N R Agrawal Industries Ltd - 32.00 Rs

Belonging to the Mumbai based NR Agarwal group, N R Agarwal Industries Ltd (NRAIL) was incorporated in 1993 by Shri N. R. Agarwal, a qualified chemical engineer having over 40 years of experience in the paper industry. Hence, company is basically engaged in production of duplex board and newsprint. Infact today, it is the second largest manufacturer in terms of duplex (packaging) board in India. It makes grey back & white back, double coated duplex boards (heavy weight coated) from 200 to 550 GSM in different size as per industry standards. These coated duplex boards are mainly used a packaging material by various industries such as cigarette, pharma, FMCG goods, cosmetics, liquor, food and beverages, industrial products etc. Hindustan Unilever, Colgate, Glaxo, Ranbaxy, Nicholas Piramal, Gillette, Rasna, Reynolds, Amul etc are few of its end user. Besides, duplex boards are also exported across the globe to many countries including Sri Lanka, Bangladesh, Philippines, Egypt, East Africa and Gulf Countries to name a few. Under newsprint division, company manufactures five different qualities i.e. deluxe, deluxe prime, super deluxe, premium and super premium depending on the specific needs of publishing houses. It has been regularly supplying to Indian Express group, Lokmat, Sandesh, Jagran, Sakal, Pudhari, Janmabhoomi, Mumbai Samachar etc.

Post the recent amalgamation with two group companies namely M/s N.R. Paper and Boards Limited and Suman Paper and Boards Ltd, NRAIL now boast of having four manufacturing units located at Vapi, Gujarat with total installed capacity of 130,000 MTPA for duplex board and 40,000 MTPA for news print. Against this company sold 99480 tonne of duplex board and 30812 tonne of newsprint during FY07. Notably, as its feed stock company uses imported waste paper of various categories carefully selected after years of R&D. And it has already developed several sources of such raw across the world over a period of time. On the power front, company has recently put up 5 MW captive co-generation power plant in Sept 2006 at Unit I besides having 3 MW plant at Unit II. To diversify its product range, company has started manufacturing cream wove i.e. writing & printing paper form this fiscal itself. It has also taken up 2nd phase of modernization of existing plant at the cost of 25 cr. Moreover, as per unconfirmed reports it has acquired 90 acres of land near Vapi to set up a 125,000 MTPA Greenfield plant for newsprint cum writing and printing paper

With the growing culture of super market & departmental store, the consumption of packaging duplex board is increasing manifold. And with print media becoming stronger day by day, the demand for news print is also robust. Importantly, to improve the operating efficiency NRAIL has recently implemented the SAP ERP system and has even won the SAP Award for customer excellence among 152 companies. Financially, company recorded 30% growth in sales to Rs 267 cr whereas net profit doubled to Rs 11 cr posting an EPS of more than Rs 6 for FY07 and gave 15% dividend. However, the first two qtr nos indicates the company is facing some margin pressure and may accordingly end FY08 with sales of Rs 325 cr and PAT of Rs 9 cr. This translates into EPS of little more than Rs 5 on current equity of Rs 17 cr. Considering its cash EPS of more than Rs 10 Rs, 4% dividend yield at CMP, 73% promoter stake and gross block of 150 cr, it’s a decent buy at an enterprise value of 150 cr. Investors are advised to buy at declines with a price target of 50 Rs (i.e.40% return) in a year’s time.

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