INTERNATIONAL PAPER APPM LIMITED ISIN… · 2018-10-05 · International Paper APPM Limited (formerly known as The Andhra Pradesh Paper Mills Limited) is one of the largest integrated

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INTERNATIONAL PAPER APPM LIMITEDResult Update (PARENT BASIS): Q1 FY19

CMP: 454.80 OCT 4th, 2018

Overweight ISIN:INE435A01028

Index DetailsSYNOPSIS

International Paper APPM Limited (formerly

known as The Andhra Pradesh Paper Mills

Limited) is one of the largest integrated paper

and pulp manufacturers in India.

Revenue of the company for Q1 FY19 was

Rs.3398.61 mn as against Rs.3267.95 mn in

previous year Q1 FY18.

For Q1 FY19, EBITDA of the company has

increased by 52.99% to Rs.894.15 mn from

Rs.584.44 mn in Q1 FY18.

In Q1 FY19, PBT rose by 91.67% to Rs. 696.36

mn from Rs. 363.31 mn in the corresponding

quarter of previous year.

During the quarter, net profit of the company has

increased to Rs. 448.58 mn from Rs. 238.53 mn

in corresponding quarter of the previous year,

higher by 88.06%.

During Q1 FY19, EPS of the company has

increased to Rs.11.28 as compared to Rs. 6.00 in

Q1 FY18.

Net Sales and PAT of the company are expected

to grow at a CAGR of 5% and 45% over 2017 to

2020E, respectively.

Stock DataSector Paper & Paper ProductsBSE Code 502330Face Value 10.0052wk. High / Low (Rs.) 591.51/273.40Volume (2wk. Avg.) 26000Market Cap (Rs. in mn.) 18087.40

Annual Estimated Results(A*: Actual / E*: Estimated)Years (Rs. in mn) FY18A FY19E FY20ENet Sales 12798.02 13604.30 14651.83EBITDA 2267.26 2975.73 3344.01Net Profit 830.67 1382.99 1628.50EPS 20.89 34.77 40.95P/E 21.77 13.08 11.11

Shareholding Pattern (%)

As on Jun 2018 As on Mar 2018

Promoter 75.00 75.00

Public 25.00 25.00

Others -- --

1 Year Comparative Graph

INTERNATIONAL PAPER APPM LIMITED S&P BSE SENSEX

PEER GROUPS CMP MARKET CAP EPS(TTM) P/E (X)(TTM) P/BV(X) DIVIDENDCompany Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)International Paper APPM Limited 454.80 18087.40 26.17 17.38 3.21 0.00Seshasayee Paper & Boards Ltd 1063.70 13417.10 101.49 10.48 1.91 150.00Emami Paper Mills Ltd 211.70 12807.60 5.69 37.21 5.28 60.00West Coast Paper Mills Ltd 328.50 21697.10 38.39 8.56 2.59 200.00


QUARTERLY HIGHLIGHTS (PARENT BASIS)

Results updates- Q1 FY19,

(Rs. in Million) Jun-18 Jun-17 % Change

Revenue 3398.61 3267.95 4.00%

Net Profit 448.58 238.53 88.06%

EPS 11.28 6.00 88.06%

EBIDTA 894.15 584.44 52.99%

Revenue for June quarter stood at Rs. 3398.61 million as against Rs. 3267.95 million, when compared with the prior year

period. EBIDTA of the company has increased by 52.99% to Rs. 894.15 million from Rs. 584.44 million in the

corresponding quarter of the previous year. The company’s net profit has increased to Rs. 448.58 million in Q1 FY19

from Rs 238.53 million in the corresponding quarter ending of previous year, higher by 88.06%. Reported earnings per

share of the company stood at Rs. 11.28 during the quarter, as against Rs. 6.00 per share over previous year period.

Break up of Expenditure

Break up ofExpenditure

Value in Rs. Million

Q1 FY19 Q1 FY18 %Change

Cost of MaterialConsumed 1164.07 1233.11 -6%

Employee BenefitsExpense 382.74 375.78 2%

Depreciation &AmortisationExpenses

161.24 156.51 3%

Other Expenditure 979.24 937.68 4%


COMPANY PROFILE

International Paper APPM Limited (formerly known as The Andhra Pradesh Paper Mills Limited) is one of the largest

integrated paper and pulp manufacturers in India. The Andhra Pradesh Paper Mills was established in the year 1964. In

2011, The Andhra Pradesh Paper Mills Limited was acquired by International Paper (IP), a USD 22 billion American

packaging, pulp and paper company founded in 1898. In the first significant domestic acquisition by a foreign paper

company, IP bought 75% stake in the Company. IP, headquartered in Memphis, Tennessee, USA is the largest packaging,

pulp and paper company in the world, with approximately 55,000 employees operating in 24 countries.

In December 2013, the Company was renamed as International Paper APPM Limited. The name change was intended to

recognize the parentage of International Paper, while maintaining the link to the history and positioning of the Andhra

Paper brand. This is also to ensure that future investments in brand-building are directed around the IP brand leveraging

the Group’s global presence and technology.

IP APPM employs ~1900 employees and is headquartered in Hyderabad, Telangana. IP APPM is focused on serving

customers with high quality printing and writing papers.

IP APPM is also focused on people safety, efficiency enhancements and social and community programs backed up with

its own pioneering work in raw material generation through social farm forestry. Across the Company, there is a strong

strategic focus to drive future growth through building on the organization strengths to produce the highest in quality,

ramping up of volumes and be a cost effective producer of paper.

The Company has always been conscious of its corporate responsibilities and follows a strict environmental policy.

Investments continue to be made in achieving benchmarks to remain ahead of compliance standards. Such efforts have

helped protect and regenerate the natural resources, conserve energy and water, improve productivity and set a good

environmental track record at the mills.


FINANCIAL HIGHLIGHT (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions)

Balance Sheet as of March 31, 2017 -2020EFY17A FY18A FY19E FY20E

ASSETS1) Non-Current Assets

a) Property , plant and equipment 7927.45 7379.66 7822.44 8213.56b) capital work in progress 25.11 41.94 57.04 73.02c) Intangible assets 55.40 36.94 44.32 51.41d) Financial assets

i) Investments 101.11 146.45 175.74 208.08ii) Loans 2.22 2.15 2.26 2.44iii) Other financial assets 92.48 99.01 103.96 111.24

e) Non current tax assets 125.48 92.01 86.49 96.01f) Other non current assets 291.01 288.86 300.41 321.44Sub Total Non- Current assets 8620.25 8087.03 8592.67 9077.20

2) Current Assetsa) Inventories 1838.41 1547.79 1826.39 2100.35b) Financial assets

i) Trades receivables 675.03 695.75 737.49 774.37ii) Cash and cash equivalents 67.73 160.11 198.53 242.21iii) Other bank balances 3.00 6.45 8.39 9.31iv) Loans 12.19 13.73 15.24 16.77v) Other financial assets 26.46 10.86 13.47 15.62

c) Other current assets 302.90 379.05 439.69 488.06Sub Total Current Assets 2925.72 2813.73 3239.20 3646.68

3) Assets classified as held for resale 0.25 65.64 0.00 0.00Total Assets (1+2+3) 11546.22 10966.40 11831.88 12723.88EQUITY AND LIABILITIES1) EQUITY

a) Equity Share Capital 397.70 397.70 397.70 397.70b) Other Equity 4381.78 5242.35 6369.35 7450.02Total Equity 4779.48 5640.05 6767.05 7847.72

2) Non Current Liabilitiesa) Financial Liabilities

i) Borrowings 1442.76 647.96 501.52 411.25ii) Other Financial Liabilities 88.85 69.13 58.48 53.81

b) Provisions 44.64 35.49 38.68 41.00c) Deferred Tax Liabilities (net) 799.74 973.43 866.35 797.05Sub - Total Non Current Liabilities 2375.99 1726.01 1465.04 1303.10

3) Current Liabilitiesa) Financial Liabilities

i) Short term borrowings 900.00 1160.00 1136.80 1125.43ii) Trade payables 1381.25 1323.10 1362.79 1326.63iii) Other financial liabilities 1574.58 591.38 563.48 597.29

b) Provisions 344.81 344.81 344.81 324.12c) Other current liabilities 190.11 181.05 191.91 199.59Sub Total - Current Liabilities 4390.75 3600.33 3599.79 3573.06

Total Equity and Liabilities (1+2+3) 11546.22 10966.40 11831.88 12723.88


Annual Profit & Loss Statement for the period of 2017 to 2020E

Value(Rs.in.mn) FY17A FY18A FY19E FY20E

Description 12m 12m 12m 12mNet Sales 12309.39 12798.02 13604.30 14651.83Other Income 59.61 52.94 61.69 67.86

Total Income 12369.00 12850.96 13665.99 14719.69

Expenditure -10608.65 -10583.71 -10690.26 -11375.68

Operating Profit 1760.35 2267.26 2975.73 3344.01Interest -335.91 -260.90 -180.02 -154.82

Gross profit 1424.44 2006.36 2795.71 3189.19

Depreciation -700.28 -658.13 -672.61 -699.52

Exceptional Items -281.86 -83.66 0.00 0.00

Profit Before Tax 442.30 1264.57 2123.10 2489.67

Tax -118.35 -433.90 -740.11 -861.18

Net Profit 323.96 830.67 1382.99 1628.50Equity capital 397.70 397.70 397.70 397.70

Reserves 4381.78 5242.35 6369.35 7450.02Face value 10.00 10.00 10.00 10.00EPS 8.15 20.89 34.77 40.95

Quarterly Profit & Loss Statement for the period of 31st Dec 2017 to 30th Sep, 2018E

Value(Rs.in.mn) 31-Dec-17 31-Mar-18 30-June-18 30-Sep-18E

Description 3m 3m 3m 3mNet sales 3282.95 3397.32 3398.61 3194.69Other income 22.82 7.52 12.11 15.99Total Income 3305.77 3404.84 3410.72 3210.68Expenditure -2725.69 -2624.47 -2516.57 -2555.75

Operating profit 580.08 780.38 894.15 654.92Interest -64.72 -62.50 -36.55 -39.11Gross profit 515.36 717.88 857.60 615.82Depreciation -168.21 -164.67 -161.24 -169.30Exceptional Items 0.00 -83.66 0.00 0.00Profit Before Tax 347.15 469.55 696.36 446.52Tax -139.89 -142.25 -247.78 -147.80

Net Profit 207.26 327.30 448.58 298.72Equity capital 397.70 397.70 397.70 397.70Face value 10.00 10.00 10.00 10.00

EPS 5.21 8.23 11.28 7.51


Ratio Analysis

Particulars FY17A FY18A FY19E FY20E

EPS (Rs.) 8.15 20.89 34.77 40.95EBITDA Margin (%) 14.30% 17.72% 21.87% 22.82%PBT Margin (%) 3.59% 9.88% 15.61% 16.99%PAT Margin (%) 2.63% 6.49% 10.17% 11.11%P/E Ratio (x) 55.83 21.77 13.08 11.11ROE (%) 6.78% 14.73% 20.44% 20.75%ROCE (%) 14.88% 21.60% 27.40% 28.18%Debt Equity Ratio 0.49 0.32 0.24 0.20EV/EBITDA (x) 11.57 8.70 6.56 5.79Book Value (Rs.) 120.18 141.82 170.15 197.33P/BV 3.78 3.21 2.67 2.30

Charts


OUTLOOK AND CONCLUSION

At the current market price of Rs. 454.80, the stock P/E ratio is at 13.08 x FY19E and 11.11 x FY20E respectively.

Earning per share (EPS) of the company for the earnings for FY19E and FY20E is seen at Rs. 34.77 and Rs. 40.95

respectively.

Net Sales and PAT of the company are expected to grow at a CAGR of 5% and 45% over 2017 to 2020E,

respectively.

On the basis of EV/EBITDA, the stock trades at 6.56 x for FY19E and 5.79 x for FY20E.

Price to Book Value of the stock is expected to be at 2.67 x and 2.30 x for FY19E and FY20E respectively.

Hence, we say that, we are Overweight in this particular scrip for Medium term investment.

Industry Overview

Indian Economy

The Indian economy grew at 6.7 per cent in 2017-18. Though economic growth remained subdued in the first half of the

year due to demonetization and GST implementation, it recovered in the second half on the back of robust consumer

demand and buoyancy in urban and rural spending. The 7.7% growth rate achieved during Q4 FY18 puts India as one of

the fastest growing economies in the world. With private consumption picking up, rural economy recovering and

investments reviving as reflected in IP capital growth index and gross fixed capital formation (GCF), India’s growth

should remain positive with both the World Bank and IMF predicting a higher growth trajectory in the years ahead., For

FY18-19 the economy is projected to grow at 7.4%.


The demand drivers for paper consumption comes from a combination of factors such as increasing numbers of

professional office workers, expanding access to education and increasing access to broadband internet and use of

computers and printers.

Global Paper Industry

Globally over 400 million tonnes of paper and paper products are consumed. The world’s three largest paper producing

countries are China, the United States, and Japan (these three countries account for approximately half of the world’s total

paper production), while India accounts for a small but growing share of the global market. The global paper and pulp

industry has contracted slightly over the past five years, primarily due to disrupting technology, and shift in customer

demand. However, the decline in growth in developed markets are expected to be offset by the demand growth in India,

Middle East, Africa and Asia.

Indian Paper Industry

The domestic demand of paper and packing is ~14 Million metric tonnes, which accounts for ~4% of the world’s

consumption. The estimated turnover of the industry is Rs 50,000 crores, contributes Rs 4,500 crores to the exchequer and

provides employment to more than 0.5 Million people and 1.5 Million people indirectly. The Indian paper industry is

highly fragmented with ~ 750 paper mills, of which ~6% have capacity of 50,000 MT and above.

Outlook

The per capita consumption of paper in India is ~10 Kg as opposed to a global average of 56 kg. India is in the early

stages of the demand cycle and expect continued growth in all paper segments.

For the Indian paper industry, strong economic growth has been accompanied by equally robust demand for paper. The

demand for paper is largely driven by:

Education: Efforts to improve the primary and higher education is driving the students enrolment and continuance of

education.

Publications: The demand for high quality printing and writing paper.

E-commerce: Internet penetration is creating new business models and demand for industrial packaging, consumer

packaging and printing & writing paper.

Economic activity: The increase in economic activity is expected to open up more avenues (Manufacturing sector, Office

space) for paper demand.

Consumerism: Higher disposable income coupled with urbanisation is expected to drive new and different consumer

behaviours and drive demand for paper products.


As per the industry estimates, Printing and Writing segment demand is expected to grow at a CAGR of ~4%, Paperboard

at a CAGR of ~9% and speciality paper at ~8%.


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Exposure/Interest tocompany/sector UnderCoverage in the CurrentReport

Dr.C.V.S.L. Kameswari M.Sc, PGDCA,M.B.A,Ph.D (Finance)

Pharma &Diversified

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Documents

INTERNATIONAL PAPER APPM LIMITED ISIN… · 2018-10-05 · International Paper APPM Limited (formerly known as The Andhra Pradesh Paper Mills Limited) is one of the largest integrated