated chemicals will drive revenue and earnings growth for RPPL. The stock has potential to deliver handsome returns to the investors over a period of next one year. Investors can enter into the stock at current level considering the huge growth potential, which would enable investors to earn a healthy return on their investment.

Source:Subhash rathod

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