West Coast Paper Mills downgraded to 'Sell' by MarketsMOJO due to negative results and bearish trend

West Coast Paper Mills, a smallcap company in the paper and paper products industry, has recently been downgraded to a 'Sell' by MarketsMOJO on March 13, 2024. This decision was based on the company's negative results in December 2023, with a decrease of 45% in its PAT(Q) at Rs 135.93 crore and a lowest operating profit to net sales(Q) at 20.82%. Additionally, its net sales(Q) also saw a decline, reaching a low of Rs 1,045.13 crore.
Technically, the stock is currently in a mildly bearish range, with a deteriorating trend since March 13, 2024, resulting in a -4.39% return. The Bollinger Band, a key technical factor, has also been bearish since the same date.

In the past year, West Coast Paper Mills has underperformed the market, generating a return of only 17.94% compared to the market's 35.11% (BSE 500). However, the company has shown high management efficiency with a ROE of 21.66% and a strong ability to service debt with a low debt to EBITDA ratio of 0.57 times. Its long-term growth is also healthy, with an annual growth rate of 19.37% in net sales and 44.30% in operating profit.

Attractive valuation is another factor to consider, with a ROE of 33.4 and a price to book value of 1.4. The stock is currently trading at a fair value compared to its historical valuations. In the past year, while the stock has generated a return of 17.94%, its profits have only risen by 9.3%, resulting in a PEG ratio of 0.5.

West Coast Paper Mills is majority owned by its promoters and has a market cap of Rs 4,188 crore, making it the second largest company in the sector (behind JK Paper) and accounting for 18.03% of the entire sector. Its annual sales of Rs 4,735.07 crore also make up 16.32% of the industry. With these factors in mind, MarketsMOJO has downgraded its stock call on West Coast Paper Mills to 'Sell'.