Satia industries is around 40 years old is an agro and wood-based paper pulp producing fully backward integrated company. It is engaged in the business of writing and printing paper, co-generation of power for captive consumption, solar power, trading activities in cotton & yarn and agricultural plantation & operations etc. However company derives its majority of revenues from paper and co generation business.
Satia Industries
Current Market price on the date of publishing this article -: 113 Rs
Introduction
Commencing its operations in 1984 by Dr Ajay Satia company later changed its name to Satia Industries Ltd. Satia Industries Limited (SIL) is one of India’s largest wood and agro-based paper producers, producing excellent writing and printing paper from wood and agro-based raw materials such as wood chips, veneer waste, wheat straw, and sarkanda. Headquartered in Punjab , company has three branch offices in Delhi, Chandigarh and Jaipur.
The company has a fully integrated production facility that satisfies 100% of the requirements, including four paper machines, pulping machinery, a chemical recovery plant, and a power generation plant. These facilities provide greater benefits in terms of cost efficiency and environmental compliance, resulting in higher profits. SIL also has 540 acres of eucalyptus plantations established in accordance with Karnal Technology, which consumes all treated water flow and supplements future wood raw material requirements.
Super Snow White, Snow White, Maplitho, Colored Paper, Ledger Paper, Cartridge Paper, Duplicating Paper, and Bond Paper with and without watermarks range in GSM from 42 to 200 GSM. These goods are widely used in the printing of textbooks, notebooks, directories, envelopes, diaries, calendars, computer stationery, wedding cards, copy manufacturing, annual reports, paper cups, and high-quality printing for both local and international sales. Satia Industries Ltd. also manufactures Chromo Paper.
Over the years, the company has undergone many modernization and growth initiatives to better its operations and product offerings.
SIL has a robust Pan-India distribution network of more than 70 dealers with total employee strength of 2,200+ employees.
Business Products
Paper
With a diverse product mix and excellent quality, SIL dominates the market. Super Snow-White Paper, Maplitho Paper, Colored Paper, Ledger Paper, Cartridge Paper, Bond Paper, Duplicating Paper, and Copier Paper are among the available items.
These goods are widely utilised in the local and international high-quality printing market for books, directories, envelopes, diaries, calendars, computer stationery, copier paper, annual reports, and other printed materials. Cup stock paper, which is produced by SIL as well, is used in disposable cutlery.
Surface Sized Paper
- Ultra Print Paper,
- Ultra Premium Paper,
- Photo Copier Paper (70, 75 & 80 GSM)
Non Surface Sized Paper
- Snow White Paper/Ultra White Paper
- Super Snow White Paper/Ultra Shine Paper
Other Paper Qualities
- Maplitho Paper
- Coloured Printing Paper
- Azure laid & Ledger Paper
- Cartridge Paper
- Duplicating Paper
- Bond Paper
- Water Mark Paper
- Chromo Paper
Culinary
The company has acquired a total of 6 new machines with a 1-ton capacity per day. Additionally, 2 machines with a 2-ton capacity are already in the company’s possession, bringing the total tonnage capacity to 10 tons per day. If the machines are utilized at 70%, which is consistent with industry standards, the company can produce a minimum of 2000 tons of cutlery per year at full capacity utilization. Based on prevailing market prices ranging from Rs. 200 per kg to Rs. 250 per kg, the expected revenue for this segment is estimated to be between Rs. 40 crores and Rs. 50 crores.
Pulping
Agricultural residue, wood chips, and waste paper are the three different types of raw materials that SIL has created the flexibility and ability to use to manufacture pulp. The facility’s 2,19,000 MTPA production capacity and location in Sri Muktsar Sahib, Punjab—the province’s wheat belt—meet the company’s present and future needs for wheat straw, wood chips, and veneer waste, all of which are readily available. Due to the lack of a paper mill within a 50 km radius, SIL enjoys a price edge.
Power Generation
The company invested in building a 44.00 MW community power plant using biomass as its fuel over time to attain self-sufficiency in electricity and secure a dependable and high-quality source of power supply without tripping. It is inexpensive and easy to get rice husk in the region, which is utilised as fuel. The business receives Renewable Energy Certificates since this is regarded as green energy. (REC). These certificates, which are sold on energy markets, provide the company with an extra stream of revenue.
Chemical Recovery Facility
Within the current plant, the company has two soda recovery boilers, one of which is a backup. The most harmful effluent in the paper industry, black liquor, is produced while washing brown cooked pulp, which is boiled and converted into a pulp using caustic soda. To recover 90–95% of the caustic soda used in the cooking process, this Blank Liquor is concentrated and burnt in the chemical recovery boiler. Additionally, electricity is generated using the high-pressure steam that is created throughout the process. This allows the business to transform trash into money while still meeting the required criteria for wastewater discharge.
Effluent Discharge Handling
SIL is aware of its obligations and dedication to preserving the environment, society, and rule of law. As a result, the wastewater is processed in a state-of-the-art activated sludge effluent treatment facility. The treated effluent is eventually dumped into the land of the eucalyptus plantation after meeting all of the SPCB’s mandated requirements.
With the help of Karnal Technology, 550 acres of a eucalyptus plantation manage all the treated wastewater. According to Karnal Technology, 600 eucalyptus trees on one acre consume 120m3 of treated effluent in one day. The Eucalyptus Plantation method of treating wastewater disposal has shown to be effective.
Clients
Capex
The company has already invested in the cutlery segment with a CAPEX of more than Rs. 10-15 crores for 6 machines, out of which 2 are installed and the next 4 should be operational by the first quarter of next year.
The company plans to economize on fuel by burning rice straw and has initiated the installation of a soda recovery boiler with a higher capacity of 1,000 tons solid per day, which should be operational in 1-1.5 years. The management does not have plans to invest in new machines, except for the upcoming boiler and the soda recovery boiler.
The soda recovery boiler and other modest projects might bring in between Rs. 100 and Rs. 125 crores in capex annually over the course of the following two fiscal years.
Financials
For Q3FY23
- Revenue from operations increased by 125% to Rs. 4,868 million in Q3 FY23.
- EBITDA for Q3 FY23 was Rs. 1,102 million with margins of 23%, which is near the all-time high quarterly margins of 27%.
- PAT for Q3 FY23: Rs. 648 million, a growth of 124%
For 9 month ended Q3FY23
- For 9 months FY23, revenue from operations grew by 129% to Rs. 13,631 million.
- EBITDA for 9 months FY23 was Rs. 2,725 million, a growth of 118% with margins of 20%.
- The company expects EBITDA margins to sustain at current levels if prices remain stable.
- Strong volumes, better pricing, and high operational efficiencies were the key factors for the improvement in financial results.
- PAT for 9 months FY23: grew by 105% to Rs. 1,459 million
- Current order book: over 30,000 tons
- Orders to be executed in Q4 and beyond
- The final dividend is anticipated to be issued in the following period. The company just announced a 20% interim dividend.
For the year ended March 22
- Operating revenue increased by 51.41% from Rs 5,884.40 million in FY21 to Rs 809.30 million in FY22.
- From Rs 1,361.18 MN in FY21 to Rs 1,812.45 MN in FY22, the EBITDA grew by 33.15%.
- In FY22, EBITDA margins were 20.34%, compared to 23.13% in FY21. EBITDA margins have slightly decreased, mostly as a result of rising input costs.
- In FY22, net profit was Rs 1,006.74 MN, up from Rs 495.49 in FY21.
- From 1,18,502 MT in FY21 to 1,43,716 MT in FY22, volume increased dramatically.
- Short-term borrowing was Rs. 365.45 Mn in FY22 vs Rs. 674.29 Mn in FY21, while long-term borrowing was Rs. 2,715.38 Mn versus Rs. 2,279.06 Mn in FY21.
Management’s comments
The PM4 machine, which was intended to operate at a speed of 1,000–1,100 metres per minute, was first put into operation by the company in February. The machine is now operating at 1,025 metres per minute, although the average speed reached is currently 900 metres per minute. The company might anticipate a 9–10% rise in output while maintaining the same grammage. Over the following two fiscal years, the management intends to update the PM3 machine and raise its pace from 660 metres per minute to 725 metres per minute. While the PM3 upgrade won’t start producing returns until the following fiscal year, the business anticipates PM4 to go into action the following year.
The company has a 110 crore rupees repayment schedule for the upcoming year, but the management intends to pay off an extra 20 to 30 crore rupees debt. As a result, it is anticipated that the total payments for the next year would be between Rs. 130 and Rs. 140 crores. The company expects to be debt-free by the end of Q4 FY 25.
EBITA Margins
The company aspires to maintain an EBITDA of 20% over the long term, and if the cost of raw materials consumed, which is presently at 48-49% owing to rising wheat straw prices, can be managed to 42-43%, the EBITDA can be maintained at the level of the most recent quarter, which would be in the region of 20-23%. And management is expecting similar margins to be maintained over next 2-3 years.
The company aims to switch out the wheat straw for imported wood pulp and waste paper, which will cost an additional Rs. 5,000–Rs. 10,000. The margins ought to improve by 3% to 4% as a result of this transition.
Growth Aspect
With respect to the growth objective, the company hopes to maintain a 7-8% rise in production volume thanks to the anticipated improvement in PM4’s speed in the upcoming fiscal year and the modernization of PM3 in the subsequent fiscal year.
Sectorial outlook
The demand for paper products in the upstream market, such as copier paper, cup stock paper board, base paper for making straws & paper bags, and other single use paper (SUP) products, is anticipated to drive the paper & paper products market in India in the upcoming years. The Indian paper industry is also anticipated to experience increased demand from the manufacturing sector.
According to the Ministry of Commerce & Industry of the Government of India, India currently consumes about 22.05 MT of paper per year and is projected to consume 23.5 MT by 2025. Carton and container boards (corrugated boards) account for the largest share of this consumption at 55%, followed by writing and printing paper at 25%, specialty paper at 10%, and newsprint at 10%.
Over the next five years, the paper sector in India is predicted to increase at an average annual rate of 8 to 9% (Source: Money Control). This growth would be driven mostly by the packaging grade. The prohibition on single-use plastics is also anticipated to increase demand for paper-based substitutes.
Conclusion
One of India’s leading wood and agro-based paper makers is Satia Industries, a 40-year-old company involved in writing and printing paper, co-generation of power for captive use, solar power, trading activities in cotton & yarn, and agricultural planting & operations. The company is about to reap the rewards of the numerous capex expansions it has undertaken in recent years. Additionally, the firm is optimistic about margin improvement in the near future as a result of declining raw material costs and specific cost-cutting measures made by the management. The management estimates that Satia Industries’ entry into the culinary industry would boost revenue sales by 40 to 50 crores over the next few years. The management expects operational revenue to expand by more than 100% in FY23 and is focused on attaining a 50% year-over-year increase in paper output. Additionally, the company has put out its goal to be totally debt-free by FY25 and is dedicated to expanding its EBITDA margins in the current year by 100 basis points YoY. Satia Industries is a company worth exploring for long run because of its several business areas and long-term growth possibilities.
