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Monday, September 3, 2007

Buy Tamil Nadu Newsprint (TNPL)

Investors with medium to low risk profile can consider investment in TNPL with a horizon of 18-24 months. At the current market price of Rs. 99 the stock trades at 8 times it's 12 months trailing EPS of 12.5. Despite the firm raw material prices, the company saw a marginal increase in the operating margin during the first quarter of 2008.

The company is in the process of completing it's Rs. 565 crore mill development plan which is slated to go on stream by October '2007. After the mill development plan in place the paper production is expected to raise to 2.45 lakh tpa from the current 2.3 lakh tpa.

The company margins are further set to raise in second half of FY08 after the mill development plan in place. The stock is currently trading at 6 times it's FY08E EPS of 16. Based on it's FY08E earnings the stock has a target of Rs. 132.

The company is planing to set up a mini cement plant with lime sludge generated as a waste product at it's paper unit. This is expected to be operational by march 2009. The company is also evaluating option to build a IT park at it's vacant Ambattur plot.

Fundamentals:

1) Modernization and Capacity increase of paper production.

2) Building Cement plant to utilize the waste generated out of paper production.

3) The company is sitting on an vacant land in chennai. Evaluating IT park to be constructed over there.

Risk:

1) Increasing raw material prices.

2) Rupee appreciation to crunch margins on paper exports.

3) Decline in International paper prices can impact the Operating margin of the firm.

Posted by Srivatsan

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2 comments:

USHA said...

Hi Srivatsan,

Wonderful job!!!!please continue your research.....its very informative and useful for novice like us.....Thanks...

September 18, 2007 at 8:39 AM
Anonymous said...

Genial fill someone in on and this mail helped me alot in my college assignement. Thank you on your information.

February 14, 2010 at 8:30 PM

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