CMP Rs 45 (FV 10) Analyst : Janak Shah (M.B.A. Finance)
Market Cap Rs 669 crs Date: 23rd Jan 2016
Target : Rs 60 Time frame : 1 year target
About the Company:
One of the consistent performers of the paper companies, with good Net Profit margin and giving a very good dividend yield, J K Paper, a part of the Hari Singhania J K Group which just completed 5 decades of existence. The J K Group consists of J K lakshmi cement, J K tyres, Fenner India, J K Seeds, J K Agri etc.
J K Paper has a wide range of paper products. It operates 2 plants in India. J K paper mill in has a total capacity of 290000 tonnes per year and also operating at good operational levels. Now the expansion of Rs 1600 crs has taken the capacity to 455000 tonnes per year and would be among the biggest capacities. The company has 200 distributors and 3500 dealers. The prices of paper are showing revival and the times are better. Asia accounts for 40 % of global consumption. To support and secure raw material, the company has covered 90000 hectares by farm forestry programme. The expansion is now fully complete and from this quarter that is 2015-16 Q 3, the impact of good results will be seen.
For the year ended March 2012, the company reported sales of 1328 crores and reported a net profit of 49.32 crores.The equity was 136.32 crs. The EPS reported was 3.6 per share and the book value stood at Rs 62 per share. The company declared dividend of Rs 1.5 per share. The year ended that is March 2013 the company has seen sales of 1459 crs and Net profit of Rs 37 crs. For the year March 2014, the sales of the company has risen to Rs 1737 crores and the Net loss for the year came at Rs 77 crs.. The company has already announced 3 price increases. For Fy 15 , the sales was at Rs 2158 crores and Net loss was Rs 12 crores. We expect Fy 15-16 profit in the range of 80-90 crores.
Promoters hold about 57% while the , dii’s hold about 10% while public hold another 36%.
Comparisions to Peers:
The company can be compared to TNPL Ltd, Andhra Paper, BILT Ltd and Westcoast paper. There are smaller companies as well.
The company has implemented the expansion which will has taken the plant to 455000 tonnes by this year. The company has introduced a new technology in paper called COLORLOK technology. The paper consumption is on the rise. The paper consumption in India is on the rise. Per capita paper consumption is low and cycle has bottomed out so prospects are great for the medium to long term for paper sector. Also Andhra Paper deal has raised eyebrows where 2.5 lac was takenover by International paper at 2800 crs valuation.
The share which is quoting at Rs 45 has the potential to cross the 50 mark in the medium term and can also cross the 60/- mark in the next 1 year. It is a fundamentally very sound company with a large capacities and is the leader in its segment.
( Disclosure: The analyst has holdings in the company as on date of issue being published)
The analyst has submitted all information as per SEBI requirement for the criteria of a research analyst
Sebi Registration No: INH000001717