3 Value Pick : Rama Pulp & Paper Limited

VALUE PICK “RAMA PULP & PAPERS LIMITED” (BSE CODE: 502587) AT 10/- TARGET OF 23/- & 36/- EPS : 4.9/-; BOOK VALUE 34/-; GOOD RESERVES AND DIV 5% EVERY YEAR.
STOCK  : RAMA PULP & PAPERS LIMITED (BSE CODE: 502587)  
CMP : 10/-                                                                             
Target : 23/- to 36/- in Short term and Medium terms;
Equity  : 11 Cr                                                     
Reserves : 23.43 Cr (Per share Rs.  22/-).
Promoters  Holding : 19.31% ;
Body Corporate  : 35%;
Public Only 43%
Face Value : 10/-
EPS : 4.9/- for 2012-13 June Quarter Annualized.
Book Value: 34/-
Every Year Dividend Paying company.
Dividend History :
2011 --- 5%;  2010 --- 5%; 2009 --- 5%; 2008 --- 5%; 2007 --- 10%
Dividend Yielding per Year 4.55%.
RAMA PULP & PAPERS LIMITED  Having Good Land Bank and Valuable Assets.
For 2012-13 June Quarter Net Income of 17.15  Cr and Net Profit was 1.29 Cr EPS 4.9/- (Annualized)
For 2012-13  Full Year Estimating Net Income of  97 Cr and Net Profit of 6 Cr As per this EPS was 5/- above.  Stock Trading at 10/- PE just 2 Industry PE is 11. As per this Stock will zoom to 23/- to 36/-levels in Short term.
Given its low debt-equity ratio of 0.35:1, a dividend yield of 4.47% and a healthy ROE of 32% , the stock`s valuations appear to be quite attractive.
                                                                                                                                              
Rama Pulp & Papers Limited (RPPL) is a certified ISO 9001-2000 Company, engaged in manufacturing various types of papers mainly cultural and specialty grades.

Rama Pulp preservation of environment is an objective. The products are manufactured from 100% recycled indigenous and imported waste paper, thereby preserving the environment. Company has given extra focus on its effluent treatment and is successful to keep clean environment and almost zero discharge mill.

RPPL has firmly positioned itself among prominent paper manufacturing groups based in India. Rama Pulp and paper is a midsized 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 MT’s. 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 and strategic 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 2x 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.

Strength of the Company
  • Company is strategically located in the Industrial Area at Vapi, Gujarat with modern infrastructure & facilities.
  • Flexibility of manufacturing Industrial and Tailor made paper in 16 Gsm. to 180 Gsm range.
  • Industrial grade products qualities at par with global standards with Substantial market share.
  • Capacity to produce value added and specialty grade papers.
  • Excellent distribution network.
  • Dedicated and competent technical /marketing team.
  • Rama Pulp has got an elaborate R&D set-up, focusing on the individual needs of our customers and providing them with specific solutions to their particular needs. We attempt to understand the processes of our customers, as well as their end usages and to supply them with specialized qualities which best fulfill their needs.
Valuation:
The company does seem undervalued significantly based on even conservative measures.
Market Cap: 12 Crores.
Reserves : 23.43 Cr means per share 22/- Now trading at 11/- Almost 50% discount.
Sales: 70 Crores.
Profits: 2.528 Crores.
Last 3 year average profits: 4 Crores.
P/E: 2.xx.
Average PE for this Industry is 11/-.
As per this stock Valuation is up to 36/-.


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3 comments:

  1. Good Report Rakesh, Keep up your good work.

    ReplyDelete
  2. can u roughly point out the time frame ? medium term ? shld we take it as 6 months ?

    ReplyDelete
  3. Short Term is : 3 to 4 weeks
    Medium Term is : 3 to 4 months
    Long Term is : 3 to 4 years

    Above mentioned pick is medium term pick and you can hold for 3 to 4 months.

    Also please refer

    Trading Rules :
    http://www.trendgurus.in/2012/08/top-10-trading-rules-about-all-types-of.html

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    http://www.trendgurus.in/p/faq.html

    Disclaimer :
    http://www.trendgurus.in/p/disclosure-disclaimer.html

    ReplyDelete

Thanks for giving your valuable inputs, TRENDGURUS

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