JK Paper hits record high; stock rallies 10% in four days on stable outlook

In the past one year, the stock price of the paper maker has more-than-doubled or zoomed 129 per cent, as against 10 per cent gain on the S&P BSE Sensex.

Shares of JK Paper hit a record high of Rs 452.40, as they rallied nearly 3 per cent on the BSE in Wednesday’s intra-day trade in an otherwise subdued market. In the past four trading days, the stock price of the paper maker has rallied 10 per cent. In comparison, the S&P BSE Sensex remained flat at 61,700 at 09:56 AM.

JK Paper (JKPL) is the market leader in Branded Copier Paper in India and amongst the top producers of Coated Paper and Packaging Boards in the country. The company is consistently following a policy of focusing on value added products like Copier, Bond, Security, Coated Papers, Virgin Fibre Packaging Boards, High-end Maplitho, Food Grade Papers and Boards.

On November 21, 2022, the company announced that it signed agreements to acquire 85 per cent stake in Horizon Packs Pvt Ltd (HPPL) and Securipax Packaging Pvt Ltd (SPPL) for a total of Rs 578 crore. The transaction is expected to be completed in December 2022.

HPPL and SPPL both manufacture corrugated packaging and have seven manufacturing plants across India. The acquisition will bolster the product portfolio of JKPL, as they entered corrugated packaging business. Acquisition will also facilitate expansion of the corrugated packaging business of JKPL Packaging Products Ltd (wholly owned subsidiary of JKPL) through ready access to the market and customers of HPPL and SPPL.

The acquisition will be funded through internal accrual, keeping the capital structure and debt protection metrics strong. The company has strong liquidity with cash balance of Rs 1,100 crore as on September 30, 2022 and is expected to be remain healthy post acquisition, according to rating agency Crisil.

The company’s EBITDA margin should sustain at more than 20 per cent over the medium term, driven by underlying process efficiency and sourcing raw material domestically, thus reducing inputs cost per tonne of production.

Also, JKPL made efforts to ensure enhanced raw material security of hardwood (key input) through increased sourcing from nearby catchment areas as well as improved yield by developing short-rotation clones. Procurement of wood resource within 200 kilometre radius improved to 77 per cent in fiscal 2022, up from 49 per cent in fiscal 2017, the rating agency said in rationale. The company will continue to benefit from healthy profitability and debt protection metrics, it said.

Meanwhile, in past six months, JKPL has outperformed the market by surging 53 per cent, as compared to 18 per cent rise in the S&P BSE Sensex. Further, in past one year, the stock price of the company has more-than-doubled or zoomed 129 per cent, as against 10 per cent gain in the benchmark index.