Paper stocks plummet despite good Q3 earnings

Since January, paper stocks have shed between 1 to 8%. The only exception was Andhra Paper, owned by West Coast Paper Mills.

It should be noted that paper stocks were among the biggest outperformers in 2022, gaining between 47 and 127%. 

According to experts, the reasons for this stock slip include limited headroom and focus on price. 

The paper mills reported strong performance in the December 2022 quarter on the back of strong performance in the writing and printing segment with healthy growth in volumes and prices. 

However, according to industry sources, prices of writing and printing paper remain stable and haven’t witnessed any pressure yet. 

Meanwhile, the demand for packaging boards has remained strong in Q3 FY23, but the realisation has moderated. Similarly, the realisation of coated paper has moderated as well. Any further weakening of the price trend for coated paper and paperboard can have a bearing on the operating margin. 

Meanwhile, on 6 February, JK Paper reported that its profit has more than doubled in the third quarter, on the back of higher demand for copier papers and packaging boards from schools and offices post-pandemic.

The company said its consolidated net profit after tax for the quarter ended 31 Dec was at Rs 3.29-billion from Rs 1.50-billion a year earlier.

The company’s revenue from its paper and board business surged 59.6% to Rs 16.33-billion in the quarter. Overall net revenue from operations jumped nearly 61% to Rs 16.43-billion.

JK Paper has also been expanding the business through acquisitions, including its purchase of 85% stake each in Horizon Packs and Securipax Packaging last year, with the remaining 15% to be bought within the next three years.

(Courtesy: Agencies)