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IDBI Capital Report
JK Paper Ltd.'s Q1 FY25 was disappointing, particularly on the margins front. Healthy sales volume growth of 16% aided net sales improvement, however, subdued net sales realisation coupled with increase in raw material prices dented margins.
We believe the company's initiatives on price hike in board and eventual price increase in writing and printing should drive NSR improvement in upcoming quarters. Raw material prices have increased by 23% YoY along with 40% YoY increase in other expenses (due to acquisition) in Q1 FY25.
We take JK Paper's Q1 FY25 result aberration and gradual improvement should be expected on both NSR and margins front. We have broadly maintained our earnings estimates for FY25E/FY26E.
Post sharp increase in stock prices, one year forward enterprise value/Ebitda average for five year stands at seven times.
As potential upside is capped from current level, we recommend Hold with a revised target price of Rs 582, assigning 5.5 times EV/Ebitda (20% discount to five year average) on FY26E.
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