It is not difficult to understand that why even an ardent value investor like Radhakishan Damani is willing to pay 80 times earnings for Snowman Logistics. The reason is sheer potential that he sees in logistics sector in light of the current E-commerce boom (Flikpkart’s “billion” sale!!!). Now being a superinvestor, our objective to search for the next sunrise sector. And investments of superinvestors like Damani point us to a particular direction. Going by Damani’s direction, we at Superinvestors of India believe that Paper and Pulp sector in India is going to be one such sunrise sector.
Currently, the sector’s complexion is just like that of logistics’ one year ago. There are not lot of companies in the sector with deep pockets but have huge potential to be great investments once they come in the purview of insitiutional investors.
This is the reason that US’ International Paper bought 75% stake in Andhra Pradesh Paper in 2010 for $250M and they are doubling down on this investment. We have already drilled down on more such opportunities and one of them we really like is Ruchira Papers.
Ruchira is a typical free cash flow generator trading half of its book value and diligently reducing debt. Juicy dividend yield of 5% provides a good cushion against any downside. TTM P/E is 4. A business which is generating annual net profits of Rs.15 crore is being valued at Rs.50 crores. Not that’s what we call a Ben Graham kid waiting for adoption! Not surprisingly, promoters are hiking their stake for last 12 months. They have increased their holding by 6% through open market purchases. We can go on and on to convince you about why this is a great investment but we don’t need to because we want you to do your own research and decide. It’s your money. We can only direct you to the right direction.
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