Posts Tagged ‘Ruchira Papers

07
Jan
13

Ruchira Papers update

In my previous post on Ruchira Papers (https://writingoptions.wordpress.com/2013/01/04/ruchira-papers/), I had mentioned about improving financials of the company. In December last week, one of the promoters of company, Subhash Chander Garg had bought 30000 shares via open market purchase at average price of 14.3 Rs/share. Obviously when promoter buys shares of the company, it gives you much more confidence and puts a floor to the share price. Promoter buying shares of his own company also acts as signalling effect to the market. It shows that promoter thinks shares of his company are undervalued at present price. Share price has risen 15 percent to 16.55 Rs/share after this news.

I am waiting Q1’FY13 results. Good Q1 results should take share price easily above 20.

04
Jan
13

Ruchira Papers

In my previous post (https://writingoptions.wordpress.com/2013/01/01/happy-new-year-2013/), I had mentioned about Ruchira Papers. I am extremely positive about this small paper company. The Company is engaged in the manufacturing of Kraft paper which is used as a Raw Material in the Packaging Industry and commonly used Writing & Printing Paper.

Financial Performance: In first half of FY13, company has posted 8.7 crore profit compared with 4.48 crore last year. In-fact half-year profits of FY13 are more than full year profits of FY12. Top line for first half of FY13 rose 5.3% over same period of FY12. Debt of the company is consistently coming down and margins are on the rise. EBITDA margins for first half FY13 were 18.2% and NPM were 5.8% (NPM were lower on account of DTL provisioning).

Valuation: Company total equity is 22.42 crore (2.242 crore shares of face value Rs. 10 each).

  • Company trades at 4.4 P/E multiple of FY12 (current share price 14.95). I am expecting 15 crore profit for FY13, so on that it trades at 2.23 P/E multiple.
  • EV/EBITDA : 2.27 (Enterprise Value (EV) : 123.69 (33.52 (Market Capitalization) + 91.92 (Debt) – 1.75 (Cash & cash equivalents)); EBITDA : 54.5 (expected FY13))

Obviously, some kind of discount needs to be given for cyclical nature of Paper Industry and small scale of company operations. I would refrain from giving any kind of price target for Ruchira Papers, but if company continues to deliver on financial parameters than significant re-rating is on the card from current levels.

One key risk for Ruchira Papers is deficit monsoon, which would increase its raw material cost.




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