JK Paper (JK Paper) Q3FY22 result was in-line with our estimates on key parameters. Healthy demand and price hike supported net sales growth, while prudent cost control aided operating margin expansion. Net sales increased by 37.4% YoY to Rs 10,236 million, while EBITDA came in at Rs2,513mn, up by 61.9% YoY.
EBITDA margin improved by 380bps YoY to 24.6%. It reported net profit of Rs1,511mn compared to net profit of R646mn in Q3FY21. The management guided that demand was marginally subdued in January’22, however, it is expected to improve in subsequent months.
"The company’s packaging board plant has started production and should contribute to net sales from FY23E. We have broadly maintained our FY23E/FY24E estimates and maintain BUY with a TP of Rs 307, assigning 5x EV/EBITDA on FY24E," stated IDBI Capital Equity Research.
Key highlights and investment rationale
Another quarter of all-round performance: JK paper reported another quarter of improved results led by recovery in paper segment which aided higher sales volume. Further, the company took price hike in October’21 to pass on higher raw material prices, which resulted in higher NSR in Q3FY22. We believe the company is poised to benefit from robust demand in packaging board as capacity utilization at new plant ramps up in FY23E. Further, incremental sales volume from Sirpur paper bodes well for earnings growth in future.
Multiple levers to growth, BUY with a TP of Rs 307: JK Paper remains our preferred pick amongst the domestic listed paper players given its scale of operations, extensive distribution reach and backward integrated operations and its leadership position in cut-size office paper. The company’s newly added packaging board plant will further strengthen the earnings trajectory in future. Buy with a TP of Rs 307.
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