ValuePickr Forum

JK Paper - Best Bet in Paper Sector?

Thanks for the reply. I got that they have a build up in inventory because of slow demand. But this keeps me thinking why margins have improved if the sales are low.

The only explanation is: They have taken the benefit of lower raw materials in finished goods in Q1 while they put the higher cost finished goods as inventory. This means the margins should go down in Q2 as they convert this inventory to sales.

Does this make any sense?

Did some further research on Changes in Inventory and got a different understanding. Pls correct if this seems wrong.

Since these are Quarter results we are talking about Inventory Change and not the actual Inventory. Here a negative number will increase the cost of goods sold and hence reduces income for period reporting period.

Inventory change is the difference of value between last reported financials and current financials (quarterly or yearly). If the current period inventory is lower than last period inventory we have a negative change and number accordingly.

One of the way calculating Cost of goods sold is adjust the cost of goods purchased or manufactured with changes in inventory. If the change in inventory is positive it means there is unsold item lying and reduced from cost of goods sold. For negative change in inventory it will be reverse that means sold more than previous period and hence added to cost of goods sold.

If Actual Inventory is 100 and change in inventory is say positive 10 then cost of goods sold is 90.
If Actual Inventory is 100 and change in inventory is say negative 10 then cost of goods sold is 110.

So as per AR 2019 - If I am not wrong then Total Inventory on CA was 322 Cr and with this change the net Inventory (of -112 cr) after Q1 2019 will be 322 - 112 = 210 Cr .

Typically the Closing Inventory has always been 300+ Cr over the last 5 years.

I can interpret two things : Management has either turned efficient and improved in Inventory Management or the Company has delivered the best Margins already for this year in Q1 and the Margins may go down in the coming quarters in order to build up the needed Inventory for future sales

I am tending towards the later conclusion more than earlier one. Also other thing to note here is Ebidta Margins over last quarter : 34.5%, 27.1%, 28.5%, 26.1%, 25.1%

This also points to one time exceptional performance of Margins than a sustained one.

But if they can pick up sales then ofcourse the impact could be smoothened due a larger base.

I understand what you are saying however by change of inventory they mean change of inventory on balance sheet not on the profit and loss account

On the profit and loss account, the change of inventory has been a negative amount thus on the balance sheet it has to be a positive amount. In accounting terms,
Credit - closing stock (profit & loss account)
Debit - closing stock (balance sheet account)

Hence if you were to look at the balance sheet (not published in this quarter), inventory would have risen.

Your explanation you copied is correct but you need to look at balance sheet figure not the profit and loss figure.

Just went through Interview again posted earlier in this post.

Realized that input cost for lumber etc have come down drastically from $800 to $550 that is a significant reduction and hence one more interpretation can also be that same level of inventory can be maintained at a much lower cost. Hence this will also reflect as Negative Inventory Change since the value is reflected in amount (INR)

In case they can maintain the volumes or even grow slightly then this could be another good year. As per the interview the current prices are up 6%- 7% from last year and down 1% from last qtr.

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I think their paper is considered premium paper. They have more capacity after sirpur acquisition which has gone live however the volume on that is not reflecting in the last quarter p&l.
When a plant goes live there are usually initial teething problems as well
They will be able to shift a lot of volume this quarter

JK Paper notes.

Hello All, Ashish Chopra (can share mail id with moderator) is preparing these notes and waiting on approval to join the forum. Is there anyone who can help accelerate his membership.

Thank you.


Looks like the fall should stop here and the stock is poised for another leg of upmove.


There are multiple questions here which we should discuss and try to answer:

1/ Demand declined in Q1 even when the industry is at top of cycle. We don’t know whether it is temporary or the industry is entering into down cycle?

2/ Margins expanded because of lower raw material costs. We don’t know whether it is temporary or the prices will move up?

3/ All the players are expanding capacity which should be live in next 2 years. This will again create a supply glut leading to lower margins in the industry


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broken falling trendline, the stock seems to be geared up for a decent upmove-


JK Paper AR Key Points/Remarks!!! Seems to be a great company but need to keep a check…

Research from E-global Group of Companies!

(Disclaimer: Not an investment/trading recommendation)


Q2 Results: Flat sales but 20% increase in EPS (Link)

Disclosure: Not Invested, on radar

Think you’re looking at QoQ numbers.
When one looks at YoY numbers, the results look good. There’s around 12% growth in the topline and the bottomline although looks flat, but if we remove the inventory impact from last yr Q2 numbers, the bottomline looks good too.

Disclosure: Invested through BACL

Wondering how there tax burden is constant and not reduced?

Could you please clarify what is BACL?

Bengal Assam Company. It’s the promoter of JK Paper and JK Tyre.

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Paper pri es are expected to go up shortly. Market information is
Duplex board by Rs 4 to 5 (NR Agarwal)
FBB/SBS by Rs 7 (JK, ITC)
Kraft Paper already increased by Rs 3 and expected to go up further by 3 to 4.

Price of NR already shot up in last one week.
This is being attributed to shortage in recycled paper.
Looks like 2020 will be repeat of 2018 when paper tightened and spiralled upwards. Year has begun on a good note for paper industry it seems.


Where can i track paper prices… any forecast on jk paper results… pls help

Only way is to connect with dealers and distributers

If you will search on youtube there are multiple interviews by management time and again on CNBC, Zee business etc. They give some sort of guidance of prices etc. But yes item by item it will have to be through dealers and distributors. as in Coated paper/ uncoated paper, paperboard etc.