Scripscan:Ruchira Papers Ltd
Cmp:18
Target:24
Percentage return:30%
Duration:4-6 months
Story:Five points to qualify ruchira as a good short term buy.
1)Ruchira Papers' manufactures kraft paper, which is largely used by the packaging industry.Ruchira started with Kraft paper production in 1983 with capacity of just 2300 tonnes per annum which has been now expanded to 52,800 tonnes.The company enjoys locational advantages as it is situated near the hub of agricultural activity
2)The company has recently hiked its prices and hopes to report a turnover of not less than 250crs.Last year, Ruchira had incurred losses but with commissioning of Cogen and Chemical Recovery plant, its operations have turned highly profitable.
3) The company has big plans into the writing and printing paper segment, which is on an uptrend.With the governments focus on education and scope for improvement in literacy levels, revenue growth prospects appear to be bright.
4)Ruchira has made a strong turnaround in Q1 and has achived PAT of 4.12 as against loss in previous year. Presently, it WPP plant is operating at more than 100% capacity and Kraft paper plant at nearly 90% capacity. Price of its main raw material i.e. agro-residue and agro-waste have come down leading to enhancement of profit margins.The company further expects a 40% drop in its basis raw material prices which would help it to achieve a healthy 30% margin.
5)Ruchira papers should report a profit of 16crs for the full fiscal which gives an EPS of 7rs.At present price of 18 its quoting at a PE of less than 3 times its 6 month forward earnings.The scrip therefore is highly undervalued and merits an investment at present prices.
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Saturday, October 30, 2010
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