₹90 Penny Stock Surges 20% After Strong Q2 Results Spark Investor Excitement

If you follow the paper manufacturing or packaging industry, you’ve likely heard of South India Paper Mills Limited (SIPM). This penny stock delivered an impressive rally on Friday, hitting the 20% upper circuit and jumping to ₹94.26. Let’s break down what triggered this sharp spike.

Outstanding Turnaround in Q2 FY26

South India Paper Mills reported its Q2 FY26 results, and the company performed far better than expected.

Financial Metric | Q2 FY25 | Q1 FY26 | Q2 FY26 | Change
Revenue (₹ crore) | 101.77 | 106.89 | 111.57 | +9.63% YoY
Net Profit (₹ crore) | -1.21 | 0.98 | 2.81 | +186.73% QoQ
EPS (₹) | 0.52 | — | 1.50 | +188.46% YoY

The company has swung from losses last year to a net profit of ₹2.81 crore, marking a strong financial turnaround.

Share Performance and Market Cap

Friday saw heavy action in the stock.

Previous Closing Price: ₹78.55
Upper Circuit: ₹94.26
Current Price (as of 26 October): ₹90.98
Market Cap: ₹170.59 crore

Although some profit-booking occurred after hitting the upper circuit, investor sentiment remains positive.

Business Model and Strengths

Founded in 1959 and headquartered in Nanjangud, Karnataka, SIPM operates in two major segments:

Paper & Paperboard Manufacturing
Packaging (cartons, boxes, corrugated boards)

Production capacity:

Paper: 1,15,500 MT/year
Packaging: 36,000 MT/year

A major strength of the company is its focus on recycled paper products. By recycling imported and domestic scrap paper, SIPM produces kraft liners, test liners, and corrugated boards. Around 40–45% of its paper output is used internally in its packaging unit, giving the company better control over raw material costs.

Financial Ratios and Growth Indicators

Revenue CAGR (5 years): 11.18%
ROCE: 1.40%
ROE: -5.19%
Debt-to-Equity Ratio: 0.80x

Debt remains manageable, but lower ROE and ROCE show the company is still working on improving operational efficiency.

What It Means for Investors

Small-cap manufacturing companies like SIPM are often influenced by cyclical demand and fluctuating input costs. However, increasing demand for recycled paper and the rising trend of sustainable packaging could be beneficial for the company in the long run.