West Coast Paper hits new high on healthy outlook; stock up 50% in a month

Shares of West Coast Paper Mills (WCPM) hit a new high of Rs 564.85, up 2 per cent on the BSE in Monday’s intra-day trade. In comparison, the S&P BSE Sensex was down 0.86 per cent at 59,135 points at 09:52 am. The stock has zoomed past 50 per cent in a month on strong earnings and healthy outlook. 

Meanwhile, in the past six months, the stock price of WCPM has more-than-doubled or soared 137 per cent, as against 3 per cent rise in the benchmark Sensex.

For the April-June quarter (Q1FY23), the company posted over five-fold jump in consolidated net profit at Rs 208.95 crore from Rs 39.20 crore in the previous year quarter, on the back of strong operational performance. On a sequential basis, net profit of the company grew 49 per cent from Rs 140.51 crore.

WCPM is involved in manufacturing of diversified range of products and has increased its presence across writing and printing segment, security and high value grade paper, creating a niche for the company in the market.

Segment-wise, the packaging paper segment has witnessed a rise with growth in demand from e-commerce, food and food products, FMCG and the pharmaceutical sector. However, the demand is expected to grow 11-15 per cent year on year in the current fiscal as schools, colleges and office spaces gradually re-open.

That apart, the new education policy is expected to increase student enrolment at a relatively faster pace. A gradual rise in education expenses by the Government and increased thrust on education are also likely to support demand for creamwove and maplitho (60- 65 per cent P&W segment).

As the company’s cable division entered into an agreement for supply of cables with large Indian Telcos, the management believes that a large network integrator for Tanfinet project and robust order book would help growth of their cable business.

"With upcoming growth in the Indian and global market with 5G and FTTH, the company is well placed to take up growth path. In direction to substantially increase the footprint in export market, this year has seen good growth and we expect to double growth year-on-year for exports," the company said.

WCPM's acquisition of Andhra Paper (APL) in October 2019 significantly improved the company's scale and market position, making it the fifth-largest paper manufacturer in India, with a consolidated capacity of 568,000 metric tonnes per annum (mtpa).

Analysts at India Ratings and Research (Ind-Ra) believe that the fundamental demand prospect for paper remains stable over the medium term, given its under penetration across segments.

They expect that the paper demand in the education sector would continue to grow with an increase in the literacy rate. Though copier paper could experience some slowdown over the near term, the increasing usage of computers in the sub-urban and rural areas will gradually replace the lost volumes from metro cities due to the ongoing remote working.

"Overall, the writing and printing segment is likely to grow at low single digits compared to mid-single digit in the pre-covid period. However, with growing consumerism and e-commerce, and the ban on plastic usage in several states, demand for cupstock and packaging paper is likely to be healthy over the medium term," the brokerage firm said.