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IDBI Capital Report
JK Paper Ltd.'s Q3 FY24 result was in-line with our expectation on net sales front, while margins disappointed. In a seasonally strong quarter, the company reported 9% YoY growth in volume, however, softness in pricing led to 4% decline in net sales realisation over Q3 FY23.
The management guided that globally pulp prices are moving up, however, paper prices are not moving in tandem. Further, volume growth was also lower than expected due to weak demand in the writing and printing sector.
On a positive note, Q4 FY24 is expected to be better given seasonality factor. We anticipate JK Paper to utilize free cash flow for substantial debt repayment over next two years in absence of new capacity addition plans in near term.
We have introduced FY26E and maintain 'Hold' with a target price of Rs 431 (earlier Rs 386), assigning 4.5 times enterprise value/Ebitda on FY26E.
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