
Ruchira Papers Q1 FY20 Earnings Call Analysis
Revenue, margin, capex, fundraise and order book outlook from management commentary.
Management growth scorecard
Revenue
Category 4
Margin
Category 4
Fundraise
Yes
Order
N/A
Capex
Yes
2 of 4 growth signals are positive.
Full analysisRevenue guidance
Category 4- The company expects domestic paper demand to grow at a CAGR of around 6.7%, with per capita consumption to increase from 13 kg to 17 kg by FY25.
- Writing & Printing Paper (WPP) and Kraft Paper capacities are being optimized, with introduction of a new cup stock paper line expected to add flexibility and better margins.
- Cup stock paper demand is growing at ~12% annually with a market size of 0.8 million tonnes.
- Company expects marginal volume growth from existing capacity, with production guidance for FY20 at 143,000 MT (Kraft 88,000 MT; WPP 55,000 MT).
- New product lines and modernization capex (~Rs 70 Crore to complete by FY20-end) will likely improve margins from Q1 FY21 onward.
- Long-term outlook is cautiously optimistic; management notes uncertainty but expects industry pricing corrections and volume growth in Q3 FY20 and beyond.
- Greenfield project is delayed due to land issues; current focus is on optimizing existing assets.
See what Ruchira Papers management said on margin guidance — free account, 30 seconds.
Fundraise plans
Yes- The company is undertaking a capex of approximately Rs. 70 Crores for modernization and adding the new product of cup stock paper.
- This capex will be funded 50% through debt and 50% through cash accruals of FY 2019-20.
- There is no mention of any new equity fundraising during this period.
- The management discussed the capex funding during the call but did not indicate any additional fundraises beyond this.
- No updates or plans were shared regarding further fundraising through debt or equity beyond this capex.
See what Ruchira Papers management said on order book — free account, 30 seconds.
Capex plans
Yes- Ruchira Papers is undertaking a modernization capex of around Rs. 70 Crores, to be completed by Q4 FY2020, with benefits starting from Q1 FY2021.
- This capex involves modification of Paper Machine No. 01 in the Kraft Paper unit, enabling manufacturing of cup stock paper along with Kraft Paper, adding flexibility.
- The modernization includes upgrading the Writing & Printing Paper unit's press section for improved paper quality and replacing the old 5.6 MW turbine with a more efficient 6.1 MW turbine.
- Investment of approx. Rs. 10-12 Crores is planned to improve effluent treatment plants and chemical recovery with increased firing capacity.
- The funding for the Rs. 70 Crores capex is proposed as 50% cash accruals and 50% debt.
- The company plans a future Greenfield project in Punjab, currently delayed due to land registration issues, with land acquisition costs of Rs. 26 Crores incurred; activity to start post clearance within six months.
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