The shares of major paper manufacturing companies in India have surged over 100 percent since the onset of the war in Ukraine. The bull run is likely to sustain through the next couple of quarters on the back of a robust demand triggered by the ban on the use of plastic, supply chain constraints, and lifting of Covid-19 restrictions, according to experts.
"After Covid-19 and the Ukraine war, paper and allied sectors have grown faster than expected. The price rise was mainly on the back of disturbance of the supply chain globally. We expect the run-up to remain for the next one or two quarters due to sudden demand," Prashanth Tapse, Senior VP of Research at Mehta Equities Ltd, told Moneycontrol.
"Paper stocks are posting double-digit gains," Ravi Singh, Vice-President and Head of Research at ShareIndia, while citing the causes that fuelled the demand.
From February 1 to September 7, the stock prices of West Coast Paper Mills grew by 131 percent, JK Paper's by 88 percent, Andhra Paper's by 115 percent, Tamil Nadu Newsprint & Paper Ltd's by 119 percent, and Seshasayee Paper stock prices by 99 percent, according to NSE.
"Paper stocks would outperform going forward on expectation of strong Q2 and Q3 earnings supported by robust growth in the packaging sectors and continued demand in the writing and printing paper segment along with school sector," said Prashanth Tapse, Senior VP for Research at Mehta Equities.
"The next 5-6 months seem favourable for the paper stocks on the back of underlying factors and we can expect the sector to grow 12-15 percent this year," Singh said.
As paper falls under the FMCG sector, expert believe it has a long way ahead. "I believe FMCG being the fourth largest sector in India, which is expected to grow at a CAGR of 20-22 percent in the next five years," according to Tapse.
"In India the imports of paper, newspaper, and newsprint have been declining since 2017-18," according to the data from Directorate General of Commercial Intelligence and Statistics (DGCI&S).
The imports fell from 3,16,8000 tonnes in 2017-18 to 1,75,2000 tonnes in 2021-22. On the other hand, the exports have almost tripled from 9,78,000 tonnes in 2017-18 to 2,85,7000 tonnes in 2021-22, according to the data from IPMA.
"The upward trend has continued in the exports of paper in India. In the last 2-3 years, imports of paper has fallen significantly. Mainly due to the pandemic, supply-chain disruption, and also the geo-political tensions," said Rohit Pandit, Secretary General, Indian Paper Manufacture Association (IPMA).
"The imports are expected to rise once the issues like shipping cost, geo-polityical situation and other factor normalises," Pandit said. "Paper Industry in India on the whole is expected to grow by 6-7 percent per annum."
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