Fundamental Analysis of JK Paper

About JK Paper Ltd:

JK Paper Ltd is one of the leading Paper and Paper Products manufacturing company in India. It is a part of J.K Organization and comes under the Harsh Pati Singhania (HS) Group. It has two large integrated paper manufacturing units in India. The first unit JK Paper Mills was commissioned in 1962 in Rayagada Odisha. JK Paper Ltd. took over Central Pulp Mills of Songadh Gujarat in 1992-1993. Central Pulp Mills, an Integrated Paper and Pulp established in 1966. JK Paper Ltd has recently taken over The Sirpur Paper Mills, an ailing paper mill, located at KagazhNagar of Telangana district by acquiring 76.37% of stake. Sirpur Paper Mills was incorporated in 1938 with a capacity of 1,38,000 tonnes per annum capacity. The combined capacity of JKPM and CPM is around 4,55,000 TPA. The Sirpur Paper Mills will add more capacity to JK Paper when it gets functional after renovation. With the upgradation plans, JK Paper can reach more than 7,00,000 TPA production within the next 2 yrs.

Product Portfolio of JK Paper Ltd

JK Paper Ltd is one of the leading players in the Indian Paper Industry. It has a large distribution network of 188 wholesalers, 10 depots, 4 regional marketing offices, and more than 4000 dealers through which it sells its products.

• Office papers- JK Cedar , JK Copier, JK Easy Copier, JK Sparkle ,JK Copier Plus and JK Excel Bond. New brands ‘JK CMax’ and JK Max.
• Printing & Writing Papers- JK Cote , JK Ledger, JK SHB, JK Evervite, JK Finesse ,JK Elektra, JK Lumina, JK Ultraprint, JK Esay Draw
• Packaging boards- JK TuffCote, JK Ultima ,JK TuffPac , JK IV Board
• Speciality Papers- MICR Cheque paper, Parchment , Cedar digital

JK Paper Ltd is a leading exporter of branded copier paper in India which exports its copier papers to 35 countries. It is also in top two players in coated Paper and High-End Packaging Boards.

Segment wise market share of JK Paper Ltd.

• JK paper ltd enjoys a 28% market share of the paper Industry in India.
• It is eyeing for 37% market share in Branded Copier paper segment. Currently, in this segment, they have a 24% market share.
• In the coated paper they are the second largest manufacturer of India with 12% market share.
• In the packaging paper segment they are market leader with 11% market share.

Paper Industry in India

Paper Industry in India is a growing Industry. The digitalization hasn’t affected its growth at all. The demand for paper is currently about 15 million tonnes. The overall paper consumption is estimated to reach 24 million tonnes in 2024-25. This industry consumes about 3% of the wood from Indian forests. Rest it relies on an agroforestry initiative for pulp production. Around 1,25,000 Hectares of land in India is under pulpwood plantations. Paper Industry is a very capital intensive technology. Indian Paper Industry has invested over $ 5 Bn in the capacity increase, technology up-gradation, and acquisitions, etc.

Anti-dumping duty on Uncoated copier paper

It was observed in the last 2 years that uncoated copier papers from Indonesia, Thailand, and Singapore were imported in India at very low prices than which it was sold globally. On the demand of the domestic Paper Industry, Government fixed an Anti-dumping duty on the uncoated copier papers recently. The recommended import price of this paper is decided at $855 per MT. If the import is done below this price, custom will collect the difference as an anti-dumping duty.

Paper Prices Trend in India

In the last few months, Pulp prices came down by almost $120 per MT which also affect paper prices. Paper prices were down by $100 per MT in the Global Market. In India as per the ASEAN policy, the duty on paper is Zero. Therefore the prices are benchmarked with the landing prices of the paper. JK Paper used 71% of its Pulp from its own Plantations produced in the vicinity of the Paper Mills and imports very small amount of Paper-Pulp. This gives the company a good pricing power over its competitors.

Apart from pulp prices, the fluctuations of the dollar also affect the pricing power of India. When China decided to ban the import of mixed waste, they started buying shooting pulp prices. On the other hand, globally mixed waste prices decreased it helped Indian Paper Industries which used cheap mixed waste for production. This helped the industry in the realization of profits.

J K Paper Ltd share price details

• Closing Price on NSE on 11th April 2019 is 153.30
• 52 Week Low/High of JK Paper Ltd share price is 97.30/194.20
• Face Value is Rs. 10
• Book Value of JK Paper Ltd share is 92.49
• Company P/E is 6.86 vs Industry P/E 11.90
• EPS-TTM 22.36
• Returns: 1 yr (6.7%), 3 yrs (225.58%) and 5 yrs (363.99%)

Shareholding pattern

Category	Percentage
Promoters	48.42
General Public	25.85
Others	16.49
Foreign Institutions	6.97
NBFCs and Mutual Funds	1.96
Financial Institutions	0.58
Central Government	0.01

Financials of JK Paper Ltd.

All Figures in Rs. Crore	Dec 2018	% Change (Qtrly)	% Change (yearly)
Sales	869.49	10.76	9.95
Operating Profit	247.16	20.91	60.92
Other Income	14.45	38.68	142.86
EBITDA	262.06	21.77	63.97
Net Profit	120.26	9.76	72.27

Views of Stocksbaazigar on the JK Paper Ltd. stock

JK Paper has given tremendous returns to Investors in last 5 yrs thanks to the growing demand of Paper in India. The globally decreased Pulp Prices may not reach the highs at which they were in the next 3-5 years. So clearly, the Indian Paper Industry will show good performance in the upcoming quarters too. The major advantage of JK Paper is it doesn’t depend much on the import of raw materials. They are integrated Paper Pulp production and Paper Manufacturer. It helps them raise the prices of different paper segments by 1,2,3% thanks to the margin they enjoy.

JK Paper Ltd is increasing its capacity and utilizing up to 103% of its capacity. They have a target to increase it up to 110% soon. The effect of GST reduced demand for FMCG products in 2017 which affected sales of packaging boards of JK Paper. But now that is history. The Sales of Packaging boards will increase in subsequent quarters. The ban of Plastics in India is helping sales of Craft Papers. Craft Papers can be made using Waste Mix and it doesn’t need bleaching by Caustic Soda which reduces the production cost too. The best time to buy Paper stocks is in October as the demand for Paper is good after Diwali till March. In case if you are a long term Investor you should buy JK Paper Ltd. which is reducing its debt efficiently at the same time increasing its capacity for gaining more market share.

Today stock closed on NSE at 153.30. The 1-year targets in this stock are 190, 203 and 215. You can buy the shares of JK Paper Ltd in dips and hold them for the given targets with an SL at 138. If you are long term Investors you will definitely get rewarded handsomely.

Disclaimer:

Please note Stocksbaazigar Mr Deepak Doddamani is not a SEBI Registered Advisor. He is NSE’s Certified Investment Analysis Professional and NSE’s Certified Marketing Professional Level – 4. Please consult your Financial Advisor before taking any Investment decisions. This post is an Educational post and Stocksbaazigar is not responsible for your Gains/Losses. Thank You.

JK Paper Ltd complete analysis by Stocksbaazigar