Tamilnadu Newsprint & Paper Ltd - Rs 102.00
Incorporated in 1979, Tamilnadu Newsprint & Paper Ltd (TNPL) was promoted by the Government of Tamil Nadu who still hold around 35% stake in the company. Inspite of being a public sector company, TNPL pioneered the concept of producing paper from Bagasse, namely sugarcane waste thereby using as little wood as possible. Today apart from being one of the lowest cost manufacturer, company boast of having the world’s largest bagasse based paper mill with a capacity of 2,45,000 TPA. It is also the largest exporter of wood free paper from India. TNPL basically manufactures printing and writing paper comprising cream wove, copier and mapiltho paper for business stationery, classical writing, computer stationery and other commercial and quality printing. It offers a range of high-quality surface sized maplitho paper to suit any kind of printing - sheet-fed or web-offset. It is the undisputed market leader for computer stationery in domestic market. It also derives nearly 2% revenue from newsprint. Presently company’s product is exported to over 20 countries across Asia-Pacific, Australia, Middle East, the Mediterranean and the African subcontinent.
TNPL is acknowledged as the world leader in technology for the manufacture of paper from bagasse and has the most modern paper mill in the country with unique bagasse procurement, storing, preserving, handling, processing and pulping system. It continues to enjoy its relatively lower reliance on wood because of its vision to make paper primarily from Bagasse - a sugarcane waste product, which is abundant and cheap, as compared to wood which is scarce and expensive. Ironically, due to this technology it actually avoids the chopping down of trees in about 30000 acres of forest land every year. However it maintains a relationship of 65:35 for bagasse and wood pulp in production to ensure high quality of the paper. To cater the increasing paper demand and become a global player, TNPL had implemented Phase-I of Mill Development Plan which is almost completed. The evaporator, recovery boiler, lime kiln and few other plants were commissioned during September 2007 and the 20 MW turbo generator during October 2007. Accordingly company has increased its captive pulp production capacity from 170,000 TPA to 260,000 TPA with element chlorine free (ECF) bleaching and also a rise in the paper production capacity by 15,000 tonnes to 245,000 TPA. In order to further de-risk the exposure to volatile wood pulp prices, TNPL intends to increase the pulpwood plantation by another 12000 acre from 19349 acres presently, through farm forestry and captive plantation schemes. Importantly, TNPL is self-sufficient in power with in-house captive power generation capacity of 86.12 MW and another 35.50 MW thru wind farm. Infact it has been supplying surplus power to State grid.
Considering the robust outlook for paper industry and to maintain its future growth, TNPL is now contemplating to further hike its paper production capacities from 245,000 to 400,000 TPA by March 2010. Besides, company has entered into the carbon trading by having got its Bio-methanation plant registered as CDM project with UNFCCC and is expected to get 37000 CER as carbon credit till 2013. Moreover it is setting up a mini cement plant with a capacity of 400 tpd for producing high grade cement using the lime sludge and fly ash – the waste material generated in the process of manufacture of paper. TNPL is also contemplating to construct an IT Park measuring an office area of 4 lakhs sq. ft. on its surplus land in suburb of Chennai
Financially as well as fundamentally company is on a strong footing, but however has a huge debt of more than 550 crore. For FY08, company is expected to clock a turnover of Rs 930 cr and Net Profit of Rs 115 cr which translates into EPS of Rs 17 on equity of Rs 69.40 cr. On the back of increased pulp capacity, rise in paper manufacturing capacity and an increase in power generation capacity coupled with robust paper prices, TNPL has the potential post an EPS of Rs 20 for FY09. Considering company’s eco friendly technology, Cash EPS of Rs 30, dividend yield of 4% and massive reserve of more than 500 cr scrip is available relatively cheaper at an Enterprise value of Rs 1300 cr. Hence investors can buy with a price target of Rs 175 in 15 months.
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