JK Paper

JK Paper delivered a 'phenomenal year' in FY23, achieving its highest-ever turnover of INR 6,772 crores, a substantial increase from INR 4,244 crores in FY22. EBITDA nearly doubled to INR 2,184 crores from INR 1,122 crores, with an impressive full-year EBITDA margin of 33.1%. Net Profit After Tax (PAT) also crossed the INR 1,000 crores mark, reaching INR 1,208 crores, more than double the INR 544 crores reported in the previous year. The company maintained strong operational efficiency with a capacity utilization of 103.9%.

The company successfully acquired two corrugated packaging businesses, which are now the largest in the country. In Q4 FY23, this segment contributed INR 190 crores to the topline, INR 18 crores to EBITDA, and INR 4 crores to PAT. For the full year, the consolidated corrugated business added INR 231 crores in topline and INR 23 crores in EBITDA. Management projects this segment to achieve INR 1,000-1,100 crores in turnover and INR 100-120 crores in EBITDA for FY24, with a target margin of 10-16% in the long term.

JK Paper's packaging board and Sirpur units are currently operating at 90% utilization, with a target to reach 100% after Q2 FY24. The newly commissioned Ludhiana plant for corrugation is expected to achieve sizable production within the next 2-3 months, following initial teething issues. The acquired corrugated plants have a capacity of 260,000 tons, with plans to add around 20,000 tons by the end of the current year, aiming to improve average utilization from 60% to over 70%.

Wood procurement costs are increasing due to higher demand from the MDF and plywood industries, with price increases ranging from 6% to over 25% depending on the region, and further pressure is anticipated. Global pulp prices, currently around $500 per ton, are considered unsustainable, with a sustainable range of $525-600 per ton. Management indicated that if pulp prices remain at $500, paper and board prices should be in the $800-850 range, increasing to $900-950 if pulp reaches $600.

The company has significantly reduced its consolidated net debt to approximately INR 1,900 crores, resulting in a healthy net debt to EBITDA ratio of 0.89. For FY24, JK Paper plans to repay INR 450-540 crores of debt. Management is focused on building a 'war chest' of INR 1,500 crores before making further significant capital allocation decisions, emphasizing a judicious and balanced approach to investments to avoid past losses.

Management expects the market in FY24 to be volatile, with continued price and commodity fluctuations. However, they anticipate a 'sizable demand' for writing and printing paper due to the implementation of the New Education Policy (NEP), which is driving a return to physical copies and increased activity in schools and coaching centers. Despite potential volatility, JK Paper aims for higher volumes in FY24 and believes a sustainable industry EBITDA margin of 20-25% is achievable.