The plastic ban in Maharashtra is likely to boost prospects of some paper companies as industries which use plastic move to alternatives.The state-wide ban which came into effect on Saturday has had everyone from large companies to restaurateurs to shopkeepers in a fix, and paper bags, bubble wraps, jute bags and tin foils are coming up as alternatives.
These businesses risk a fall in sales unless they make the transition.
Analysts said paper is fast emerging as a key alternative and thats a boon for paper manufacturers.This is an opportunity for paper and paperboard units in Maharashtra, also other adjoining states would meet the demand.
Production capacity may increase and that will positively affect the industry, said Ajay Srivastava, associate VP-research at Stewart Mackertich Wealth Management.
ET takes a look at companies that are likely to benefit from the move.JK PaperCMP (In Rs): 110.1 YTD Change (per cent): -22Stewart Mackertich said in a recent note that market leadership in branded copier paper, focus on value-added products, improving profitability, implementation of GST, and robust outlook for the Indian paper industry bodes well for the company.
Edelweiss, which has a buy rating on JK Paper expects the performance of the company to remain strong over the next 2-3 years due to favourable pricing environment in the global market and sharp rupee depreciation in the past few months whereas rawmaterial cost is expected to remain well under control.
Technical analysts said buying support may come in for the stock near Rs 102.Tamil Nadu Newsprint PapersCMP (In Rs): 260.05 YTD Change (per cent): -40Way 2 Wealth Brokers said the company has faced many headwinds in the year gone by given the rising prices of raw material and plant shutdown impacting volumes, with higher capital and fixed costs weighing down on profitability.
The brokerage believes that in the next two years the company will witness improvement in performance given the resumption of its production facility leading to ramp-up in volume and stability in raw material costs.NR Agarwal IndustriesCMP (In Rs): 375 YTD Change (per cent): -17.3The company, which manufactures recycled paper, gets around 40 per cent of revenues from Western India and realisation may go up from Rs 37-38 per kg to Rs 40-41 per kg, said Rabindra Nath Nayak, research analyst at Sunidhi Securities.
Prabhudas Lilladher, in a note on the company, in April said it sees significant headroom for growth in paper, going ahead, given the low per capita consumption in India as well as higher demand due to rising literacy rates, burgeoning FMCG and packaged food industry, and rise in e-commerce.