Dear Sir,

Hope you are doing good and having a good festive season.

Just a few days back we shared our new stock recommendation with our members and would like to share with you details on the same.

Besides investing in growth companies at reasonable valuations, we also look for good companies in cyclical businesses at their lows so that once the cycle turns around, we can make 2-4x or sometimes even more on such investments.

Such high returns do materialize in the deeply cyclical companies as during downturns the stocks get beaten badly to extremely low valuations and when the cycle turns around, the investor gets the benefit of both earnings and valuations expansion; however, it is also important to not get trapped at the high-end of the business cycle.

So, the stock that we shared yesterday operates in a paper business.

If you are interested in investing in such stocks, you may find our latest stock report and the thesis behind the same interesting.


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Latest Stock Recommendation

The paper industry has been going through a bit of a downturn because of 8-10% drop in realizations in FY 20 and now drop in volumes in H1 FY 21 on account of covid-19 related lockdown.

As a result, some of the good companies from the Paper space are available at less than 0.4-0.3 times their highs recorded in 2018. In terms of valuations, they are available at less than 0.5 times book value and only 4-5 times last 7 years avg. PAT or Cash flows from operations.

The stock we have recommended is available at such valuations despite very low debt, continuous expansion and other operational improvements.

We believe as the vaccine becomes available and the educational establishments and commercial offices start opening up, the performance and the valuations of the company will improve significantly.

More details on the attributes of the company are as follows:

  1. Market Cap < 500 crore
  2. FY 10-FY 19 – 10% CAGR in sales; 16% CAGR in operating profits
  3. Avg. Return on Equity – 17% for the last 5 years
  4. Debt – Consistently reducing since FY 10 with debt equity ration of less than 0.3
  5. Valuations – Available at 4-5 times 7 years avg. PAT and Cash flows from operations. Less than 0.5 times book value
  6. Promoter stake – Higher than 50% with regular addition through open market purchases since FY 12
  7. Growth Plans – Modernizing its existing units with a proposed CAPEX of 70 crore spread over FY 20-FY 21. The objective is to produce higher quality papers, improve realizations and generate better output

As mentioned above, despite the characteristics of a good company, the stock is available at 4-5 times earnings and cash flows and significantly below book value.

With such stocks, one can’t rule out a possibility of 100-200% gains or even more with the turnaround in the cycle.


Wish you good health and wealth.


Best Regards,

Ekansh Mittal
Research Analyst
Email: [email protected]
Ph: +91-727-5050062, Mob: +91-9818866676


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Name: Ekansh Mittal     Email Id: [email protected]    Ph: +91 727 5050062

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Analyst Certification: The Analyst certify (ies) that the views expressed herein accurately reflect his (their) personal view(s) about the subject security (ies) and issuer(s) and that no part of his (their) compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report.

Disclaimer: (here in referred to as Katalyst Wealth) is the domain owned by Ekansh Mittal. Mr. Ekansh Mittal is the sole proprietor of Mittal Consulting and offers independent equity research services to investors on subscription basis. SEBI (Research Analyst) Regulations 2014, Registration No. INH100001690.

The views expressed are based solely on information available publicly and believed to be true. Investors are advised to independently evaluate the market conditions/risks involved before making any investment decision.

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This report is for the personal information of the authorized recipient and does not construe to be any investment, legal or taxation advice to you. Ekansh Mittal/Mittal Consulting/Katalyst Wealth is not soliciting any action based upon it. This report is not for public distribution and has been furnished to you solely for your information and should not be reproduced or redistributed to any other person in any form. This document is provided for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. Ekansh Mittal or any of its affiliates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Neither Ekansh Mittal, nor its employees, agents nor representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information. Ekansh Mittal/Mittal Consulting or any of its affiliates or employees do not provide, at any time, any express or implied warranty of any kind, regarding any matter pertaining to this report, including without limitation the implied warranties of merchantability, fitness for a particular purpose, and non-infringement.

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