Reviews

In this edition, Recommendation for Two Stock

In this edition, we have reviewed JK Paper and Ashoka Buildcon. We suggest our reader-investors to HOLD JK Paper and Ashoka Buildcon 

We had recommended JK Paper in Volume 33, Issue No 20, dated September 03 - 16, 2018 in our Special Report when the stock was trading at Rs 169. The recommendation was given as the company is the largest producer of branded papers and does not depend on hardwood pulp for its P&W segment and also the expected gain in market share due to expanded capacity. 

JK Paper operates mainly in the paper manufacturing business and is India’s largest producer of branded papers and a leading player in the printing and writing segment. The company operates two manufacturing facilities, one each located at Rayagada in Orissa and Songadh in Gujarat. 

On the financial front, on a standalone basis, in Q2FY19, the net sales of the company expanded by 17.04 per cent and stood at Rs 785.04 crore as against Rs 670.74 crore in Q2FY18. The PBIDT of the company has gone up by 47.51 per cent and stood at Rs 204.79 crore, while in Q2FY18 was Rs 138.83 crore. The PAT has surged dramatically by 93 per cent at Rs 93.48 crore in Q2FY19 versus Rs 56.63 crore in Q2FY18. 

On the valuations front, the stock is trading at a PE multiple of 8.38x. The RoE stood at 17.10 per cent and RoCE was 16.88 per cent.JK Paper is expected to see a substantial increase in production side resulting from the acquisition of Sirpur Paper Mills that has a capacity of around 138,000 tonnes per annum (TPA). This is expected to come on stream much before 2020 on completion of the refurbishment of the existing plant. This will give JK Paper relative advantage vis-a-vis its peers. We, therefore, recommend a HOLD on this scrip to our reader-investors. 

We had recommended Ashoka Buildcon in Volume 33, Issue No 17, dated July 23 – August 5, 2018 in our ‘Choice Scrip’ section when the stock was trading at Rs 148. Our recommendation was backed by the strong order book and the government’s impetus to infrastructure development. 

Ashoka Buildcon Limited is an Indiabased infrastructure company engaged in construction and maintenance of roads and supporting services to land support-operation of toll roads and others. The company operates through three segments, namely, construction and contract-related activities, Build Operate and Transfer (BOT) projects and sales of goods. 

On the financial front, the net sales figure has doubled in Q2FY19 to reach Rs 764.42 crore as against Rs 378.69 crore in the corresponding quarter of the previous year. The PBIDT of the company has also doubled on a QoQ basis to reach Rs 103.69 crore in Q2FY19 as against Rs 45 crore in Q2FY18. The PAT has also risen by 124 per cent YoY and stood at Rs 62 crore in Q2FY19 versus Rs 27.62 crore in Q2FY18. 

On the annual front, the net sales in fiscal year 2018 has gone up 22 per cent at Rs 2446.28 crore as against Rs 2006.48 crore in the previous fiscal. The PBIDT has increased by 24 per cent and came in at Rs 391.20 crore in FY18 versus Rs 314.57 crore in FY17. The PAT has increased by 35 per cent to Rs 237.01 crore in FY18. On the valuations front, the RoCE stands at 17.87 per cent. 

The quarterly performance of Ashoka Buildcon has been quite impressive. The company has also been receiving multiple construction and engineering orders. We would thus recommend our readerinvestors to HOLD the stock.