Paper Makers Rally on Hopes of a Strong Q4
Mumbai: Shares of paper manufacturers rallied on Friday, outperforming the broader market, on expectations they will report strong earnings for the quarter ended March 31. West Coast Paper mills gained the most and ended up 8% at Rs 80.95. Others like JK Paper, Tamil Nadu Newsprint & Papers, Star Paper Mills, Ruchira Papers and International Paper APPM jumped 4 to 6%. The midand small-cap indices rose 0.6% each on Friday.
“Fourth quarters are generally the strongest for these companies as most of the new school curriculums get pushed along and they get demand from publishers in terms of notebooks and paper products,” said Narendra Solanki, an analyst at Anand Rathi Shares and Stock Brokers.
Moreover, softness in world prices for wood pulp, which is expected to continue in the near term, would also add to their bottom line, Solanki added.
Some of these stocks are also trading at cheap valuations, which could have led to some buying interest, analysts said. Year to date, shares of Ballarpur Industries, Tamil Nadu Newsprint and Star Paper are down 13 to 29%.
However, SP Tulsian, an independent advisor, said there is no fundamental reason for the rally and the rise in these stocks is merely due to sector churning as dye intermediates, sugar, and tea companies have already rallied.
“If you see the fundamentals, neither prices or offtake has changed in the recent past…if you look at the last 40 years, paper industry has never rewarded shareholders, and I don’t think that this trend will get changed,” he said.