Stock Pick From Paper & Construction Sector

Seshasayee Paper and Boards is engaged in the manufacture of printing and writing papers. The company is also engaged in the manufacture of paper and paper boards at its unit in Erode and Tirunelveli. On the financial front, Seshasayee Paper & Boards’ revenue increased 15.7 per cent to Rs 267 crore in Q2FY17 as compared to same period in previous financial year. The company’s EBITDA almost doubled to Rs 49.83 crore in Q2FY17 on yearly basis. Its net profit has soared four-fold to Rs 30.7 crore in Q2FY17 as compared to same period in period in previous fiscal year. According to company’s management, Seshasayee Paper and Boards’ cost of production has declined in the last quarter and it expects to maintain the same trend for the next two quarters. The paper prices have not increased in the last few months. The company’s topline is higher due to higher production and not because of higher prices. The rising demand of writing and printing paper, coupled with a fall in raw material prices, helped boost margins of Indian paper mills.

Hindustan Construction Company

CMP: Rs 34.55

On the financial front, Hindustan Construction Company’s (HCC) revenue declined by 2.23 per cent to Rs 1,894 crore in H1FY17 as compared to the same period in previous financial year. The company’s EBITDA margin expanded by 56 basis points to 19.45 per cent in H1FY17 on a yearly basis. However, its net profit stood at Rs 37.18 crore in H1FY17 as against Rs 51.46 crore in H1FY16. HCC has bagged orders of Rs 4,818 crore in H1FY17 till date. The company has order backlog of Rs 21,309 crore as on H1FY17 excluding L1 contracts of Rs 3,014 crore. The Overseeing Committee of the Reserve Bank of India (RBI) has given its approval for the Scheme for Sustainable Structuring of Stressed Assets (S4A) for HCC. HCC has a total funded debt of Rs 5,107 crore, which has been considered under the S4A scheme. As per the company, the lenders will subscribe to 24.44 per cent fresh equity (Rs 1008 crore, assuming a rate of Rs 40 per share) which will bring down the promoters’ holding from 36.07 per cent to 27.44 per cent.