Tamil Nadu Newsprint & Papers Ltd Q1 FY21 Earnings Call Analysis
Revenue, margin, capex, fundraise and order book outlook from management commentary.
Management growth scorecard
Revenue
Category 3
Margin
Category 3
Fundraise
Yes
Order
No
Capex
Yes
2 of 5 growth signals are positive.
Full analysisRevenue guidance
Category 3- Per capita paper consumption in India is expected to rise from 14 kgs to 17 kgs by 2024-25, indicating growth potential.
- Increased use of packaging board in the pharma industry due to the plastic ban and rise in e-commerce home deliveries.
- Growth in packaging boards estimated at 10-12% per annum, with strong demand from pharma, FMCG, and e-commerce sectors.
- Printing and writing paper demand expected to recover as schools, colleges, and offices resume normal operations post-Covid-19.
- Digitalization and growing literacy rates contribute to long-term demand growth, despite short-term Covid impacts.
- Expansion projects (MEP Unit II) will increase production capacity from 6,00,000 MT to 7,65,000 MT annually, driving volume growth.
- Optimism that fading Covid-19 pandemic will lead to normalization and trigger volume and revenue growth.
See what Tamil Nadu Newsprint & Papers Ltd management said on margin guidance — free account, 30 seconds.
Fundraise plans
Yes- There is no proposal for a buyback of shares this year as the company needs funds for regular maintenance CAPEX, new projects, and loan repayments.
- The company plans to repay around Rs. 400 crores of loans on earlier projects during the current year.
- Capital expenditure of about Rs. 50 crores is planned for normal CAPEX.
- A significant investment of around Rs. 875 crores is planned for the Mill Expansion Plan (MEP) Unit II pulp mill expansion.
- Due to these huge funding requirements combined with cash flow pressures from the Covid-19 outbreak, the company is conserving funds and not paying interim dividends.
- No requests or plans for bonus shares or equity fundraising have been indicated.
- Overall, the company is focusing on managing existing debt and funding expansion through internal accruals and loan repayments without announcing fresh equity or debt fundraising.
See what Tamil Nadu Newsprint & Papers Ltd management said on order book — free account, 30 seconds.
Capex plans
Yes- The company has a Mill Expansion Plan (MEP) in Unit II to increase mill capacity from 200,000 MT to 365,000 MT per annum of Multilayer Coated Paper Board.
- This includes installation of a state-of-the-art Paper Machine with 165,000 MT per annum capacity and a 400 tons per day chemical hardwood pulp mill with chemical recovery boiler and wastewater treatment plant.
- Total capital outlay for this expansion is Rs. 2,520 crores.
- Overall paper and packaging board production capacity post-expansion will increase to 765,000 MT per annum from the current 600,000 MT.
- The company plans to spend about Rs. 875 crores for MEP Unit II pulp mill expansion.
- Around Rs. 50 crores are planned for normal capex (maintenance and upgrades).
- The company has significant loan repayment obligations (~Rs. 400 crores) in the current year, impacting available funds for buybacks or dividends.
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Margin guidance
Category 3- Covid-19 severely impacted printing and writing paper demand, with order flows dipping from 1.20 lakh MT (2018-19) to 41,000 MT in peak pandemic period, but packaging boards and cement sales remained resilient.
- Packaging board demand expected to grow at 10-12% annually driven by pharma industry, e-commerce growth, and ban on single-use plastics.
- Per capita paper consumption in India projected to rise from 14 kgs to 17 kgs by 2024-25, indicating growth potential.
- Capacity expansion underway: Mill Expansion Plan in Unit II will increase production capacity from 6,00,000 MT to 7,65,000 MT per annum, including a 400 tpd chemical pulp mill and 30 MW power plant.
- The company anticipates recovery in printing/writing paper demand with reopening of schools, colleges, and corporate activities.
- Despite challenges, management remains positive on volume growth as economic activities normalize post-pandemic.
- Large ongoing capital expenditures (~Rs. 875 crores for expansion) and loan repayments constrain interim dividends and share buybacks, focusing resources on growth.
Order book
No- During the peak Covid-19 period from April to August, order flow for printing and writing paper dipped significantly.
- Order quantities comparison:
- - April-August 2018-19: 1.20 lakh metric tonnes
- - April-August 2019-20: 83,000 metric tonnes
- - April-August 2020-21: 41,000 metric tonnes
- Printing and writing paper segment severely impacted, while paperboard and cement sales were relatively stable.
- Demand for cut size papers is expected to normalize faster than other sectors due to printing needs during the pandemic.
- Packaging board demand sustained and expected to grow, especially in pharma industry and via e-commerce channels.
- Per capita paper consumption in India, currently at 14 kgs, is expected to increase to 17 kgs by 2024-25, indicating growth potential.
How does Tamil Nadu Newsprint & Papers Ltd rank vs peers in Paper, Forest & Jute Products?
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What Tamil Nadu Newsprint & Papers Ltd's management said in earlier quarters
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