Rama Papers Mills Ltd - 30.00 Rs
Promoted by Mr. Pramod Agrawal in 1985, Rama Paper Mills Ltd (RPML) primarily manufactures newsprint for the newspaper publishers and writing/printing paper for government supplies as well as for printing of text books and note books. It also produces coated/uncoated duplex board used to make packing material like cartons for industrial purpose and packaging of articles in pharmaceuticals, soaps, paste, apparels, and tea industries. However, company derives 60% of revenue from newsprint which is totally exempted from central excise and sales tax. It has wide client base including Hindustan Times, Jan Satta, Indian Express, Amar Ujjala, Dainik Jagran, Gujarat Samachar, Dainik Bhaskar etc. RPML enjoys a strong brand royalty as 80% of its customers are dealing with the company for more than 5 years. And since company is not into exports it is not affected by the rupee appreciation.
RPML is having three manufacturing units spread across 12 acres of land at Kiratpur in Dist. Bijnor in Uttar Pradesh. To cater the rising demand, it augmented its production capacity from 39,500 TPA to 44,000 TPA in Dec 2006 by installation of some balancing equipments. More importantly, company has put up a captive power plant of 6 MW which commissioned operation only from April 2007. It incurred a total capital expenditure of Rs 31.50 cr for both the projects, financed by term loan of Rs. 22 crore and balance by internal accruals. Ironically, due to captive power generation, company is able to make substantial saving in power and fuel cost to the extent of Rs. 450 per tonne of paper produced, on a very conservative basis. This means, a straight away addition of minimum Rs 2 cr to the bottomline. Besides, only 4 MW is actually used for captive consumption with balance 2 MW being as surplus currently. To diversify its product portfolio, RPML is putting up an additional line of paper manufacturing machine to produce tissue and poster paper with annual capacity of 16320 TPA under a capex of 24 cr. For this company has already taken a bank loan and is planning to start the production by mid 2008. With this its total capacity will stand increased to 60,000 TPA.
Morever, company is contemplating to make some modifications in all the machines in phases to be completed by 2009-10, which will further enhance its capacity to 80000 TPA. To fund its growth plan, company raised 8.75 cr in early 2006 thru private placement of 25 lac shares @ 35 Rs and now recently it again raised 7.50 cr thru preferential allotment of around 21 lac shares @ Rs 36 to promoter group. Hence its current fully diluted equity stands Rs 9.7 cr with 41% promoter stake. Financially, the first two quarter nos of the company were not so encouraging, maybe due to some disruption in its manufacturing facility. Hence for FY08 it is estimated to clock a turnover of 80 cr and profit of 5.50 on back of higher operating margin. But for FY09 it can report more than 100 cr of sales and 8.50 of PAT. This means an EPS of Rs 6 and 9 for FY08 and FY09 respectively. Moreover, against its gross block of Rs 79 cr, company is currently available at an enterprise value of only Rs 70 cr which is extremely cheap. Investors are strongly recommended to buy at current levels as share price can shoot up to 50 Rs in six months and 75 Rs in medium to long term.
RPML is having three manufacturing units spread across 12 acres of land at Kiratpur in Dist. Bijnor in Uttar Pradesh. To cater the rising demand, it augmented its production capacity from 39,500 TPA to 44,000 TPA in Dec 2006 by installation of some balancing equipments. More importantly, company has put up a captive power plant of 6 MW which commissioned operation only from April 2007. It incurred a total capital expenditure of Rs 31.50 cr for both the projects, financed by term loan of Rs. 22 crore and balance by internal accruals. Ironically, due to captive power generation, company is able to make substantial saving in power and fuel cost to the extent of Rs. 450 per tonne of paper produced, on a very conservative basis. This means, a straight away addition of minimum Rs 2 cr to the bottomline. Besides, only 4 MW is actually used for captive consumption with balance 2 MW being as surplus currently. To diversify its product portfolio, RPML is putting up an additional line of paper manufacturing machine to produce tissue and poster paper with annual capacity of 16320 TPA under a capex of 24 cr. For this company has already taken a bank loan and is planning to start the production by mid 2008. With this its total capacity will stand increased to 60,000 TPA.
Morever, company is contemplating to make some modifications in all the machines in phases to be completed by 2009-10, which will further enhance its capacity to 80000 TPA. To fund its growth plan, company raised 8.75 cr in early 2006 thru private placement of 25 lac shares @ 35 Rs and now recently it again raised 7.50 cr thru preferential allotment of around 21 lac shares @ Rs 36 to promoter group. Hence its current fully diluted equity stands Rs 9.7 cr with 41% promoter stake. Financially, the first two quarter nos of the company were not so encouraging, maybe due to some disruption in its manufacturing facility. Hence for FY08 it is estimated to clock a turnover of 80 cr and profit of 5.50 on back of higher operating margin. But for FY09 it can report more than 100 cr of sales and 8.50 of PAT. This means an EPS of Rs 6 and 9 for FY08 and FY09 respectively. Moreover, against its gross block of Rs 79 cr, company is currently available at an enterprise value of only Rs 70 cr which is extremely cheap. Investors are strongly recommended to buy at current levels as share price can shoot up to 50 Rs in six months and 75 Rs in medium to long term.
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2 comments:
paper stocks have a bright future in the days ahead
paper is the sunrise sector now
hence rama paper can move up in the medium term
It is a Good Value Pick-Up, and good future for paper Industry
But Unfortunately, this script has been not allowed to buy/sell for NRI
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