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Buy of The Week


STAR PAPER MILLS LTD
 (516022)  (29.35)

On 6th April 2015, we had recommended this stock at Rs.21.70, after our recommendation it zoomed to Rs.37 levels. Again we are recommending this stock.
 

Star Paper Mills is engaged in manufacturing of paper and paper related products. Incorporated in 1938, the company is part of Duncan Goenka Group. Star Paper has received ISO 9001:2000 and ISO 14001:2004 certifications for its quality management. To produce its raw material, the company owns 34983 hectare on which 270 lakhs saplings have been grown spread across seven districts of western Uttar Pradesh and two districts of Uttranchal. The company has started Clonal Technology Programme with an intension to increase the yield per unit area. The paper major has developed fully automatic green houses and hardening chambers at Tapri for production of clonal plants. Star Paper Mills produces range of products used in industrial, packaging and cultural papers catering to almost all segments of consumers. The company has an installed manufacturing capacity of 75,000 tonnes per annum of paper and paperboard. Its clients include Century, Laminating, Eveready, Greenply, Thomson Press, Hindustan Lever, ITC, Pearson Education (Singapore), Shree Krishna Paper and Thomson Press, among others.

 
It has an equity base of just Rs.15.61 crore that is supported by reserves of around Rs.16.66 crore. It has a share book value of Rs.30.63& price to book value ratio is just 1 which is highly impressive.

 
The Promoters hold 53.06%, DIIs hold 3.61% while the investing public holds 43.33% stake in the company. Promoters holding were 45.37% after June 2014 which is increased to 53.06% after June 2015. Means promoters have increased their stake by 7.69% in one year which is very positive sign.

 

Financial Performance

 
Q1FY16
Q1FY15
FY15
Sales
66.08
61.16
271.30
Profit Before Tax
3.70
-1.38
7.51
Tax
-0.20
0.06
-8.03
Profit After Tax
3.90
-1.44
15.54
EPS
2.50
-0.92
9.96

 
SPML has made heavy losses in last 4 years. However, fortunes of company have started improving in current year. SPML has reported vastly improved nosYoY basis. For Q1FY16, SPML has reported sales of Rs.66.08crore as against Rs.61.16core in Q1FY15. While it has recorded net profit of Rs.3.90crore against loss of Rs.1.44crore.Q1FY16 EPS stood at Rs.2.50. The scrip is trading at P/E multiple of just 2.2.
Stock is looking explosive for investment. Investors can buy this stock with a stop loss of Rs.23. On the upper side, it will zoom to Rs.37--40 levels in the medium term while stock may zoom up to Rs.50--55 in the next 12---15 months.Its all-time high rate is Rs.118.7……

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