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IDBI Capital Report
JK Paper Ltd.'s Q2 FY24 result was in-line with our expectation on net sales/profit after tax front, while operating margin was a miss. Subdued demand led to muted volume growth, while net sales realisation remained under pressure.
The management guided paper prices to improve as globally pulp prices are inching up higher. Further, demand for packaging board has shown improvement QoQ, driving better net sales in H2 FY24E.
The management is optimistic about JK Paper's first acquisition in the monocarton conversion business of Manipal Utility Packaging Solutions Pvt. Ltd.
We have maintained our earnings estimates for FY24E/FY25E.
Post sharp rally in the stock price, potential upside is capped from current level. We downgrade the stock to 'Hold' with a target price of Rs 386 (unchanged), assigning 4.5 times enterprise value/Ebitda on FY25E.
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