Satia Industries Ltd. – an interesting paper play

The Union Cabinet has recently given a green signal to the New Education Policy (NEP), by replacing a 34 year old legacy policy system and proposing sweeping reforms in schools and higher education. Parallely, an interim report has been reportedly prepared by the HRD Ministry on the New Curriculum Framework, for school education, which is also being revised after 15 long years.

Both these measures would definitely provide increased impetus to the paper industry, specifically the Writing & Printing paper segment, on account of the need to print and reprint text books whenever these get implemented. Various State text book boards expect a significant increase in requirement of paper for new syllabus text book printing due to NEP 2020. An additional demand, of anywhere between 30-50%, over and above the old requirement is estimated in coming years.

One listed company specifically deriving a large part of revenues from this segment is Satia Industries Ltd. (SIL). While my attached note details on the various aspects of SIL, hereunder is a quick summary of what i think makes SIL tick:

  • SIL is an agro-based paper manufacturer; fully Integrated with in-house chemical recovery facility, power generation, effluent discharge facility etc.
  • With existing capacities of 103k MTPA being fully utilised (actual utilisation @ 126%), ongoing capex (doubling capacity) will take care of future volume visibility.
  • Increased capacity to be absorbed thru’
    • Increased exports
    • Market share gains with the State Boards
    • New product line introduction
  • Change in product mix would stoke margins
    • Upon commencement of the new capacity, SIL estimates a reasonable uptick in its operating margins driven by: change in product mix in favour of (high realisations) Grade 1 copier paper & higher operational leverage
  • NEP to provide a significant boost to the demand for text book paper

Attached hereunder is my detailed note for your perusal. I would be happy to hear any view / feedback that you may want to share.



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