Flash Equity Research Report: JK Paper Stock Analysis

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HIGHLIGHTs of JK Paper Stock Analysis:


  • Import Duty on Paper imported from China will be increased- Sources (Trigger)
  • Total import from china was around 1778cr in FY17 while registered already 1215cr in 1HFY20.
  • Total Paper Imported from April-Sep 2019 was around 5295cin 1HFY20 up 30% YoY.
  • Existing import duty is 10% while proposed by Indian Paper Manufacturers association to raise it to 25%
  • The ratio of Import/Export of Paper product in FY19 was 1.9 times.
  • Capacity utilization in FY19 was 90.5%
  • Per Capita paper consumption in India is 13 Kg while the global average is 57kg.

JK Paper

  • History of more than 75 years under the Trusted JK group with a history of 125 years.
  • Board approved buyback at Rs. 130 per share on 18 April 2020.
  • Current capacity of 5.91 lac MT p.a. (Uncoated paper 67%,Coated Paper 9%,Packaging 21% & Pulp 3%) –
  • JK paper is present in segments serving 22% of Total Market.
  • Market leader in Copier paper -23% market share(Forms parts of Uncoated Paper used as printing paper)

Coated paper (Amongst leading player)-12% market share (Wedding cards, Magazines, and Brochures)

Packaging Product (Amongst Leading Player)-10% market share

  • In FY19 company registered the highest ever production of 4.95 lac MT and Highest ever sales of 5.23 lac MT.
  • It has 3 plants in Odisha (JKPM), Gujurat (CPM) and acquired in Aug 2018 facility in Telangana (Sirpur paper mills)
  • JKPM Unit is the lowest cost paper manufacturing facility in India.


  • Although sales grew by around 26% in 4 years from FY16 to FY20 profit grew by 8.5times
  • From the above point, it is evident that operationally the company has performed a lot better. Hence, we have seen operating profit rising from just 16% in FY16 to 28% in FY20 mostly due to raw material procurement decisions.
  • Raw material procurement from Local area to manufacturing facilities rose from 41% in 2015-16 to 96% in 2018-19 (local area within 200km radius of its manufacturing facility)
  • DE ratio in 4 years reduced from 1.71 as of 31 March 2016 to just 0.65 as of 31 March 2020.
  • Interest coverage ratio currently at 6.4 times.
  • Fixed assets got increased by 390cr during the same time that means the company generated good internal cash flows.
  • Company is trading at a PE of just 4, PB of just 0.84 and dividend yield of 4.09%
  • ROCE and ROE is good stands at 22% and 21.3%


  • Digitalization, Work from Home culture may reduce paper dependence and its packaging segment which can cause a major turnaround is only 21% of its total capacity
  • For the last 2 years, borrowing has been increasing mainly due to acquisition and CAPEX. Hence, Free Cash flow for the firm has been negative.

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Arman Nahar

Arman Nahar

C.A. who is a USA CFA L3 candidate | Cleared L1 & L2 | Doing independent equity research since 2016 | Screens stocks for investment | Makes in-depth valuation models | Crafts portfolios.
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