Few investors dream about investing in paper companies. It’s not the kind of sector that gets discussed around coffee tables or makes headlines. But value investing isn’t about what’s exciting; it’s about what’s quietly working.
Take India’s top three pure-play paper companies: JK Paper, West Coast Paper, and Seshasayee Paper. Over the past decade, they’ve quietly grown profits at annualised rates of 35%, 50%, and 25% respectively. Part of that growth comes from consolidation — a global trend. A BCG report states that between 2000 and 2023, mergers and acquisitions in the global paper industry consistently totalled $15-25 billion annually.
JK Paper knows this playbook well. Its recent acquisitions in corrugated packaging, particularly over the last three years, has catapulted it to become the largest player in the segment.
Source: Annual Reports FY22,23 / Q3FY25 Investor Presentation
Today, JK Paper stands at a total capacity of 7,61,000 MT with packing accounting for 2,91,000 MT.
Source: JK Paper Q3FY25 Investor Presentation
Why corrugated packaging?
The answer is simple and compelling: India’s e-commerce and quick commerce markets are booming. Explosive growth in online shopping has created an enormous demand for packaging that’s not just cost-effective but also durable and sustainable. Corrugated boxes fit perfectly into this narrative. Not to mention, compared to plastic, paper is environmentally friendly if tree plantations and cutting are done in a sustainable manner.
Source: https://avonpackaging.com/corrugated-boxes/
According to the Indian Paper Manufacturers Association (IPMA), packaging paper and board segments are expected to grow at a robust 8.2%.
Source: http://www.ipma.com
The Federation of Corrugated Box Manufacturers (FCBM) is even more optimistic, forecasting 10-12% growth, making it one of the fastest-growing segments within the paper industry.
But then comes the tough part
Paper is fundamentally a commodity. JK Paper’s A4 sheets aren’t fundamentally different from BILT’s (which went bust) or Century’s copier paper. Commodity pricing is relentless; it doesn’t care about brand. So, success boils down to something less flashy but more important: cost efficiency.
The real winners here are the integrated players which manage their own raw material sources. JK Paper’s cost advantage lies in its extensive social forestry programme, with approximately 81,000 acres dedicated to plantation. Owning its own raw material source means JK Paper is better positioned compared to competition.
Source: JK Paper Q3FY25 Investor Presentation
Paper manufacturers use mainly three raw materials: wood (i.e. pine, eucalyptus, etc), recycled paper, and agricultural residues like sugarcane bagasse or wheat straw.
Source: Infometrics Report on Paper Industry – 2023
Each comes with unique challenges. For example, wood-based mills typically have their own plantations, but trees take three to five years to mature. Farmers often shy away because the cash flow payoff takes too long.
And as large companies expand production, demand for wood rises faster than the supply, causing prices to spike — exactly what’s happening today. Wood prices have surged by 30-35% in FY25 alone, driven by competition from the rapidly growing MDF board industry, which competes for the same wood supply.
The pulp price story mirrors this volatility. Prices spiked dramatically between January and June 2024, reaching $700-750. Looking ahead, however, global capacity expansions suggest pulp prices will likely stabilise around $550 (± $25) in the longer term.
Then there’s recycled paper, accounting for about 70% of raw materials used by Indian paper mills, according to Infometrics Ratings. The catch here is quality: recycled paper tends to produce lower-quality paper because shorter fibre lengths lead to weaker product quality.
JK Paper’s realisations too have taken a hit recently, driven mainly by aggressive imports from China and Indonesia, which are flooding the Indian market at prices far below local prices. Data from IPMA shows imports reached an all-time high of 1.76 million tonnes in the first nine months of FY25, a staggering 20% jump YoY. Imports from China alone rose by 36%, with ASEAN imports up by 23%.
Margins, unsurprisingly, are under pressure. EBITDA margins for India’s top three paper companies have slipped back to levels last seen in 2015, far from their peaks of FY23.
Source: http://www.tijorifinance.com
Are valuations attractive?
Price to Earnings for a cyclical commodity player such as JK Paper has little value because in an environment where realisations are falling, trailing PE does not provide an important signal about the business’s undervaluation or overvaluation.
Instead, price to book value should be a better metric.
Based on historical data available on screener.in, the lowest P/B value JK paper endured was around 0.5x, way back in 2014 when the industry was going through a severe downturn. Compared to that, the current P/B of 0.9x seems expensive. However, compared to the median value of 1.2x and recent highs of around 2x, it’s fairly attractive.
Based on a key cash flow metric i.e. Price/CFO, where CFO equals the 10 year average CFO adjusted for outliers is 650 crore. A multiple of 4,919/650 = 7.5x appears reasonably attractive, with an implied cash flow yield of 13.3%.
So, perspective matters. Where we are in the cycle matters because in the absence of lead indicators or “triggers” pointing to a change in the cycle, investors might be left holding the bag for a long time.
So when will the cycle turn?
IPMA is pushing for government intervention, by raising basic customs duties (BCD) to curb imports. In September 2024, the Directorate General of Trade Remedies (DGTR) initiated an anti-dumping investigation specifically targeting virgin multi-layer paperboard.
Meanwhile, visibility on wood prices coming down remains cloudy. Without clarity on these critical elements — raw materials and dumping — the Indian paper industry currently demands patience.
Investors love certainty, but sometimes the hardest — and most valuable — thing to do is simply to wait and watch.
Note: We have relied on data from http://www.Screener.in and http://www.tijorifinance.com throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.
Rahul Rao has helped conduct financial literacy programmes for over 1,50,000 investors. He has also worked at an AIF, focusing on small and mid-cap opportunities.
Disclosure: The writer or his dependents do not hold shares in the securities/stocks/bonds discussed in the article.
The website managers, its employee(s), and contributors/writers/authors of articles have or may have an outstanding buy or sell position or holding in the securities, options on securities or other related investments of issuers and/or companies discussed therein. The content of the articles and the interpretation of data are solely the personal views of the contributors/ writers/authors. Investors must make their own investment decisions based on their specific objectives, resources and only after consulting such independent advisors as may be necessary.
JK Paper stands at a total capacity of 7,61,000 MT with packing accounting for 2,91,000 MT. (Photo: X/@JKPaperIndia) 
Source: BCG Report / Mergers & Acquisitions Analysis in Pulp, paper & packaging industry.
Source: Annual Reports FY22,23 / Q3FY25 Investor Presentation
Source: JK Paper Q3FY25 Investor Presentation
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Source: JK Paper Q3FY25 Investor Presentation
Source: Infometrics Report on Paper Industry – 2023
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