Pa­per Mak­ers Rally on Hopes of a Strong Q4

The Economic Times - - Markets: Beating Volatility - Our Bu­reau

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.

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