Recommendation From Paper & Steel Products Sectors
The scrips in this column have been recommended with a 15-day investment horizon in mind and carry high risk. Therefore, investors are advised to take into account their risk appetite before investing, as fundamentals may or may not back the recommendations.
WEST COAST PAPER MILLS
CMP - Rs 300.50
BSE CODE 500444
Volume 40,752
Face Value Rs 2
Target Rs 325
Stoploss Rs 272
p style="text-align: justify;">The company manufactures paper, paperboards and optical fibre cables (OFCs), where paper is produced mainly for printing, writing and packaging. In FY17, the company generated 96% revenue from paper and 4% from OFCs. Considering the financials, the company posted 4% revenue growth in FY17, while its PAT crossed Rs 100 crore for the first time, clocking Rs 128.50 crore as against negative PAT of Rs 0.47 crore earlier. The FY18 bottomline is also expected to give robust growth amid operating efficiency with stable wood prices over years, a basic raw material, lower pulp prices, lower power costs, favourable pricing and decline in interest expense. The pricing would remain constant or increase amid demand glut and also transition from plastic to paper or allied goods. The company’s D/E stands at 0.78 and coverage stands at 7.85, which lends financial stability. The company plans to become debt-free by 2020. Its P/E is lower at 9.3x as compared to industry PE of 17x, which shows that the company is undervalued. We recommend a BUY in the scrip SHANKARA BUILDING PRODUCTS
CMP - Rs 1936.20
BSE CODE 540425
Volume 41,799
Face Value Rs 10
Target Rs 2150
Stoploss Rs 1794
The company deals in organised retailing of home and building products, including retail, processing and enterprise. In FY17, the company generated revenue from retail (42.5% ) and channel and enterprise segment (57.5%). The company posted revenue and PAT growth of 13.5% and 48%, respectively, in FY17. Its TTM growth depicts expansion across the country. It acquired three Bengaluru-based stores from JP Sanitation to penetrate further. The Vaigai Store, Chennai, also started fetching revenue after it started operations in Q3FY18. It is looking forward to expanding stores to 200 with 15-20 launches every year. Not just new stores, but upgradation of the existing stores has helped it boost the same store sales. The retail segment revenue share is expected rise 70%, which would offset de-growth/moderate growth in other segments. Its asset-light expansion plan, while targeting developing organised home improvement market, would boost earnings further.