JK Paper is the largest producer of branded paper in India and a leading player in fine paper and packaging board segment. The company currently has a capacity of 2.7 lakh TPA. It plans to increase its capacity by nearly 50% to 4 lakhs TPA by the end of 2012 when its plant in Orissa will be operational.
The company plans to raise Rs 225 crore through foreign currency convertible bonds. It also plans to build a pulp mill in South Asia, which will enable it to source raw material at cheaper rates. Capacity expansion and good demand will boost earnings. JK Paper's stock is under-valued with a trailing price-to-earnings multiple of 3.5. Its market valuation is a tad more than onefifth its annual net sales.
With the capacity expansion of most of these players rolling out over the next couple of years, the sector is a long-term play for investors.
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