JK Paper drops 7% as Q2 profit declines 58% to ₹129 crore

JK Paper shares experienced a sharp 6.7% drop on Tuesday, November 5, registering an intraday low of ₹426 on the NSE. This decline followed a 58% fall in Q2 consolidated net profit, down to ₹128.85 crore from ₹305.68 crore in the same period last year. 

By mid-morning, shares were trading at ₹444, reflecting a 2.78% decrease, while the broader NSE Nifty index held steady, up just 0.01% at 23,997.15. The stock, which has fluctuated significantly in the past year, reached a 52-week high of ₹638.75 and a low of ₹319.10, making it a dynamic player in share market investment.

Revenue, costs, and profit impact

Despite the decline in profits, JK Paper saw a slight increase in revenue from operations, up by 1.58% to ₹1,777.48 crore from ₹1,749.77 crore. However, the company's expenses rose considerably, increasing 14.7% year-on-year to ₹1,569.63 crore. 

According to the company's chairman, Harsh Pati Singhania, high wood costs and an influx of lower-cost imports significantly affected profitability, particularly in the Printing & Writing and Packaging Board segments. For investors, these factors highlight the impact of external cost pressures on companies in resource-dependent sectors—a critical point to consider in any share market investment decision.

How does this affect share market investment in paper stocks?

JK Paper's performance, especially with a decline in net profits despite revenue growth, serves as a reminder of the volatility in sectors reliant on commodity inputs. For those considering share market investment in paper manufacturing or similar industries, it's essential to look beyond revenue figures and consider operational expenses, which can impact profitability. 

The company's EBITDA for the half-year ending September 2024 stood at ₹605 crore, showing some resilience despite challenges. Long-term investors might view this as an opportunity to assess whether the stock's current valuation aligns with their portfolio goals.

Key takeaways

• Volatility in paper stocks: High wood costs and low-priced imports are key risks impacting JK Paper's profitability. Investors should watch input cost trends when evaluating paper sector stocks.
• Revenue vs. profit dynamics: Despite modest revenue growth, rising expenses can significantly affect net profits—a critical consideration for share market investment.
• Sectoral analysis essential: JK Paper's fluctuations offer insights into the broader market for resource-reliant stocks, reinforcing the need for strategic timing and thorough sectoral research in share market investment.