indiabull
24-12-2007, 07:05 AM
Promoted by Pramod Agrawal in 1985, Rama Paper Mills Ltd. (RPML) 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. However, the company derives 60% of its revenue from newsprint, which is totally exempt of central excise and sales tax. It has wide client base including Hindustan Times, Jan Satta, Indian Express, Amar Ujala, Dainik Jagran, Gujarat Samachar, Dainik Bhaskar etc. RPML enjoys strong brand royalty as 80% of its customers are dealing with the company for more than 5 years. And since the company is not into exports, it is not affected by the rupee appreciation.
RPML has three manufacturing units spread across 12 acres of land at Kiratpur in Dist. Bijnor in Uttar Pradesh. To cater to the rising demand, it augmented its production capacity from 39,500 TPA to 44,000 TPA in December 2006 by installation of some balancing equipments. More importantly, the company has put up a captive power plant of 6 MW, which commenced operation from April 2007. It incurred a total capital expenditure of Rs.31.50 cr. for both the projects financed by a term loan of Rs.22 cr. and balance by internal accruals. Due to this captive power generation, the company is able to make substantial savings in power and fuel costs to the extent of Rs.450 per tonne of paper produced on a conservative basis. This means a straight addition of minimum Rs.2 cr. to its bottomline. Besides, only 4 MW is used for captive consumption leaving the balance 2 MW as surplus, which the company is free to sell to others or the grid. To diversify its product portfolio, RPML is putting up an additional machine to manufacture tissue and poster paper with a capacity of 16,320 TPA at a capex of Rs.24 cr. For this, the company has already taken a bank loan and is planning to start production by mid 2008. With this its total capacity will stand increased to 60,000 TPA.
Moreover, the company is contemplating some modifications in all the machines in phases to be completed by 2009-10, which will further enhance its capacity to 80,000 TPA. To fund its growth plan, the company raised Rs.8.75 cr. in early 2006 through private placement of 25 lakh shares at Rs.35 and has again raised Rs.7.50 cr. through preferential allotment of around 21 lakh shares at Rs.36 to the promoter group. Hence, its current fully diluted equity stands Rs.9.7 cr. with 41% promoter stake. Financially, the first two quarter results of the company were not so encouraging possibly due to a disruption in its manufacturing facility. Thus for FY08, it is estimated to clock a turnover of Rs.80 cr. with net profit of Rs.5.50 cr. on the back of higher operating margin. But for FY09 it can report more than Rs.100 cr. of sales and PAT of Rs.8.50 cr. This means an EPS of Rs.6 and Rs.9 for FY08 and FY09 respectively. Besides, against its gross block of Rs.79 cr., the company is currently available at an enterprise value of only Rs.70 cr., which is extremely cheap. Investors are strongly recommended to buy the scrip at current levels as the share price can shoot up to Rs.50 in the short-term and Rs.75 in the medium-to-long-term.
RPML has three manufacturing units spread across 12 acres of land at Kiratpur in Dist. Bijnor in Uttar Pradesh. To cater to the rising demand, it augmented its production capacity from 39,500 TPA to 44,000 TPA in December 2006 by installation of some balancing equipments. More importantly, the company has put up a captive power plant of 6 MW, which commenced operation from April 2007. It incurred a total capital expenditure of Rs.31.50 cr. for both the projects financed by a term loan of Rs.22 cr. and balance by internal accruals. Due to this captive power generation, the company is able to make substantial savings in power and fuel costs to the extent of Rs.450 per tonne of paper produced on a conservative basis. This means a straight addition of minimum Rs.2 cr. to its bottomline. Besides, only 4 MW is used for captive consumption leaving the balance 2 MW as surplus, which the company is free to sell to others or the grid. To diversify its product portfolio, RPML is putting up an additional machine to manufacture tissue and poster paper with a capacity of 16,320 TPA at a capex of Rs.24 cr. For this, the company has already taken a bank loan and is planning to start production by mid 2008. With this its total capacity will stand increased to 60,000 TPA.
Moreover, the company is contemplating some modifications in all the machines in phases to be completed by 2009-10, which will further enhance its capacity to 80,000 TPA. To fund its growth plan, the company raised Rs.8.75 cr. in early 2006 through private placement of 25 lakh shares at Rs.35 and has again raised Rs.7.50 cr. through preferential allotment of around 21 lakh shares at Rs.36 to the promoter group. Hence, its current fully diluted equity stands Rs.9.7 cr. with 41% promoter stake. Financially, the first two quarter results of the company were not so encouraging possibly due to a disruption in its manufacturing facility. Thus for FY08, it is estimated to clock a turnover of Rs.80 cr. with net profit of Rs.5.50 cr. on the back of higher operating margin. But for FY09 it can report more than Rs.100 cr. of sales and PAT of Rs.8.50 cr. This means an EPS of Rs.6 and Rs.9 for FY08 and FY09 respectively. Besides, against its gross block of Rs.79 cr., the company is currently available at an enterprise value of only Rs.70 cr., which is extremely cheap. Investors are strongly recommended to buy the scrip at current levels as the share price can shoot up to Rs.50 in the short-term and Rs.75 in the medium-to-long-term.