Lumber prices could be due for a late summer rally, Bank of America said. Wildfires in parts of the United States and Canada have raised concerns on supply constraints, the global brokerage added.
The prices of lumber, a key raw material for industry, have moved up sharply in China, making Indian players more competitive.
Also, the gradual opening up of the localised lockdown across states augurs well for the writing and printing segment. “The companies manufacturing paper from own pulp have started doing well,” said S Ranganathan, Head of Research at LKP Securities.
Shares of NR Agarwal Industries surged 20 per cent, its daily circuit limit, to 301.70 on Thursday.
and gained 6 per cent each to Rs 172.30 and Rs 334.95, respectively.
, , , Nath Industries, Ganga Papers and B&A Packaging India advanced up to 5 per cent each. Most of them were locked in the upper circuit.
“The long-term outlook for the Indian paper industry remains favorable, driven by increasing literacy levels, growth in print media, higher government spending on education sector, changing urban lifestyles as well as economic growth,” said Likhita Chepa, Senior Analyst, CapitalVia Global Research.
According to Ranganathan, many paper companies have de-risked from W&P paper into multilayer boards, which will propel growth going forward and accelerate the earnings trajectory for such companies.
The paper industry is one of the worst-affected industries due to the outbreak of Covid-19 pandemic. “Pure play paper and board companies like JK Paper, West Coast Paper & NR Agarwal should reap the benefits next fiscal,” said Ranganathan.
Chepa is bullish on JK Paper in this industry as it has the potential to generate decent returns over the long term.