Jk Paper reports 63.6% EBITDA growth in 2016 and 5.0 pp EBITDA Margin growth from 11.4% to 16.4%

06-05-2016 • About Jk Paper ($JKPAPER) • By InTwits

Jk Paper reported FY2016 financial results today. Here are the key drivers of the company's long term financial model:

Jk Paper is a growth stock: FY2016 revenue growth was 13.5%, 5 year revenue CAGR was 14.6% at FY2016 ROIC 10.5%
Jk Paper has high CAPEX intensity: 5 year average CAPEX/Revenue was 25.8%. At the same time it's in pair with industry average of 34.5%
CAPEX is quite volatile: ₹394m in FY2016, ₹908m in FY2015, ₹2,731m in FY2014, ₹8,645m in FY2013, ₹6,321m in FY2012
The company has business model with average profitability: ROIC is 10.5%
It operates with high leverage: Net Debt/EBITDA is 4.0x while industry average is 1.6x

Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.

Revenue and profitability

Jk Paper's Revenue jumped on 13.5%. During the last 5 years Revenue growth topped in FY2015 at 24.3%. Revenue growth happened at the same time with EBITDA margin expansion. EBITDA Margin increased on 5.0 pp from 11.4% to 16.4% in FY2016. During the last 5 years EBITDA Margin bottomed in FY2014 at 9.3% and was growing since that time.

Net Income margin increased on 3.9 pp from -0.86% to 3.0% in FY2016. During the last 5 years Net Income margin bottomed in FY2014 at -4.3% and was growing since that time.

Investments (CAPEX, working capital and M&A)

In FY2016 the company had CAPEX/Revenue of 1.6%. The company's CAPEX/Revenue dropped on 57.9 pp from 59.5% in FY2013 to 1.6% in FY2016. It's average level of CAPEX/Revenue for the last three years was 7.2%. CAPEX as a % of Revenue stuck to a declining trend at -14.7 pp per annum in FY2012-FY2016.

Return on investment

The company operates at low ROIC (10.5%) and ROE (8.8%). ROIC increased on 6.2 pp from 4.3% to 10.5% in FY2016. ROE jumped on 11.1 pp from -2.3% to 8.8% in FY2016. During the last 5 years ROIC bottomed in FY2014 at 1.1% and was growing since that time. During the last 5 years ROE bottomed in FY2014 at -8.9% and was growing since that time.

Leverage (Debt)

Company's Net Debt / EBITDA is 4.0x and Debt / EBITDA is 4.0x. Net Debt / EBITDA dropped on 4.7x from 8.6x to 4.0x in FY2016. Debt dropped on 24.7% while cash surged on 12.8%. During FY2012-FY2016 Net Debt/EBITDA topped in FY2014 at 14.1x and was declining since that time.

Jk Paper has short term refinancing risk: cash is only 8.6% of short term debt.

Valuation and dividends

Jk Paper's trades at EV/EBITDA 5.9x and P/E 10.5x while industy averages are 17.8x and 21.9x. Jk Paper's EV/(EBITDA-CAPEX) is 6.5x with the industry average at 22.8x.

Financial and operational results

Jk Paper ($JKPAPER) key annual financial indicators

mln. INR	2012	2013	2014	2015	2016	2016/2015
P&L
Revenue	13,283	14,532	17,214	21,398	24,277	13.5%
EBITDA	1,607	1,385	1,594	2,430	3,976	63.6%
Net Income	485	380	-747	-184	729
Balance Sheet
Cash	85	284	79	103	116	12.8%
Short Term Debt	2,480	2,702	5,084	4,916	1,345	-72.6%
Long Term Debt	8,456	15,140	17,393	16,127	14,499	-10.1%
Cash flow
Capex	6,321	8,645	2,731	908	394	-56.6%
Ratios
Revenue growth	7.9%	9.4%	18.5%	24.3%	13.5%
EBITDA growth	-38.0%	-13.8%	15.1%	52.5%	63.6%

EBITDA Margin	12.1%	9.5%	9.3%	11.4%	16.4%	5.0%
Net Income Margin	3.7%	2.6%	-4.3%	-0.9%	3.0%	3.9%
CAPEX, % of revenue	47.6%	59.5%	15.9%	4.2%	1.6%	-2.6%

ROIC	5.2%	2.7%	1.1%	4.3%	10.5%	6.2%
ROE	6.7%	4.4%	-8.9%	-2.3%	8.8%	11.1%
Net Debt/EBITDA	6.8x	12.7x	14.1x	8.6x	4.0x	-4.7x

Peers in Paper & Paper Products

Below you can find Jk Paper benchmarking vs. other companies in Paper & Paper Products industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.

Top companies by Revenue growth, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
N.R.Agarwal Industries ($NRAGRINDQ)	5.5%	4.0%	5.5%	34.1%	-
South India Paper Mills ($STHINPA)	2.2%	-1.1%	-14.7%	29.2%	-
Pudumjee Pulp & Paper Mills ($PDUMJEPULP)	2.1%	8.4%	4.9%	26.5%	-
Tcpl Packaging ($TCPLPACK)	17.8%	33.7%	5.8%	26.1%	-
Yash Papers ($YASHPPR)	-	-3.6%	39.5%	17.3%	0.6%
Median (14 companies)	10.0%	4.7%	7.5%	-0.3%	0.6%
Jk Paper ($JKPAPER)	-	9.4%	18.5%	24.3%	13.5%

Top companies by EBITDA margin, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Tamil Nadu Newsprint & Papers ($TNPL)	21.0%	22.2%	22.5%	24.0%	-
Tcpl Packaging ($TCPLPACK)	16.1%	14.9%	15.7%	16.5%	-
South India Paper Mills ($STHINPA)	13.5%	16.1%	10.2%	15.8%	-
Yash Papers ($YASHPPR)	15.7%	16.8%	16.0%	15.7%	-
Kuantum Papers ($KUANTUM)	11.2%	14.2%	15.9%	12.7%	-
Median (15 companies)	11.7%	14.4%	14.9%	9.8%	-
Jk Paper ($JKPAPER)	12.1%	9.5%	9.3%	11.4%	16.4%

Top companies by CAPEX/Revenue, %


Top	FY2012	FY2013	FY2014	FY2015	FY2016
Emami Paper Mills ($EMAMIPAP)	24.4%	7.3%	19.2%	89.3%	-
Tamil Nadu Newsprint & Papers ($TNPL)	18.9%	10.4%	5.5%	35.2%	-
Tcpl Packaging ($TCPLPACK)	18.3%	8.6%	11.1%	12.1%	-
Median (3 companies)	11.3%	8.6%	11.1%	35.2%	-
Jk Paper ($JKPAPER)	47.6%	59.5%	15.9%	4.2%	1.6%

Top companies by ROIC, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Tcpl Packaging ($TCPLPACK)	15.4%	17.4%	16.9%	23.1%	-
Tamil Nadu Newsprint & Papers ($TNPL)	5.3%	8.2%	11.1%	12.7%	-
Emami Paper Mills ($EMAMIPAP)	5.8%	5.9%	5.4%	3.0%	-
Rama Pulp & Papers ($RAMAPULP)	-	10.8%	-	-	-
Ruchira Papers ($RUCHIRA)	15.4%	20.2%	-	-	-
Median (21 companies)	8.3%	9.4%	11.3%	12.7%	-
Jk Paper ($JKPAPER)	5.2%	2.7%	1.1%	4.3%	10.5%

Top companies by Net Debt / EBITDA


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Emami Paper Mills ($EMAMIPAP)	7.4x	5.3x	5.0x	11.2x	-
Tamil Nadu Newsprint & Papers ($TNPL)	5.4x	3.6x	2.8x	4.0x	-
Tcpl Packaging ($TCPLPACK)	2.6x	2.3x	2.2x	1.9x	-
Yash Papers ($YASHPPR)	5.2x	5.5x	4.5x	0.0x	-
Sree Sakthi Paper Mills ($SREESAKHTI)	2.1x	1.7x	-	0.0x	-
Median (13 companies)	3.2x	2.7x	0.0x	0.0x	-
Jk Paper ($JKPAPER)	6.8x	12.7x	14.1x	8.6x	4.0x

Jk Paper stock price chart

Jk Paper financials

mln.	FY2010	FY2011	FY2012

Revenue	26,407	12,307	13,283
EBITDA	2,442	2,592	1,607
Net income	910.0	1,065	485.2
CAPEX	359.3	1,242	6,321
Debt	5,482	5,384	10,936
Cash	8.958	278.2	85.400

About Jk Paper

JK Paper Limited, an integrated pulp and paper company, manufactures and sells papers and boards primarily in India. The company offers a range of office documentation papers, such as photocopy and multi purpose papers for use in desktop, inkjet and laser printers, fax machines, photocopiers, and multi-functional devices; and premium watermarked and laid-marked business stationery papers for corporate customers and individuals under the JK Copier Plus, JK Copier, JK Easy Copier, JK CMax, JK Sparkle, JK Max, JK Cedar, JK Excel Bond, JK Bond, JK Ledger, and Cedar Digital brand names. It also provides uncoated writing and printing papers, MICR cheque papers, pulp boards, bonds, ledgers, and parchment grades under the JK Bond, JK SS Maplitho (SHB), JK MICR Cheque Paper, JK Parchment Paper, and JK SS Pulpboard brand names; coated papers and boards under the JK Cote, JK Superkote/JK Cote Premium, and JK Cote Chromo brand names; and coated packaging boards for packaging industry under the JK Ultima, JK TuffCote, JK TuffPac, JK Endura, JK IV Board, and JK Club Card brand names, as well as imported coated art papers. The company also exports its products to the Middle East, South East Asia, SAARC, and various African countries. JK Paper Limited was incorporated in 1960 and is headquartered in New Delhi, India.