Detailed Analysis on Shreyans Industries Ltd.

 


Market Cap : 314 Cr

Current Price (25-03-2024)  : 227

Sector : Paper

About :

The company was incorporated in 1979, as Shreyans Paper Mills Ltd, the name was subsequently changed to Shreyans Industries Ltd. The Company, has been promoted by well known Oswal family of Ludhiana. Presently, the company has two paper manufacturing units located at Ahmedgarh (Distt. Sangrur) & at Banah (Distt. Nawanshaher) in the state of Punjab. the company manufactures writing and printing paper from Agricultural residues. Company has 1 marketing branch in Delhi and 100 dealers across India. It sells to government clients on tender basis and to private players.

Financial Metrics : 

(source : screener.in)

  • Current Price : 227
  • Market Cap : 314 Cr
  • Book Value : 251
  • EPS : 69.90
  • Promoter Holding : 50.53 %
  • Pledged Percentage : 0.00 %
  • P/E Ratio : 3.25 (Industry PE : 7.44)
  • PEG Ratio : 0.18
  • Return on capital employed (ROCE) : 31.00 %
  • ROCE 5Yr : 18.40 %
  • Return on equity (ROE) : 27.40 %
  • ROE 5Yr : 15.40 %
  • Return on assets (ROA) : 16.00 %
  • ROA 5Yr : 8.71 %
  • Sales Growth 5Yr : 13.30 %
  • Profit Growth 5Yr : 18.10 %
  • Dividend Last Year : 5.00
  • Dividend Yield : 2.20 %
  • Debt : 45.40 Cr
  • Debt to Equity : 0.13
  • Current Assets : 299 Cr
  • Current Liabilities : 135 Cr
  • Free Cash Flow : 84.60 Cr
  • Net Cash Flow : 0.02 Cr

Please refer to this article for detailed explanation on above mentioned financial metrics


Quarterly Earnings :

(source : screener.in)

The company is maintaining good consistency in QOQ sales, operating profit and net profit.

Yearly Earnings :

(source : screener.in)

The company is consistently increasing its YOY sales, operating profit & net profit.

Manufacturing Facility :






Shreyans Industries Ltd is an agro based paper plant using wheat straw, sugarcane residue and sarkanda with an annual production capacity of 94000 M.T. It installed Asia’s first soda recovery plant with US aid test assistance US AID TEST SCHEME. Presently, the company has two paper manufacturing units located at Ahmedgarh (Distt. Sangrur) & at Banah (Distt. Nawanshaher) in the state of Punjab.
Company has also set up Chemical Recovery Plant at both the paper units. This has enabled to economizing on consumption of chemicals and simultaneously achieving the prescribed standards of effluent discharge. In addition, company has total captive cum power co-generation capacity of about 5.6 MW, at Ahmedgarh unit. However to augment the total power requirement at Banah power plant with a capacity of 5MW is already installed. With a view to improve the quality of pulp and also to save on cooking chemicals, a Continuous Digester has been installed in both the units. The units at Ahmedgarh & Banah have its own E.O. Bleaching plant, for the manufacturing of High Bright, Superior Quality paper.

Products :

The company is operating with a wide product mix with well accepted quality in the market based on non-conventional raw materials.
In the range of 44 GSM to 200 GSM :
  1. High Brightness Paper
  2. Cream Wove
  3. Coloured Paper
  4. Duplicating Paper
  5. Surface Sized Printing Paper
  6. Azure Laid Paper
  7. Maplitho Paper
  8. Stamp Paper
  9. Inland Letter Paper
  10. Postal Envelope Paper
  11. Offset Paper
  12. Cover Paper
  13. Super Calendered Paper
  14. Rail Ticket Paper
  15. Super Printing Paper 
Major users of the company’s products includes Major Publishers, Copy Manufacturers, Job Printers, Various states Text Book Boards, Exporters of Notebooks & Diaries, Printing & Stationary Dept., Railways, P&T Dept., Security Press etc. It also exports its products to UAE, Nepal, Sri Lanka etc.
In FY23 sale of soda ash also contributed for 13 % in revenue.

Industry Insights :

(source :infomerics.com)

The consumption of paper in India increased from 8.5 million Tons in 2011-12 to 13.05 million tons in 2016-17. This sector is predicted to continue expanding in India as a result of rising domestic demand, a flourishing manufacturing sector, growing upstream market for paper products like tissue paper, filter paper, tea bags, and lightweight online coated paper, and higher demand for better quality packaging from organized retail outlets. During the last decade, from 2012-13 to 2022-2023, India's paper consumption registered CAGR (Compound Annual Growth Rate) of 6 per cent compared to the global growth of 3 per cent making India one of the fastest growing paper producers in the world. India's part of global paper demand is rising as domestic demand rises steadily and western demand falls. Indian paper demand increased from 9.4 million tonnes in FY 2008 to 15.4 million tonnes in FY 2016. Despite the industry's rise, per head paper usage in this country is just over 14 kg, far below the world norm of 57 kg and North America's 200 kg.
The paper output increased by 67,100 tonnes in January 2023, i.e., output rose 12.5 per cent to 604,300 tonnes. During April 2022-January 2023, Paper output rose 6.7 per cent. The production reached 5,553,900 tonnes in the ten months ending January 2023. The production of paper products rose by 11.1 per cent in November 2022 over the production in November 2021. 
newsprint consumption has declined slowly and marginally, production and imports of the newsprint material has declined drastically in the past decade. As per Indian Newsprint Manufacturers Association (INMA), the annual demand for newspaper in India is approximately 2.2 million tonnes, but an overwhelming 68 per cent of this demand (1.5 million tonnes per annum) is met by imports, primarily from Canada and Russia. The interruption in supply chains and increases in prices stemming from the Russia-Ukraine war have exacerbated the situation. the proliferation of digital alternatives is expected to have contributed to a gradual drop in demand for writing and printing papers.

Raw Material Shortage: The Indian paper industry is highly dependent on the availability of raw materials such as wood, bamboo, and bagasse. Any shortage or price fluctuations of these raw materials can adversely affect the industry’s operations and profitability. Due to extreme insufficient supply and high input costs, the Indian paper market is in an untenable state. The increase in production costs, logistics, chemicals, and raw materials has compelled paper mills to set new price records.

Competition: The Indian paper industry is highly competitive, with several large and small players heavily concentrated in a single community. Price competition, coupled with increasing demand for high-quality paper products, can affect the industry’s profitability. Government policies related to tariffs, taxes, subsidies, and import/export regulations can significantly impact the paper industry’s profitability. any adverse changes in these policies can increase the cost of operations and reduce the industry’s competitiveness.

PROS :
  1. Company has been maintaining healthy dividend payout
  2. Company with low debit
  3. Stock is trading less than book value
  4. Stock PE is lower than industry PE
  5. Net profits improving for last 2 years
  6. ROCE, ROE, ROA improving since last 2 years
  7. Zero promoter pledge
CONS :
  1. Company not able to generate net cash
  2. Highly competitive industry
This is not a buy/sell advice I am not SEBI registered, just providing basic details regarding this company from various sources available online, please do your own research or consult a SEBI registered investment advisor before taking any investment decision.

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