>ORIENT PAPER & INDUSTRIES LIMITED

Orient Paper & Industries Ltd (OPIL) is a 76-year old Bhubaneswar (Odisha) based company established in 1936. It is a multi-product and multi-locational company belonging to the C. K. Birla Group. The company’s operations can be broadly categorized under 3 Divisions viz: Cement, Paper and Electrical Divisions. The company’s paper unit is located at Amlai, Madhya Pradesh, Cement units at Devapur in Andhra Pradesh and Jalgaon in Maharashtra Mr. Chandra Kant Birla is the chairman while Mr. Manohar Lal Pachisia is the managing director of the company. In cement, the company has earned a solid reputation. The company’s products are sold under the brand name ‘Orient’. i.e. Orient Cement, Orient Fan and Orient Paper. In appliances, Orient, has become a household name. A pilot pulp and paper plant of the company was commissioned in February 1978. The pulp mill was redesigned for production of bleached pulp from rags, hemp, cotton, stalk, etc., as also from bamboo or other forest and/or agricultural residues. In September 1982, a cement plant was commissioned at Devapur (AP) with an annual capacity of 9 lakh tonnes. By end 1990, the second unit of the cement factory was commissioned.


In 1991, the company undertook to supply technical know-how for the manufacture of paper in and outside India. The first stage of oxygen bleaching was commissioned for improved brighteners of paper and the second stage of chlorine di-oxide bleaching were commissioned in 1992 and 1993 respectively.


In 1996, the company's 6 MW Back Pressure Turbine was commissioned at Amlai to reduce power cost and reduce dependence on outside supply. The new tissue plant at Amlai was also commissioned in 1997. In 2005, OPIL introduced high speed table fans in the Appliances Division while the Amlai paper mill of the company had installed and commissioned a fly ash brick making plant with a capacity of 15,000 bricks per day in March 2006. During 2006-07, the Cement Division of the company received the Phase-II of TPM certification from ISO-9001 and in the same year it developed nine clones of eucalyptus suitable for semiarid regions under the Paper Division. In October 2007, it diversified into manufacturing and marketing of CFL products at an estimated investment of Rs.40 crore.


■ Growth Plans: OPIL is planning to set up a greenfield cement plant in the Gulbarga district of Karnataka with a capacity of 3 million TPA (MMTPA) at an estimated investment of Rs.1,720 crore. Land acquisition for the project is at an advanced stage. Further, the company is setting up a 55 MW power plant at its Paper Division at Amlai to fully cater to the requirements of both the paper and caustic chlorine plants at an investment of Rs.174 crore. It is also planning to increase the production capacity of fans to 90 lakh units per year. Diversification: The company has plans to further diversify the range of its electrical appliances by addition of household appliances such as mixers, geysers, coolers, room heaters etc. in addition to fans and lighting products.


■ Carbon Credits: Its claim for carbon credits for the Cement Division for 2008-09 for issuance of 1,28,895 CERs is in the final stage of UNFCC approval, which is expected to be accounted for in the year the amounts are realized.


■ Performance: For FY11, company posted a total revenue of Rs.1989.36 crore with net profit of Rs.143.10 crore netting a basic EPS of Rs.7.42 and diluted EPS of Rs.7.41 for the year.
Latest Results: The company notched a total income of Rs.578.43 crore with a net profit of Rs.42.40 crore posting a basic EPS of Rs.2.20 and diluted EPS of Rs.2.16 for Q3FY12.
Financials: The company has an equity base of Rs.19.29 crore with a share book value of Rs.45.41 (FV: Re.1). The company has a debt:equity ratio of 0.64 with RoCE of 18.45% and RoNW of 17.24%.


■ Share Profile: The company’s share with a face value of Re.1 is listed and traded on the BSE under the ‘B’ group. Its share price touched a 52-week high/low of Rs.66/Rs.44. At its current market price of Rs.61, it has a market capitalization of Rs.1249.80 crore.


■ Dividends: The company has been paying dividends as shown below: FY12 - 100% (Interim Dividend), FY11 - 150%, FY10 - 150%, FY09 - 150%, FY08 - 120%, FY07 -100%.
Shareholding Pattern: The promoter holding in the company is 33.61% while the balance 66.39% is held by non-corporate promoters, institutions, mutual funds and the Indian public. Mutual Funds like Franklin India, HSBC, L&T, Templeton India, BNP Paribas, ICICI Pru, Reliance, UTI, Birla Sun Life, Canara Robeco and Religare have added the company’s shares to their various schemes.


■ Prospects: With the Indian economy is poised to grow at a rate of above 8%, cement consumption is bound to return to a growth rate of a minimum 10% per year, which should result in restoring capacity utilization to a healthy level.


While the demand for cement in Andhra Pradesh may take somewhat longer to recover, we feel that this is a passing phase and normal demand growth should return in due course. However, OPIL remains one of the lowest cost producers of cement in India and is, therefore, well-positioned to face any short-term downturn in cement realizations. The demand for cement is expected to increase by around 10% per year during the next few years. As the company’s capacity utilization increases, full benefit of the captive power plant will also become available. The proposal is to set up a cement plant of 3 MMTPA along with a 50MW power plant at Gulbarga, Karnataka at an estimated to cost Rs.1720 crore is slated to be completed in around 33 months after completion of land acquisition. Further, the off take of electrical goods and paper is also likely to increase going ahead. Hence, the company is confident and optimistic about future prospects of its overall business.


Conclusion: OPIL is an existing, profit making and dividend paying company belonging to the C K Birla Group. In view of its highly encouraging performance and expansion plans, the company is expected to post a robust performance in the days to come. At its current market price of Rs.61, the OPIL share price is discounted over 9 times its 9 months earnings of Rs.6.52. Considering its low P/E multiple, high payouts and robust performance, the OPIL share may be added to one’s portfolio for steady gains.


RISH TRADER