The fifty four year old IPAPPM (formerly Andhra Pradesh Paper Mills) is an integrated paper and pulp manufacturer with a total production capacity of 241,000 TPA. The company produces a range of premium grade writing, printing, copier and industrial papers for domestic and export markets. Each of these products offers a differentiated proposition and is targeted to meet unique needs of discerning customers.

It employs around 1,900 people.

The company's Rajahmundry Mill plant is an integrated wood-based paper mill with a rated capacity to produce 174,000 MT of finished paper and 181,500 MT of bleached pulp annually. The unit manufactures uncoated writing and printing paper - mainly cut-sizes, industrial papers and posters using Casuarina, Eucalyptus and Subabul as main sources of pulp wood.

Kadiyam Mill plant has a rated capacity to produce 67,000 MT per annum of finished paper such as cream wove, azurelaid, colored cutsizes and kraft liner using recycled fiber and purchased pulp as base raw materials.

A 75% subsidiary of a strong American company

The Parent company, International Paper is a leading global producer of renewable fiber-based packaging, pulp and paper products with manufacturing operations in North America, Latin America, Europe, North Africa, India and Russia. It is the largest such company in the world.

It produces corrugated packaging products that protect and promote goods, and enable worldwide commerce; pulp for diapers, tissue and other personal hygiene products that promote health and wellness and papers that facilitate education and communication.

International Paper is headquartered in Memphis, Tennessee, USA, and employ approximately 52,000 colleagues located in more than 24 countries.

Net sales for 2017 were $22 billion or more than Rs 150000 crore.

The Parent company holds 75% stake in the Indian subsidiary.

In September 2018 quarter it registered a17% rise in sales to Rs 335.90 crore. OPM improved 1100 basis points to 21.6% which saw OP rise 139% to Rs 75.52 crore. Other income jumped 139% to Rs 4.39 crore and interest fell 65% to Rs 2.40 crore. After providing for depreciation (down 2% to Rs 16.51 crore), PBT went up 586% to Rs 58.01 crore.

Tax grew 662% to Rs 20.56 crore (tax incidence went up from 31.9% to 35.5%), after which PAT went up 550% to Rs 37.44 crore.

During the quarter and six months the performance was impacted by planned annual outage as the production was lost for 10 days at its Rajahmundary plant.

Six months results

During six months it registered 10% rise in sales to Rs 675.76 crore. OPM improved 930 basis points to 23.8% which saw OP rise 82% to Rs 160.72 crore. Other income jumped 148% to Rs 5.60 crore and interest fell 55% to Rs 6.05 crore. After providing for depreciation (stagnant at Rs 32.63 crore), PBT went up 185% to Rs 127.64 crore.

Tax grew 199% to Rs 45.34 crore (tax incidence went up from 33.9% to 35.5%), after which PAT went up 178% to Rs 82.30 crore.

During the quarter and six months the performance was impacted by planned annual outage as the production was lost for 10 days at its Rajahmundary plant.

FY 2018 results

FY 2018, it registered an 8% rise in sales to Rs 1264.01 crore. OPM improved 300 basis points to 17.5% which saw OP rise 30% to Rs 221.43 crore. PBT went up 86% to Rs 134.82 crore.

EO loss fell 70% to Rs 8.37 crore after which PBT after EO grew 186% to Rs 124.46 crore.

PAT went up 156% to Rs 83.07 crore.

During the period ended March 2018 the management on evaluation of the performance of usefulness of all fixed assets in use, determined to de-commission certain fixed assets which are not required for the continued r future business operations. Consequently, the net book value of these assets has been reclassified in the balance sheet as ‘Assets classified as held for sale and Rs 8.37 crore representing the write down of the net book value has been disclosed as EO item.

Paper Industry is growing steadily

The Paper Industry in India is growing steadily with increasing demand from various customer segments like education, business & corporate and commercial printing. The demand and growth drivers have come from a combination of factors such as rising income levels, growing per capita expenditure, rapid urbanization, industrial production, government spending on education and increased school enrollments.

To cater to the customer needs, IPAPPM offers the best and recyclable products and services using innovation, sustainability and manufacturing excellence programs. The company has been able to grow in most regions through distribution expansion and customer engagement programs.

Focuses on creating innovative, sustainable and recyclable products

IPAPPM manufactures a wide variety of writing, printing, copier and offers a wide range of high quality specialty grade products for a diverse range of applications for foreign and domestic markets.

These products are designed to provide outstanding performance, functional excellence and exceptional finish quality.

The well-known cut-size papers of the Company offer a wide range of office documentation and multipurpose papers, from economy to premium grades, ideal for both home and commercial use.

The papers are available in best-in-class brightness and produced with Elemental Chlorine Free (ECF) pulp technology.

In Writing and Printing it offers a wide range of superior quality writing and printing papers suitable for printing journals, text books, reference books, calendars and a variety of other commercial printing applications as well as for notebooks and diaries.

In copier, the papers are available in best in class brightness and produced with Elemental Chlorine Free (ECF) Pulp technology. Its range is perfect for high volume photocopying and high-quality color printing needs and engineered to run flawlessly on all types of Photocopiers, Laserjet and Inkjet printers and Multi functional devices.

In speciality papers, IPAPPM offers a wide range of superior quality Specialty grade products that are custom engineered to suit specific and diverse range of applications.

Valuation

The stock trades at Rs 465