Best Paper Stocks in India

03 July 20246 mins read by Angel One

Uncovering promising investment opportunities in the paper sector using financial metrics like PE ratios, sales and profit growth rates, and return ratios.

Understanding PE Ratio Gaps

Analysing the price-to-earnings (PE) ratio gap between the current PE and the historical 10-year average PE offers insights into whether a stock is undervalued or overvalued. A current PE lower than the historical average indicates undervaluation, suggesting potential for PE multiple expansion, while a higher current PE suggests overvaluation, indicating possible mean reversion.

Name	Price to Earning	Historical PE 10Years	Market Capitalization	Dividend yield
Century Textiles	103.73	46.25	26471.85	0.21%
JK Paper	9.09	9.47	10214.15	1.30%
West Coast Paper	7.05	6.43	4867.83	1.06%
Andhra Paper	7.3	10.65	2466.13	2.05%
Seshasayee Paper	8.71	8.88	2257.87	1.37%
T N Newsprint	9.56	7.71	1993.25	1.35%
Kuantum Papers	7.8	6.85	1429.83	1.83%
Satia Industries	6.4	8.03	1354.5	0.72%
Orient Paper	204.01	13.34	1270.75	1.66%
Pudumjee Paper	11.75	8.36	1152.72	0.42%
Pakka	21.17	11.85	1030.71	0.94%

Undervalued Stocks:

JKPaper: Current PE of 9.09 is slightly lower than the historical average of 9.47.
WestCoastPaper: Current PE of 7.05 is lower than the historical average of 6.43.
SeshasayeePaper: Current PE of 8.71 is slightly lower than the historical average of 8.88.
T N Newsprint: Current PE of 9.56 is slightly higher than the historical average of 7.71, indicating possible mean reversion.
Kuantum Papers: Current PE of 7.8 is higher than the historical average of 6.85, suggesting mean reversion potential.
Satia Industries: Current PE of 6.4 is lower than the historical average of 8.03, indicating undervaluation.

Overvalued Stocks:

CenturyTextiles: Current PE of 103.73 is significantly higher than the historical average of 46.25, indicating overvaluation.
AndhraPaper: Current PE of 7.3 is lower than the historical average of 10.65, suggesting undervaluation.
OrientPaper: Current PE of 204.01 is significantly higher than the historical average of 13.34, indicating overvaluation.
PudumjeePaper: Current PE of 11.75 is higher than the historical average of 8.36, suggesting mean reversion.
Pakka: Current PE of 21.17 is higher than the historical average of 11.85, indicating overvaluation.

Market Capitalisation Insights

Market capitalisation provides a sense of the size and market value of the company. Century Textiles, with a market capitalisation of Rs 26,471.85 crores, is the largest among the listed paper stocks. JK Paper and West Coast Paper follow, with market caps of Rs 10,214.15 crores and Rs 4,867.83 crores, respectively. Smaller companies like Pudumjee Paper and Pakka have market caps around Rs 1,000 crores, indicating potential growth opportunities in the sector.

Dividend Yield Leaders

The top five dividend yielders among paper stocks are Andhra Paper (2.05%), Kuantum Papers (1.83%), Orient Paper (1.66%), Seshasayee Paper (1.37%), and T N Newsprint (1.35%). These companies offer attractive returns to investors seeking income along with capital appreciation.

Sales Growth and Profit Growth

Name	Sales growth 3Years	Profit growth 3Years	NPM growth	Cashflow growth	Debt
Century Textiles	19.93%	117.87%	82.93%	-216.4%	138.59%
JK Paper	34.27%	71.11%	-9.13%	-21.9%	-19.43%
West Coast Paper	25.60%	495.50%	-21.05%	-38.2%	-59.11%
Andhra Paper	26.63%	336.69%	-25.97%	-40.5%	159.03%
Seshasayee Paper	32.08%	37.27%	-22.41%	-38.4%	169.23%
T N Newsprint	19.24%	64.91%	-41.04%	-48.1%	-34.10%
Kuantum Papers	44.21%	258.52%	11.45%	-20.7%	-22.23%
Satia Industries	43.08%	62.33%	20.18%	28.4%	-7.45%
Orient Paper	23.34%	28.74%	-92.11%	63.6%	263.76%
Pudumjee Paper	21.57%	25.63%	66.89%	707.8%	-66.39%
Pakka	30.14%	42.50%	-5.20%	-2.3%	93.80%

Over the past three years, all listed paper stocks have shown robust sales growth, with double-digit increases. The top performers in sales growth are Kuantum Papers (44.21%), Satia Industries (43.08%), Andhra Paper (26.63%), West Coast Paper (25.60%), and Orient Paper (23.34%).

In terms of profit growth, West Coast Paper leads with an astounding 495.50% increase, followed by Andhra Paper (336.69%), Kuantum Papers (258.52%), Century Textiles (117.87%), and JK Paper (71.11%).

Net Profit Margin Growth

Net Profit Margin (NPM) growth reflects the company’s efficiency in converting sales into actual profit. Positive NPM growth indicates improved profitability. The top five companies in NPM growth are Pudumjee Paper (66.89%), Satia Industries (20.18%), Kuantum Papers (11.45%), Century Textiles (82.93%), and Andhra Paper (-25.97%), despite the negative growth indicating a potential turnaround.

Cash Flow Growth and Debt Reduction

Cash flow growth is critical for assessing a company’s financial health. Notable cash flow growth was observed in Pudumjee Paper (707.8%), Orient Paper (63.6%), and Satia Industries (28.4%). Companies like West Coast Paper, JK Paper, and T N Newsprint have shown significant debt reduction, indicating improved financial stability.

Return Ratios

Name	Return over 1year	Return on equity	Return on assets
Century Textiles	165.91%	6.49%	3.22%
JK Paper	68.03%	24.64%	12.42%
West Coast Paper	37.82%	23.78%	16.92%
Andhra Paper	41.11%	19.55%	15.25%
Seshasayee Paper	20.37%	15.20%	11.96%
T N Newsprint	30.64%	10.32%	3.42%
Kuantum Papers	-20.00%	17.59%	10.28%
Satia Industries	11.32%	25.36%	15.21%
Orient Paper	34.61%	0.40%	0.27%
Pudumjee Paper	182.66%	22.07%	14.64%
Pakka	126.39%	20.36%	10.87%

Return on Equity (ROE), Return on Assets (ROA), and return over one year are crucial indicators of a company’s financial performance. Century Textiles has demonstrated remarkable one-year returns of 165.91%, while Pudumjee Paper and Pakka have delivered returns of 182.66% and 126.39%, respectively. Satia Industries boasts the highest ROE at 25.36%, with JK Paper and West Coast Paper showing strong ROE of 24.64% and 23.78%, respectively. In terms of ROA, West Coast Paper leads with 16.92%, followed by Andhra Paper (15.25%) and Satia Industries (15.21%).

Conclusion

After examining the various financial metrics, it is evident that certain paper stocks stand out as potential contenders of watchlist. West Coast Paper, with its impressive profit growth and debt reduction, appears promising. JK Paper shows strong returns and a healthy dividend yield, making it attractive for income-seeking investors. Kuantum Papers’ significant sales growth and profit margins highlight its potential. Satia Industries, with robust ROE and cash flow growth, presents a solid investment case. Lastly, Pudumjee Paper’s outstanding one-year returns and NPM growth make it a compelling choice.

These stocks are poised for potential growth and offer a blend of income and capital appreciation, making them worthy additions to any investor’s watchlist.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. The information is based on various secondary sources on the internet and is subject to change. Please consult with a financial expert before making investment decisions.