Paper stocks rally; JK Paper, TN Newsprint, West Coast surge up to 14%

Paper stocks rallied on expectation that reopening of offices, educational institutions and courts will lead to regularization of demand

Shares of paper companies rallied up to 14 per cent on Friday, amid heavy volumes, on expectation that re-opening of offices, educational institutions, and courts will lead to regularization of demand.

JK Paper, Tamil Nadu Newsprint & Paper, West Coast Paper Mills, Ruchira Papers and Star Paper Mills surged between 8 per cent and 14 per cent on the BSE in Friday's intra-day trade. In comparison, the S&P BSE Sensex was up 0.12 per cent at 55,529 points at 01:56 PM.

Digitisation in education sector and giving emphasis for online classes in education sector, cancellation of school examinations were some of the factors which impacted overall demand of maplitho paper segment. However, for cup stock and industrial grade products, demand is expected to revive again after normalcy returns. The companies expect demand of W/P segment to revive after normalcy returns and the growth prospects would be better.

Among individual stocks, JK Paper soared 14 per cent to Rs 272.40 on the back of 8-fold jump in trading volumes. The stock was quoting close to its 52-week high price of Rs 284.80 hit on August 9, 2021. A combined 8.9 million equity shares had changed hands on the counter on the NSE and BSE till the time of writing of this report.

For October-December quarter (Q3FY22), JK Paper had reported 134 per cent year-on-year (YoY) growth in profit after tax at Rs 151 crore on the back of 35 per cent YoY jump in turnover of Rs 1,094 crore.

The management had said that the improvement in Company's performance was due to recovery in the paper segment and growth in production and sales volume coupled with higher realisation. This was despite sharp increase in major input costs in the recent period.

"The outlook for the paper sector is optimistic in India on account of the intrinsic use of paper in education in India, based on which the market for writing and printing paper in India is expected to grow around 4 per cent per annum, higher than the global average," JK Paper said in FY21 annual report.

The market for packaging board is likely to grow at 9 per cent to 10 per cent annually in India, compared to around 4 per cent around the world. This growth is catalysed by personal consumption and the growing substitution of plastic products, the company said.