The agency has also affirmed the company’s short-term rating at ‘IND A1+’.
India Ratings and Research stated that the affirmation reflects JKPL’s continued strong market position in FY24, with a diversified presence in writing and printing paper, packaging board and corrugated boxes.
The company also benefits from operating efficiencies, leading to strong EBITDA margins and cash flows through the cycle. In FY24, the EBITDA margins moderated from the supernormal level of FY23 but remained high due to strong realisations.
The EBITDA margins are likely to decline in FY25 owing to high wood prices coupled with a decline in realisations. However, the increase in farm forestry plantation is likely to result in a moderation in wood costs by FY26, and hence, India Ratings expects the margins to remain strong on a sustained basis.
Furthermore, notwithstanding the decline in margins, JKPL’s financial profile remained strong in FY24, with low balance sheet leverage.
The leverage is likely to remain at comfortable levels in FY25, given the limited capex and healthy cash flows. In addition, the company’s liquidity position remains strong, with cash and cash equivalents exceeding Rs 10 billion at end-September 2024.
JK Paper has an annual capacity of 761,000 MT of paper and paper boards located in Gujarat, Odisha and Telangana. It is also present in the corrugated boxes segment. Sirpur has a capacity to manufacture 136,000 MT of paper.
The scrip rose 0.28% to currently trade at Rs 391 on the BSE.