INVESTMENT RESEARCH… · Has one of the largest capacities in Northern India. ... DARK HORSE - Genus paper & boards Ltd. Dated : 08th August 2018 FV Share Holding Pattern Corporate

Price ` 12

Fair Value 20

Ban on Plastic bag to boost demand for paper

Div Yield -

Tenure 2-3 years

Sensex 37,861.25

Nifty 11,439.80

Group/Index B

Non-binding MOU's with GOI- ` 1650Cr

M.cap (` in cr) 319

Equity (` In cr) 25.71

52 wk H/L ` 16.70/4.95

Face Value ` 1.00

NSE code GENUSPAPER

BSE code 538961

Competitive Advantage

RONW 5%

P/E 17.73

P/BV 0.9

EV/EBIDTA 8.50

IN `

Expansions

EV (ìn cr) 396.73

BV (ìn cr) 14.00

NW(ìn cr) 359.89

EPS (TTM) 0.70

FY 21Est. Earnings 32.63

Equity Share Capital 25.71

1.00

25.71

EPS(FY21Est.) 1.27

Estimated Price/share 20

Note: P/E has been estimated around 16xs

Year End 201803 201703 201603 201503

Tax Rate % 33.75 25.85 45.46 32.77

Receivable days 80 81 66 61

Source: Google Div. Payout % - - - -

Multibagger

Key Financial Data

One of the leading manufacturer of multi-layer Kraft paper in India with a preferredsupplier for corrugated box manufacturers & a DOMINANT player in North India.

Also, Company is a preferred vendor for large FMCG clients. Major Customer includes HUL,Dabur, Onida, Moser Baer, Samsung, LG, whirlpool, Eveready etc.

Moreover, to address the Growing Demand, company have leased an operational manufacturingplant for a period of 5years. The facility is located at Kashipur, Uttarakhand and hasmanufacturing capacity of 75,000 metric tonnes per annum (MTPA). This plant will cater todemand of existing clients of Genus paper and would help to add few more clients in thatregion & has enhanced its manufacturing capacities by 50%. Moreover, its Asset lightstrategy helps to move faster in the long term and build a sustainable business model.

Company have performed very well for the FY 2018, the year has started on a encouraging note.Along with improved sales volumes, the mix has changed favorably towards the value-addedproducts. After Maharashtra, Uttar Pradesh has become the 19th state in the country to ban theusage of plastic bags. The ban will further boost the demand for the Kraft paper formanufacturing of paper bags & Genus being the dominant player in North India, would standto benefit for the same.

VALUATION (` In Cr except per share)

Company has entered into two non-binding MoU with Government of Maharashtra to invest`1,050cr for setting up of Kraft Paper manufacturing plant and with the Government of Uttar

Pradesh to invest ` 600cr for expansion of current manufacturing facility.

The company will incur the investing amount within a period of 5 years from the date ofapplication after completion of all effective steps.

Company enjoys competitive advantage amongst other players. Has one of the largest capacities in Northern India. 11 MW Co-generation Captive Power Plant generation. Licensed bore well for sufficient Water Supply for its requirement. Zero liquid discharge plant with full fledged waste water treatment plant. Strong relation with key FMCG customers.

Leased Plant and Brownfield expansion is in line with Management Vision to furtherStrengthen their Foothold in Northern India

With growing demand company have undertaken a Brownfield expansion at its existing facilityin Moradabad through debottlenecking. This will enhance the existing capacities by 50,000 MTPA. Company is continuously focusing on premiumization of products and improvinginternal efficiencies. With a strong start of the year, is confident of continuing on the growthtrajectory for the coming quarters as well.

INVESTMENT RESEARCH

DARK HORSE - Genus paper & boards Ltd.Dated : 08th August 2018

FV

Share Holding Pattern

Corporate Governance Transparency Ratio's

No. of Equity Shares

ACCUMULATE Investment Rationale

Stock Details

Key Valuation Ratios

50%50%

Promoter Others

Page 1 www.rudrashares.com

Growth Drivers

Exponential Growth in DEMAND

Shift to value added products- PREMIUMIZATION

RECYCLE & RESUE of waste paper

LOCATION advantage

FY18 – Revenue Break up Way Forward Add new capacities via organic and inorganic modes

Higher sales of Kraft Paper with Bursting Factor (BF) greater than 22

Increased product offering of better quality to customers

Better Realization

Improved operating efficiencies

Quarterly Highlights- Q1FY19

FY17 FY18

FY17 FY18

Kraft Paper

Mild Steel Ingot

FY17 FY18

REVENUE (` in Cr)

EBITDA (` in Cr)

PAT (` in Cr)

Owned 140000 MTPA at Moradabad(UP)

Total: 215000MTPALeased 75000 MTPA at Kashipur(Uttrakhand)

Current capacity

Contribute less than 5% of the total business. Steel ingot is manufactured by using the excesspower generated in cogeneration plant after meeting the requirement for Kraft paper. This product is used for manufacturing various types of steel bars by rolling mills.

Kraft paper is a type of industrial paper and used by packaging industry for manufacturingcorrugated boxes and liners, corrugated sacks and composite containers.Company offers Multi Layered Kraft paper with High Tear Factor (TF), High Burst Factor (BF)i.e. range from 18 to 40 BF with GSM ranging from 100-400. This paper is used to the extentof around 90 % by corrugated box manufacturer which includes FMCG, Consumer Durables,Pharmaceuticals, Garments, textiles & footwear, E-commerce, served by Genus.

Catering to Diversified Industry Needs from FMCG to Industrials to Ecommerce

Focused towards increasing asset productivity, operating efficiencies and strengthening thecompetitive position

Higher the Burst Factor (BF)

better the realization

Future Prospect

Kraft Paper demand to outspace supply

Strong Presence of FMCG & Consumer

durable Co's in North IndiaBrownfield Expansion by

50000MTPA at

Moradabad(UP)

RUDRA SHARES &

STOCK BROKERS LTD.

RESULTS CORNER

The Revenue stood at `121.0 Cr for Q1FY19 as against `72.8 Cr in Q1FY18 recording a growth of

66% YoY led by high volume growth.Company reported EBITDA of ` 11.1 Cr for Q1FY19 as against ` 7.3 Cr in Q1FY18 recording a

growth of 51% YoY. EBITDA margin stood at 9.1%.PAT has increased by 113% YoY to ` 5.1 Cr in Q1FY18

44%

56%

Up to 20 BF

Above 20 BF


Cater to needs of multiple industries

Indian Economy

Global Paper Industry

Indian Paper Industry

Kraft Paper: Industry Dynamics

Demand for Kraft Paper to outpace the production

RUDRA SHARES &

STOCK BROKERS LTD.

INDUSTRY ANALYSIS

The Indian economy grew at 6.7 per cent in 2017-18. The 7.7% growth rate achieved during Q4 FY18 putsIndia as one of the fastest growing economies in the world. With private consumption picking up, ruraleconomy recovering and investments reviving as reflected in IP capital growth index and gross fixedcapital formation (GCF), India’s growth should remain positive with both the World Bank and IMFpredicting a higher growth trajectory in the years ahead., For FY18-19 the economy is projected to grow at7.4%.

Globally over 400 million tones of paper and paper products are consumed. The world’s three largest paperproducing countries are China, the United States, and Japan (these three countries account forapproximately half of the world’s total paper production), while India accounts for a small but growingshare of the global market. The global paper and pulp industry has contracted slightly over the past fiveyears, primarily due to disrupting technology, and shift in customer demand. However, the decline in growthin developed markets are expected to be offset by the demand growth in India, Middle East, Africa and Asia.

The reduction of import duties (10% to Nil) on paper and paperboard from ASEAN countries pose achallenge to India paper industry. During the year FY18 the imports of paper and paper boardstouched 1.9 MT which is ~ 35% higher than FY17. The higher cost of fiber and capital in India affectsthe competitiveness of the Indian players and could potentially impact the relevance of local players.

Genus Paper has recently expanded its capacity by ~50% by leasing a manf. plant

Looking for other organic and inorganic means of capacity expansions

The domestic demand of paper and packing is ~14 Million metric tones, which accounts for ~4% of theworld’s consumption. The estimated turnover of the industry is ` 50,000 crores, contributes

` 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

Valuation Conclusion

Incorporated in 2012, company is engaged in manufacturing of Multi-layer Kraft Paper & Mild Steel Ingot.Kraft Paper is classified as industrial paper and is used by packaging industry in making corrugated boxesand liners, corrugated sacks and composite containers. Multilayer Kraft paper contribute more than 95% tothe total revenue. The Company's plant is located at Moradabad, Uttar Pradesh with total capacity of215,000 MTPA and has two independent plants within the factory premises.

RUDRA SHARES &

STOCK BROKERS LTD.

The Chinese government’s move to ban waste paper amidst environment concerns is expected tobenefit the Indian paper manufacturers. Waste Paper (WP) is one of the major sources of raw material usedfor manufacturing the recycled paper products. The Chinese Government’s decision to ban waste paperimports has caused a drop in global waste paper prices. As a result, the price of recycled paper inChina, used for packaging material, has increased due to short supply of WP. Indian manufacturersusing waste paper stand to benefit on account of lower global waste paper prices (on excess supply)and higher realization for recycled paper. To conclude, the global shortage of wood pulp has resulted

in increasing prices of finished paper. Indian wood pulp based having requisite self-sourcing (farmforestry) are expected to benefit from increasing global finished paper prices- Indirect benefitingGENUS.

Company Overview

Estimating the share price of the company as per P/E valuation, the estimated share price for next 2-3years tenure turns to be around ` 20-25. We recommend to Accumulate the stock at current levels to

achieve long term gains.

The Paper Industry in India is growing steadily with increasing demand from various customer segmentslike education, business & corporate and commercial printing. The demand and growth drivers have comefrom a combination of factors such as rising income levels, growing per capita expenditure, rapidurbanization, industrial production, government spending on education and increased school enrollments.Higher disposable income coupled with urbanization is expected to drive new and different consumerbehaviors and drive demand for paper products.

Company have performed very well for the FY 2018. Along with improved sales volumes, the mix haschanged favorably towards the value-added products. The ban on plastic in UP will further boost thedemand for the Kraft paper for manufacturing of paper bags & Genus being the dominant player inNorth India, would stand to benefit for the same.Moreover, company's focus on Premium products going forward, Brownfield expansion, signing ofMOU, add new capacities via organic and inorganic modes & Strong clientele (catering to packagingneeds of multiple industries- Dabur, Unilever, Havells, LG, Lays, Pepsi, Samsung, Patanjali etc.) attracts the share price at current levels.


LTM 201806 201803 201712 201709

393.8 121 100.06 89.37 83.37

46.7 13.55 10.23 12.21 10.73

12.9 3.22 3.2 3.25 3.24

33.8 10.33 7.03 8.96 7.49

6.9 2.49 1.73 1.38 1.32

7.6 3.06 1.63 1.61 1.34

26.2 7.27 5.4 7.35 6.15

8.5 2.2 1.78 2.55 2.01

17.6 5.07 3.62 4.8 4.13

- - - - -

17.6 5.07 3.62 4.8 4.13

0.7 0.2 0.14 0.19 0.16

Particulars 201503 201603 201703 201803 2019E 2020E 2021E

Sales(Net of Excise) 288.61 315.81 308.69 345.57 396.84 464.12 548.68

Other operating Income - - - - - - -

Total Inc. from operations 288.61 315.81 308.69 345.57 396.84 464.12 548.68

Operating EBITA 16.05 11.03 9.24 23.15 29.92 38.14 49.16

Total Inc. from operations 288.61 315.81 308.69 345.57 396.84 464.12 548.68

TOTAL EXPENDITURE 262.38 293.03 287.02 309.50 353.19 411.21 483.45

EBITDA 26.23 22.78 21.67 36.07 43.65 52.91 65.24

Depreciation (10.18) (11.75) (12.43) (12.92) (13.73) (14.77) (16.07)

Goodwill amortization - - - - - - -

OTHER INCOME 4.41 3.96 6.04 5.48 7.96 9.93 12.65

Net financials

Interest income - - - - - - -

Interest expenses (6.18) (6.28) (5.92) (6.08) (8.21) (9.73) (12.53)

Net Financial Items (6.18) (6.28) (5.92) (6.08) (8.21) (9.73) (12.53)

Reported Pre-tax profit 14.28 8.71 9.36 22.55 29.67 38.34 49.28

Reported Tax charge (4.68) (3.96) (2.42) (7.61) (10.03) (12.96) (16.66)

Reported Net profit 9.60 4.75 6.94 14.94 19.64 25.38 32.63

Minorities - - - - - - -

P/L OF ASSOCIATE CO. - - - - - - -

9.60 4.75 6.94 14.94 19.64 25.38 32.63

Extra Ordinary income - (1.75) 1.26 - - - -

Dividend Paid - - - - - - -

Retained earnings 9.6 6.5 5.68 14.94 19.64 25.38 32.63

Reported EPS 0.37 0.25 0.22 0.58 0.76 0.99 1.27

DPS - originally declared - - - - - - -

Opening Balance 25.71 25.71 25.71 25.71 25.71 25.71 25.71

Issued - - - - - - -

Bought Back - - - - - - -

Closing Balance 25.71 25.71 25.71 25.71 25.71 25.71 25.71

FV 1.00 1.00 1.00 1.00 1.00 1.00 1.00

Wtd. Avg. no. of shares 25.71 25.71 25.71 25.71 25.71 25.71 25.71

Note:- The figures shown in the brackets means NEGATIVE.

EBITDA

Misc.Inc (Exp.)

29.92

11.03

Rep. profit before othrinc.,

fin.cost,tax & excp. Item

Rep. profit before othrinc.,

fin.cost,tax & excp. Item

Depreciation

Particulars

Taxes

Interest Exp

Net Inc(Reg)

Rep Net Inc

Quarterly Results (` in cr except per share)

16.05

61.81

23.15

EPS

Rep. NP after min. Int.

EPS and Dividend

19.64 25.38 32.63Rep.Net Income after

extra ordinary items9.60

49.16 11.03 23.15

16.05

Extraord. Items

Net Sales

Op Income

EBT

9.24 38.14

Profit & Loss

14.945.686.50

48.08

9.24 49.16

Number Of Shares

28.6315.2814.99

RUDRA SHARES &

STOCK BROKERS LTD.

Income Statement and Estimates ( ` in Cr except per share)

38.14 29.92

37.88Profit from ordinary act. Before

Fin.Cost ,TAX & Exp.Items 20.46


201503 201603 201703 201803 2019E 2020E 2021E

Equity & Liabilities

Shareholders' Fund

Share Capital 25.71 25.71 25.71 25.71 25.71 25.71 25.71

Reserves and Surplus 286.49 291.24 298.17 329.11 348.75 374.14 406.76

- - - - - - -

Total Shareholders' Fund 312.2 316.95 323.88 354.82 374.46 399.85 432.47

Non-Current Liabilities

Long-term Borrowings 22.8 28.4 15.02 21.37 27.82 37.12 48.47

Other LT Liabilities - - - - - - -

Deferred Tax Liability 18.25 19.25 19.55 23.57 25.97 28.62 31.54

Long term Provisions 0.38 0.46 0.55 0.57 0.63 0.69 0.76

Total Non-Current Liab. 41.43 48.11 35.12 45.51 54.42 66.43 80.77

Current Liabilities

Short term Borrowings 32.16 26.5 25.48 35.73 41.73 55.68 72.71

Trade Payables 38.42 28.1 41.04 52.55 61.51 74.26 93.28

Other current liability 9.15 12.66 14.79 24.96 27.78 32.49 38.41

Short term Provisions 0.77 0.27 0.28 0.16 0.18 0.19 0.21

Total current Liab. 80.5 67.53 81.59 113.4 131.19 162.62 204.61

Total Equity & Liab. 434.13 432.59 440.59 513.73 560.08 628.90 717.85

Assets

Non-Current Assets

Fixed Assets

Tangible fixed Assets 209.04 209.45 200.2 221.02 235.07 252.78 275.12

G/W On Consolidation - - - - - - -

Non-current Investment 31.18 24.76 23.95 75.21 94.01 117.52 146.89

Long term L&A - - - 72.17 75.78 79.57 83.55

Other Non current Ass. 52.93 70.25 87.28 - - - -

Deferred tax receiv. - - - 16.96 19.08 21.47 24.15

Total Non-Current Ass. 293.15 304.46 311.43 385.36 423.94 471.33 529.71

Current Assets

Current Investments - - - - - - -

Inventories 58.03 34.98 26.95 34.42 39.53 46.64 57.61

Trade Receivables 51.32 63.39 74.18 76.81 85.32 97.47 113.58

Cash & cash Equi. 13.14 8.62 8.8 4.39 5.33 6.48 8.71

Short Term L&A 18.02 20.78 18.89 0.01 0.01 0.01 0.01

Other current Assets 0.44 0.37 0.36 12.75 5.95 6.96 8.23

Total current Assets 140.95 128.14 129.18 128.38 136.14 157.56 188.14

Total Assets 434.13 432.59 440.59 513.73 560.08 628.90 717.85

Cash & cash equivalents 13.14 8.62 8.8 4.39 5.33 6.48 8.71

Other int. bearing assets 31.18 24.76 23.95 75.21 94.01 117.52 146.89

Interest-bearing debt 64.11 67.56 55.29 82.06 97.33 125.29 159.59

Net interest-bearing debt 19.79 34.18 22.54 2.46 -2.02 1.29 3.98

Tangible assets

Gross capex (32.58) (12.12) (3.15) (33.74) (27.78) (32.49) (38.41)

Sale of fixed assets - - - - - - -

Net capex (32.58) (12.12) (3.15) (33.74) (27.78) (32.49) (38.41)

Depreciation tangibles (10.18) (11.75) (12.43) (12.92) (13.73) (14.77) (16.07)


Minority Interests

Investments

RUDRA SHARES &

STOCK BROKERS LTD.

BALANCE SHEET

Particulars


201503 201603 201703 201803 2019E 2020E 2021E

Return on assets - 1.50% 1.30% 3.13% 3.66% 4.27% 4.85%

Return on equity - 2.07% 1.77% 4.40% 5.39% 6.56% 7.84%

ROCE - 2.73% 2.29% 5.51% 6.44% 7.51% 8.73%

EBIT Margin - 4.75% 4.95% 8.28% 9.55% 10.36% 11.27%

Pre tax margin - 2.76% 3.03% 6.53% 7.48% 8.26% 8.98%

Net Profit Margin - 2.06% 1.84% 4.32% 4.95% 5.47% 5.95%

Total asset turnover - 0.73 0.71 0.72 0.74 0.78 0.81

Fixed asset turnover - 1.51 1.51 1.64 1.74 1.90 2.08

Equity turnover - 1.00 0.96 1.02 1.09 1.20 1.32

Current Ratio - 1.90 1.58 1.13 1.04 0.97 0.92

Quick Ratio - 1.38 1.25 0.83 0.74 0.68 0.64

Cash Ratio - 0.13 0.11 0.04 0.04 0.04 0.04

Receivable Days - 71.44 87.47 89.03 83.78 81.12 79.67

Inventory Days - 57.93 39.38 36.19 38.21 38.24 39.36

Payable Days - 44.97 45.23 53.89 58.10 59.23 61.84

Conversion Cycle (Days) - 84.40 81.62 71.33 63.89 60.13 57.18

Financial Leverage Effect - 3.50 3.82 2.41 2.22 2.08 2.00

Debt to Capital - 0.18 0.15 0.19 0.21 0.24 0.27

Debt to Equity - 0.21 0.17 0.23 0.26 0.31 0.37


RUDRA SHARES &

STOCK BROKERS LTD.

RATIO ANALYSIS

Particulars


Disclosures :

1) Business Activity :

2)

3)

4)

Sr. No. Yes/No

a) No

b) No

c) No

5)

Sr. No. Yes/No

a) No

b) No

c) No

6) Other Disclosures:

Yes/No

Sr. No.

a) No

b) No

c) No

Disciplinary History :

Disclosures & Disclaimers

Disclosures

The research analyst has served as an officer,director,employee of the subject company.

Rudra or its research analyst has been engaged in market making activity for the subject

company.

Rudra or its or associates have received any compensation from the subject company in the

past twelve months.

Rudra or its associates have managed or co-managed public offering of securities for the

subject in the past twelve months.

Disclosures

Rudra or its associates have received any compensation from the subject company in the

past twelve months.

RUDRA SHARES &

STOCK BROKERS LTD.

The Research report is issued to the registered clients. The Research Report is based on the facts, figures and

information that are considered true, correct and reliable. The information is obtained from publicly available media

or other sources believed to be reliable. The report is prepared solely for informational purpose and does not

constitute an offer document or solicitation to buy or sell or subscribe for securities or other financial instruments for

clients.

There has been no instance of any Disciplinary action, penalty etc. levied/passed by any regulation/administrative

agencies against RUDRA and its Directors. Pursuant to SEBI inspection of books and records of Rudra, as a Stock

Broker, SEBI has not issued any Administrative warning to Rudra.

Rudra or its research analysts, or his/her relative or associate has any other material

conflict of interest at time of publication of the research report.

Terms & Conditions of issuance of Research Report:

Rudra or its research analysts, or his/her relative or associate has any direct or indirect

financial interest in the subject company.

Disclosures with regard to ownership and material conflicts of interest :

Disclosures

Disclosures with regard to receipt of compensation :

Rudra Shares & Stock Brokers Limited is engaged in the business of providing broking services & distribution of

various financial products. RUDRA is also registered as a Research Analyst under SEBI(Research Analyst) Regulations,

2014. SEBI Reg. No. INH100002524.

Rudra or its associates have received any compensation or other benefits from the subject

company or third party in connection with the research report .

Rudra or its research analysts, or his/her relative or associates have actual/beneficial

ownership of one per cent or more securities of the subject company.


RUDRA SHARES & STOCK BROKERS LTD.

Phone: +91 – 512 – 67011001

Disclaimers:

This Research Report (hereinafter called report) has been prepared and presented by RUDRA SHARES & STOCK BROKERS

LIMITED, which does not constitute any offer or advice to sell or does solicitation to buy any securities. The information presented in

this report, are for the intended recipients only. Further, the intended recipients are advised to exercise restraint in placing any

dependence on this report, as the sender, Rudra Shares & Stock Brokers Limited, neither guarantees the accuracy of any information

contained herein nor assumes any responsibility in relation to losses arising from the errors of fact, opinion or the dependence placed

on the same.

Despite the information in this document has been previewed on the basis of publicly available information, internal data , personal

views of the research analyst(s)and other reliable sources, believed to be true, we do not represent it as accurate, complete or

exhaustive. It should not be relied on as such, as this document is for general guidance only. Besides this, the research analyst(s) are

bound by stringent internal regulations and legal and statutory requirements of the Securities and Exchange Board of India( SEBI)

and the analysts' compensation was, is, or will be not directly or indirectly related with the other companies and/or entities of Rudra

Shares & Stock Brokers Ltd and have no bearing whatsoever on any recommendation, that they have given in the research report.

Rudra Shares & Stock Brokers Ltd or any of its affiliates/group companies shall not be in any way responsible for any such loss or

damage that may arise to any person from any inadvertent error in the information contained in this report. Rudra Shares & Stock

Brokers Ltd has not independently verified all the information, which has been obtained by the company for analysis purpose, from

publicly available media or other sources believed to be reliable. Accordingly, we neither testify nor make any representation or

warranty, express or implied, of the accuracy, contents or data contained within this document. Rudra Share & Stock Brokers Ltd

and its affiliates are engaged in investment advisory, stock broking, retail & HNI and other financial services. Details of affiliates are

available on our website i.e. www.rudrashares.com.

We hereby declare, that the information herein may change any time due to the volatile market conditions, therefore, it is advised to

use own discretion and judgment while entering into any transactions, whatsoever.

Individuals employed as research analyst by Rudra Shares & Stock Brokers Ltd or their associates are not allowed to deal or trade in

securities, within thirty days before and five days after the publication of a research report as prescribed under SEBI Research

Analyst Regulations.

Subject to the restrictions mentioned in above paragraph, we and our affiliates, officers, directors, employees and their relative may:

(a) from time to time, have long or short positions acting as a principal in, and buy or sell the securities or derivatives thereof, of

Company mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or profits.

RUDRA SHARES &

STOCK BROKERS LTD.


Documents

INVESTMENT RESEARCH… · Has one of the largest capacities in Northern India. ... DARK HORSE - Genus paper & boards Ltd. Dated : 08th August 2018 FV Share Holding Pattern Corporate