Stocks of paper companies rose to 11 percent on the BSE in intraday trading on Tuesday on the back of an improved business outlook and high volumes. As concerns about Covid disappear, the reopening of offices, educational institutions and courts, demand for paper is expected to return.

The stocks of the paper companies were in focus during a number of trading sessions, helped by the unlock theme. Shares of West Coast Paper Mills rose the most today, rising nearly 11 percent, followed by Andhra Paper, which rose nearly 9 percent. Meanwhile, Pudumjee Paper, which won more than 8 percent on the BSE, was the third biggest winner.

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While JK Paper won 7.5 percent and Orient Paper about 6.5 percent; Balkrishna Paper hit a 5 percent intraday circuit higher on the BSE.

JK Paper and West Coast Paper also hit their new 52-week highs at Rs 297.95 and Rs 304.65 per share respectively. Both have seen a resurgence in the past 5 sessions. The former won over 25 percent and the latter about 24 percent on the BSE, compared to nearly 5 percent jumped in the BSE Sensex.

According to Centrum Broking, “With the impact of the pandemic, schools, colleges, offices and courts have been fully opened. Distributors have started stockpiling with increasing demand, also the inflation trend has led to higher than normal demand at the distributor level.

The Troika of demand normalization, higher level of demand from channels and favorable prices has created a happy scenario for companies like JK Paper, West Coast Paper and Andhra Paper, the brokerage said. It added that the windfalls for these companies can be expected in the coming quarters.

On the valuation side, JK Paper is currently trading at 7.5x EV/EBITDA, while West Coast Paper and Andhra Paper are trading at 3.9x and 4x lagging EBITDA. Debt-to-equity of all three companies stands at 1.2x/0.5x/0.1x, according to the Centrum report.

S Ranganathan, Head of Research at LKP Securities said: “Paper stocks have seen good accumulation this week as almost all players have increased prices and traditionally the fourth quarter is always the best quarter more, so this time considering the opening of the theme is gaining momentum.”

“JK Paper recently started its governance facility and the outlook is promising for the future. Despite the absence of Boards, West Coast Paper has a strong capacity and is a formidable player with positive prospects for the future,” added the market analyst.

This post Paper stocks boost profits, rise to 11% intraday – what makes JK Paper, West Coast Paper most lucrative, decodes brokerage

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