Friday, February 15, 2008

Jindal Poly Films

Jindal Poly Films, of B. C. Jindal Group, is India’s largest producer of Polyester Film, commonly known as PET Film and Polypropylene Film, also known as BOPP Film, used for food packaging

The present capacity of the company is 86,000 TPA of PET Films, 90,000 TPA of BOPP Film, 26,000 TPA of Metalliser, 1,00.000 TPA of Polymer Chips and 9,000 TPA of Coating Plant.

Two Metallisers of 2,850 mm width, with an annual capacity of 20,000 TPA, is under commissioning and would stablilise by March 08, thus increasing capacity of Metalisers to 46,000 TPA.

Two lines of 8.7 meter width, with an annual capacity of 90,000 TPA is under implementation which shall be operational by September 08, thus raising capacity of BOPP Films to 1,80,000 TPA. All the production line of the company has been sourced from Dornier of Germany, the leading supplier of Polymer Film plants.

The company has been posting robust financial performance. For FY 07, the total income of the company was at Rs.1,032 crores with EBITDA of Rs.168.41 crores, resulting into a margin of 16.30%. PBT for the year was Rs.90.30 crores, while PAT was at Rs.64.96 crores, resulting in an EPS of Rs.23.12, for the year. Cash profit for the year was at Rs.138.09 crores, resulting in a cash EPS of Rs.49.15.

For quarter ending December 07, total income was at Rs.317 crores with PAT of Rs.26.69 crores, resulting in an EPS of Rs.9.50. Cash profit for the quarter was at Rs.43.32 crores giving a cash EPS of Rs.15.42. For 9 months ending December 07, total income was at Rs.932 crores with PAT of Rs.94.77 crores, giving an EPS of Rs.33.73 for the period. Cash profit was at Rs.144.50 crores, resulting in a cash EPS of Rs.51.40 for the period.

FY 08 is likely to have a topline of Rs.1,250 crores, PAT of Rs.120 crores, giving an EPS of Rs.42.70 and cash profit would be Rs.180 crores, resulting into a cash EPS of Rs.64.

Since the expansion in capacity of BOPP Films by 90,000 TPA, would be completed by September 08 and Metalliser Plant by 20,000 TPA, by March 08, EPS of the company for FY 09 is likely to be close to Rs.60, with cash EPS of Rs.70.

The book value, per share of the company, as at 31-03-07 was at Rs.280, which would rise to Rs.320 by March 08.

The share is presently ruling at Rs.205, which is available at a price to book of 0.65 : 1 or at 65% of its book value. PE multiple on historic earning is below 5 times, while on future earnings of FY 09 at 3.50 times. This kind of valuation, leaves no downward risk. Also, other small size packaging films companies are discounted at a PE of about 10 times.

A safe and excellent bet at Rs.205 for a reasonable gain of 30% per annum, over the next 2 – 3 years. The company and sector would get re-rated sooner or later.