Scripscan:Tamil Nadu Newsprint & Papers Ltd
cmp:102
Code:531426
Story:Tamil Newsprint (TNPL)'s Q3FY12 results disappointed due to lower sales volumes & high input costs. Revenues of Rs 3.1bn, 13% yoy, were below est of Rs 3.2bn. Total paper sales volumes for the quarter stood at 69,000mt. Sluggish demand combined with increased paper supply in the market has resulted into significant inventory built up during the last couple of quarters and company now holds ~60,000 mt of inventory (15% of its annual paper capacity). Sales realisations remained weak during the quarter and declined 6% qoq to Rs 43,200/mt though they remain higher by 3% yoy.Lower sales coupled with high input costs resulted into significant squeeze of 700bps yoy/900bps qoq in EBITDA margins to 19.1% against est of 25%. Company reported EBITDA of 592mn, -18% yoy against est of Rs800mn. Interest costs of Rs 394mn (against est of Rs 356mn) & depreciation of Rs 451mn (against est of Rs 413mn) were higher than est. Adjusted net loss of Rs 177mn was significantly belowestimates of Rs 22mn of profit. APAT has been adjusted for EO gain of Rs 1bn (tax adjusted Rs 812mn) on forward currency contract. Sluggish demand & increased paper supply in the market has resulted into significant inventory builtup for TNPL which will create near term pressures on realizations and hence margins. TNPL is currently holding inventory to the tune of 61,000mt compared to 11,500mt of inventory held in June 2011. Higher inventory has also increased working capital requirement and hence interest cost.Sluggish demand coupled with significant inventory builtup is likely to exert pressure on realisations and margins in the near future. Due to weak Q3FY12 results I have reduced our FY12 EPS est to Rs 1.3 (from Rs 9.1). Estimates for FY13 remain unchanged.
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