Tuesday, October 20, 2009

[Investors Please Listen] JK Paper Q2FY10 Results – Better than expectation

JK Paper's Q2FY10 results were ahead of our expectations. The company reported marginal revenue growth of 0.9% to Rs 2.9 bn due to higher capacity utilization of 115% for Q2FY10 versus 109% in Q1FY10. Improved sales numbers were also a result of change in product mix as the company shifted focus to High grade packaging board (FBB) paper which commands higher margins. Consequently, EBITDA margins improved impressively by 510 bps YoY to 22.2% due to the benefit derived from established coal linkages and low pulp inventory resulting in EBITDA increase of 31.1% to Rs 634 mn for Q2FY10. The company repaid loans worth Rs 500 – 600 mn which led to reduced interest charges resulting in a whooping increase in APAT of 89% YoY to Rs 234 mn. AEPS for the quarter stood at Rs 3.0 as against Rs 1.6 in Q2FY09.

We have Hold rating on the stock with a price target of Rs 34. We are likely to revise our FY10 EPS by 10-15%.


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