TNPL is one of India’s largest paper manufacturers with one of the lowest cost structures. Considering the dynamics of the Indian Paper Industry, it has been executing a very strong growth strategy involving consistent growth in capacities, high focus on energy conservation, own plantations, efficient cost management & focus on high quality products.It expects to complete its capacity expansion program (2.45 lakh MTPA to 4 lakh MTPA) by Sept. 2010. In FY10, its revenues fell 2.5% YoY but its APAT grew by 32.8% YoY with an EPS of Rs. 17.1. Going forward, with increased capacities & better price realization, we expect its revenues and APAT to grow by 24.6% & 14.4%, respectively in FY11E; and by 24.1% & 20.8%, respectively in FY12E.
At the CMP of Rs. 119, the stock is available at an attractive valuation of 5.1x its FY12E earnings of Rs.23.6, also offering a dividend yield of 4%. We initiate our coverage on the stock with a Buy Rating and a Target price of Rs.165 (7x FY12E Earnings)FULL CHART at http://www.moneycontrol.com/india/stockpricequote/paper/tamilnadunewsprintpapers/TNN
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