Paper manufacturing company stocks are in big demand since last couple of days and here’s why

• Shares of most paper manufacturing companies are picking up amid a volatile market as COVID-19 impact recedes and it has turned out good for the sector.
• Since schools, colleges, offices and courts have opened up, full-fledged demand for paper got a boost.
• Analysts expect strong earnings growth for the sector over the next couple of quarters.

Paper manufacturing companies are witnessing a good pickup in demand as the impact of COVID-19 recedes and schools, colleges, courts and offices opening in full capacity.

Besides, most of the paper manufacturers have reportedly taken a price hike due to low collection of waste paper, a key raw material for manufacturing recycled paper after the European Union (EU) banned exports of waste paper in October 2021. This was because the sudden digitalisation led by the pandemic had dipped the demand for paper.

There are two types of paper -- recycled and mills’ paper. Recycled papers are made from waste paper, while mills’ paper are made from wood pulp. Generally, prices of mills’ paper trade are at a premium to recycled paper.

Analysts at Centrum Institutional Research said that there has never been a situation in the last 40 years when recycled paper prices have been more than mills' paper.

Further, analysts expect strong earnings growth for the sector over the next couple of quarters led by favourable price hikes and uptick in demand.

“With (the) impact of pandemic receding, schools, colleges, offices and courts have opened up full-fledged. With [an] uptick in demand, distributors have started stocking inventory. Also, inflationary trend has led to higher than normal demand at distributor level. Thus, the troika of demand normalisation, higher level of demand at channels and favourable pricing has created a happy scenario for [the] likes of JK, West Coast and Andhra Paper. Windfall gains can be expected for these companies over [the] next couple of quarters as per our channel checks,” said analysts at Centrum Institutional Research.
“Paper stocks have seen good accumulation this week as almost all players have raised prices and traditionally the fourth quarter is always the best quarter more so this time around in view of the opening up theme gaining momentum," reportedly said S Ranganathan, head of research at LKP Securities.

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