Paper stocks in demand; JK Paper surges 19%, Orient Paper up 10%

Paper industry will witness an uptick during FY22 on year on year basis backed by better paper demand and increase in its prices

Shares of paper and paper products companies were in focus, rising up to 19 per cent in intra-day trade, on the BSE on Tuesday on expectation of higher demand.

JK Paper surged 19 per cent to hit a 52-week high of Rs 208.75 in intra-day trade today, on the back of three-fold jump in trading volumes. Thus far in the month of June, the stock has outperformed the market by gaining 31 per cent, as compared to 1.6 per cent rise in the S&P BSE Sensex.

In the January-March quarter (Q4FY21), JK Paper reported a more-than-doubled consolidated net profit at Rs 135.79 crore, as compared to Rs 65.94 crore in Q3FY21. Net revenue from operations grew 20.5 per cent to Rs 898 crore from Rs 745 crore in the previous quarter.

The company said that higher production and sales volume with improved realisation over the preceding quarter led to better performance. The revival of demand, which started in the third quarter (October-December), continued to gather momentum. While, the impact from second wave of Covid-19 is yet to be seen, the management said it expects some disruptions in the coming months.

Among other stocks, Orient Paper & Industries, Seshasayee Paper & Boards, Andhra Paper, Astron Paper & Board Mill, West Coast Paper Mills and Ruchira Papers were up in the range of 5 per cent to 10 per cent. In comparison, the S&P BSE Sensex was up 0.37 per cent at 52,769 points, at 02:39 pm.

The paper & paper products industry is one of the worst affected industries due to the outbreak of Covid-19 pandemic. Closure of education institutions, adoption of work from home by offices, muted demand for printing of newspapers among others disturbed the consumption of paper & paper products. Moreover, subdued demand also had an impact on prices of paper & paper products which further affected the revenues of industry.

With the ongoing vaccination program in India and with people now adapting to Covid-19 norms and environment, it is expected that the sales of paper & paper products industry will witness an uptick during the current financial year 2021-22 (FY22) on year on year (y-o-y) basis backed by better paper demand and increase in its prices.

“The education institutions are likely to begin upcoming academic sessions (around June 2021) physically at least for higher class students if not for all the students. Physical study sessions for higher class students have been witnessed in the past few months as well. This is expected to result in better demand for papers like printing & writing and maplitho that find their usage in education institutions and offices. In addition to this, more employees are expected to work from office going forward,” CARE Ratings said in March paper sector report.

Another segment, newsprint which has seen sequential improvement in newspaper circulation and advertisement revenues, is expected to see uptick only when businesses increase advertisement spends, offices and transport services (rail services, airline services) operate at pre Covid-19 levels and household circulation of newspapers return to normal levels. Considering these factors, the demand for paper & paper products from these segments is expected to improve by Q2FY22, the rating agency said.