JINDAL POLY FILMS Ltd by mikesanye

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									                                                   JINDAL POLY FILMS Ltd
                                                          Result Update: Q3 FY 11

  C.M.P:                   Rs. 422.85
  Target Price:            Rs. 486.00
  Date:                    April 23rd 2011                          BUY

    Stock Data:                                                SYNOPSIS
    Sector:                   Packaging
                                                    Jindal Poly Films (JPFL) is India’s
    Face Value Rs.            10.00
                                                    leading producer of flexible packaging
    52 wk. High/Low (Rs.)     700.00/180.00         films.
    Volume (2 wk. Avg.)       91,000
    BSE Code                  500227                Jindal Poly Films Ltd is a part of Rs
    Market Cap (Rs.In mn)     19468.01              30 Billion B C Jindal Group, A 50-
                                                    Year Old Industrial Group Offering a
    Share Holding Pattern                           Wide Range of Products.

                                                    During the quarter the company has
                                                    incorporated three wholly owned

                                                    Jindal Poly Subsidiary Awarded Coal
                                                    Block in Mozambique.

    1 Year Comparative Graph                        Jindal Metal and Mining Limited have
                                                    entered    into   a  joint    venture
                                                    agreement       for      prospecting,
                                                    exploration and mining of coal.

                                                    Net Sales and PAT of the company
                                                    are expected to grow at a CAGR of
                                                    31% and 88% over 2009 to 2012E

Years                 Net sales        EBITDA     Net Profit        EPS             P/E

FY 10                 15866.80         4015.60     2051.50          89.12           4.74

FY 11E                27739.54         11684.53    7324.30         159.09           2.66

FY 12E                31623.08         13307.78    8371.01         181.82           2.33

Peer Group Comparison
                                             Market                                     Dividend
 Name of the company           CMP(Rs.)    Cap.(Rs.Mn.)   EPS(Rs.)   P/E(x)   P/Bv(x)      (%)

 Jindal Poly Films Ltd          422.85      19468.01      115.25     3.67      1.82      100.00

 Cosmo Films                    106.15        2063.6       24.19     4.39      0.71      50.00

 Uflex                          178.25       12866.2       32.74     5.44      1.61      50.00

 Polyplex Corporation           234.30        7494.0       52.27     4.48      4.21      80.00

As on 22/04/2011

      Investment Highlights

              Q3 FY11 Results Update

              Jindal Poly Films reported a rise of 88% sales in the standalone net sales for
              the quarter ended December 2010. During the quarter, the company disclosed
              a standalone profit of Rs. 2210.90 million as against of Rs. 348.50 million for
              the quarter ended December 31, 2009. Net sales are increased by 88% to Rs.
              7290.40 million from Rs. 3869.80 million in the same quarter previous year.
              Total income of the company was at Rs7440.00 million, a rise of 88% over the
              prior year period. Company EPS is stood at Rs.48.02 for the quarter ended
              December 2010.

                           Quarterly Results - Standalone (Rs in mn)

                   As At                  Dec-10          Dec-09            %change

                   Net sales              7290.40         3869.80             88

                   PAT                    2210.90         348.50              534

                   Basic EPS               48.02           15.14              217

Break up of Expenditure

Subsidiary companies are incorporated

Company’s two wholly owned subsidiary companies namely (1) Jindal Metal
and Mining Limited (2) Jindal Poly films Investment Limited were incorporated.
Further one Subsidiary company in Mozambique namely Jindal Resources
Limitada was also incorporated.

Arm Awarded Coal Block in Mozambique

Jindal Resources Limitada, a subsidiary of Jindal Poly Films Limited
participated in the tenders issued by Ministry of Mineral Resources,
Government of Mozambique for auction of coal blocks for geological prospecting
and exploration of coal in Mozambique. The company has been allotted Block-2
situated in Moatize district, Tete Province. The license covers an area of 1.480
hectares, which may have a potential to contain a resource of 150 million tons
of coal including coking / thermal coal.

Forms Joint venture agreement

Jindal Metal and Mining Limited, a wholly subsidiary of Jindal Poly Films
Limited has entered into a joint venture agreement with a Mozambique
entrepreneur for prospecting, exploration and mining of coal. The exploration
license is situated around 80 Km south west of Tete town in Changara district,

      Tete Province. The license may have a potential to contain a resource of 300
      million tons of coal including coking/thermal coal.

Company Profile

Jindal Poly Films (JPFL) is a part of Rs 30 billion B C Jindal group, a 50-year old
industrial group offering a wide range of products. The group has promoted a number
of companies over the years and is involved in diverse activities including
manufacturing of polyester film, polypropylene film, steel pipes and photographic

JPFL is the largest manufacturer of BOPET and BOPP films in India. The company
produces BOPET film, BOPP film, metalized BOPET film and BOPP film, coated
BOPET and BOPP films, polyester chips (for captive consumption in the BOPET film)

From being only a polyester yarn producer in 1985, JPFL diversified in 1996 into
BOPET film production. In 2003, JPFL commenced production of BOPP film and
metallised film. JPFL commenced production of coated film products by July 2005.
JPFL capabilities were strengthened by the acquisition in November 2003 of Rexor
SAS, in France, which produces metallised and coated films as well as tear tape,
stamping foil, security thread and other high-value products. JPFL plant at Nasik,
Maharashtra is the world’s largest single location plant for the manufacture of
BOPET and BOPP films.

The company is the world's 5th largest BOPET Film manufacturers in the world. It is
in the league of top five producers of BOPP Films in the world after the expansion.
Rexor makes and sells a broad range of metallised and coated BOPET films for
preserving food products and is a market leading producer of “tear tape” for easy
opening of cheese portions and laminated films used in the packaging of luxury
products such as cosmetics and perfumes. It is the leading independent producer of
security threads for bank notes. The company also produces film for decoration,
insulation, aeronautics and sun protection. It holds proprietary technologies for laser
demetallisation of security threads and other bank note security applications and for
slitting films into widths as short as 0.20 millimeters.


1. PET Films

Polyester film commonly known as PET film is a versatile film, which has a vast range
of applications. The film provides a strong barrier to moisture, odour and gases
making it suitable for use in flexible packaging. Its high tensile strength, thermal and
chemical stability makes it suitable for a multitude of applications in electric
insulation, office supplies, graphic arts, magnetic media imaging, metallic yarn and
industrial applications.

2. BOPP Films

Polypropylene film commonly known as BOPP is widely used for food packaging,
textile bags, overwraps for cigarette and personal products, adhesive tapes and
labels. BOPP film possesses dimensional stability, high tensile strength, good
stiffness, high clarity, excellent printability and most importantly, heat sealability.

3. Metalized Films

JPFL has four wide width metallizers with plasma treatment facilities for enhanced
shelf life and barrier properties. Two more metallizers of 2850 mm width are being
installed by Jan & March 2008.

4. Coated Films

As a part of the forward integration of BOPP and PET Films, JPFL installed two
coating lines for manufacturing of entire range of specialty coated films like PVdC,
Acrylic, Low Temperature Seal and High Seal Integrity coatings.

5. Poly Chips

Jindal Group stands for the highest Polyester films, polyester chips and resins
production facilities, with plants located at Nasik to cater to captive consumption.

Expansion Plans:


3 lines of 8.7 mtrs width with an annual capacity of 90000 MT will be commissioned
by financial Year 2012-2013.


10 metalizers with an annual capacity of 80000 MT will be commissioned by financial
year 2012-2013.


4 new Line of BOPP Film with an annual capacity of 132000 MT will be
commissioned by Financial Year 2012-2013.

Subsidiary Companies

   •   Jindal Metal and Mining Limited
   •   Jindal Poly films Investment Limited
   •   Jindal Resources Limitada

Financials Results
12 Months Ended Profit & Loss Account (Standalone)

    Value(Rs.in.mn)         FY09          FY10        FY11E       FY12E

      Description            12m          12m          12m         12m

       Net Sales          14208.90      15866.80     27739.54    31623.08

     Other Income           216.70       435.90       582.79      658.55

      Total Income        14425.60      16302.70     28322.33    32281.63

      Expenditure         -11656.80     -12287.10    -16637.80   -18973.85

    Operating Profit       2768.80       4015.60     11684.53    13307.78

        Interest           -196.50       -273.90      -298.21     -330.49

      Gross profit         2572.30       3741.70     11386.33    12977.29

      Depreciation         -688.20       -797.60      -879.30     -967.23

    Profit Before Tax      1884.10       2944.10     10507.02    12010.05

          Tax              -619.20       -892.60     -3182.72    -3639.05

       Net Profit          1264.90       2051.50     7324.30     8371.01

     Equity capital         258.20       230.20       460.40      460.40

        Reserves           9472.60      10462.10     17786.40    26157.41

       Face Value           10.00         10.00       10.00       10.00

   Total No. of Shares      25.82         23.02       46.04       46.04

          EPS               48.99         89.12       159.09      181.82

Quarterly Ended Profit & Loss Account (Standalone)

    Value(Rs.in.mn)      30-Jun-10     30-Sep-10     31-Dec-10   31-Mar-11E

      Description            3m            3m           3m          3m

       Net sales           5556.30       6873.40     7290.40      8019.44

     Other income           110.10        169.00      149.60       154.09

      Total Income         5666.40       7042.40      7440.00     8173.53

      Expenditure          -4318.50      -4052.20    -3936.60     -4330.50

   Operating profit        1347.90       2990.20     3503.40      3843.03

        Interest            -67.50        -81.50      -73.50       -75.71

      Gross profit         1280.40       2908.70      3429.90     3767.33

      Depreciation         -217.40       -218.90      -220.40     -222.60

    Profit Before Tax      1063.00       2689.80      3209.50     3544.72

          Tax              -228.20       -892.50      -998.60     -1063.42

       Net Profit          834.80        1797.30     2210.90      2481.30

     Equity capital         230.20        230.20      460.40       460.40

       Face Value           10.00         10.00        10.00       10.00

   Total No. of Shares      23.02         23.02        46.04       46.04

          EPS               36.26         78.08       48.02        53.89

Key Ratio

       Particulars        FY09 A   FY10 A   FY11 E   FY12 E

EBIDTA %                   19%      25%      42%      42%

PAT %                      9%       13%      26%      26%

P/E ratio (x)              8.63     4.74     2.66     2.33

ROE - %                    13%      19%      40%      31%

ROCE - %                   14%      21%      46%      39%

EV/EBIDITA (x)             2.61     2.13     1.87     1.83

Debt Equity Ratio          0.49     0.45     0.28     0.20

Book Value(Rs.)           376.87   464.48   396.33   578.15

Price/Book Value           0.74     0.91     1.07     0.73


   •    Net sales & PAT

•   P/E Ratio (x)

•   P/BV (X)

  •   EV/EBITDA(X)

Outlook and Conclusion

      At the current market price of Rs.422.85, the stock is trading at 2.66 x FY11E
      and 2.33 x FY12E respectively.
      Earning per share (EPS) of the company for the earnings for FY11E and FY12E
      is seen at Rs.159.09 and Rs.181.82 respectively.
      Net Sales and PAT of the company are expected to grow at a CAGR of 31% and
      88% over 2009 to 2012E respectively.
      On the basis of EV/EBITDA, the stock trades at 1.87 x for FY11E and 1.83 x for
      Price to Book Value of the stock is expected to be at 1.07 x and 0.73 x
      respectively for FY11E and FY12E.
      We expect that the company will keep its growth story in the coming quarters
      also. We recommend ‘BUY’ in this particular scrip with a target price of
      Rs.486.00 for Medium to Long term investment.

Industry Overview

Flexible Packaging

The fiscal year 2009-10 was a challenging year for the Indian economy. India
witnessed a significant revival in economic activity following the moderation in fiscal
2009. The economic recovery was evident across a wide range of sectors with the
momentum gaining strength in the second half of fiscal 2010. The growth in Gross
Domestic Product (GDP) during the first half of fiscal 2010 was 7.0% compared to
6.0% during the second half of fiscal 2009. However, during the third quarter of fiscal
2010, GDP growth moderated to 6.0% mainly due to decline in agricultural output
following below normal monsoons and moderation in services sector growth to 6.6%.
Reflecting the overall improvement in the economy, the Central Statistical
Organization (CSO) has placed advance estimates of GDP growth for fiscal 2010 at

Flexible packaging industry is the fastest growing segment of the packaging industry
worldwide and growing about 5.5% to 6% annually. Asia is growing faster than North
America and Western Europe and will emerge as the world's largest regional flexible
packaging market by 2013. The area will account for more than one-third of total
demand. China on its own will have 10% of global demand - up from 8% in 2008.
Over the last five years, all regions except Western Europe experienced growth
ranging from around 4% per annum in North America to 9% in South-East Asia and
Oceania as well as in Eastern Europe. China and India were the most dynamic
markets, growing in value terms by around 12% and 17% respectively.

At a compound annual growth rate of 17 percent, the flexible packaging market is
one of the most dynamic and fastest growing in the Country. As the advantage of
flexible packaging of lesser storage space, easy handling, cost effectiveness with
better aesthetic factors becomes increasingly appreciated, traditional rigid packaging
will take a backseat. Flexible packaging scores better over traditional packaging for
such reasons.

Flexible packaging also offers the advantage of packing smaller quantities compared
to traditional packaging and hence, middle class consumers, who comprise of a
major section of the Indian society, have the choice of purchasing just the required

The flexible packaging market has excellent growth potential in the food and
processed food, personal care, FMCG and retail sector. The demand for smaller
packaging and increasing consumerism due to higher purchasing power has been a
boon for the flexible packaging market. However, there is a certain lack of quality
consciousness among some end users and they tend to gravitate towards low-grade
products, thereby restricting the growth of flexible packaging materials.

With the introduction of innovative and new products, Indian Flexible Packaging
Industry will lead to faster growth at a rate of around 25% annually. With the advent
of newer plastic films, other novel materials and new technologies, the industry will
be looking at better quality of the products and thereby, increased sales volumes. In
fact, the market is expected to treble its output in the next few years owing to the
greater demand from the food and processed food and retail segments.


BOPET Film is a versatile product broadly classified according to thickness of the
film. Thick Films (50-350 microns in thickness) find application in photographic/X-
ray, electronics, printing, textile, pre-press back up films for photo voltaic cells used
for generating solar power and office supplies, motor insulations and document
lamination. Thin Films (10-36 microns in thickness) are used in flexible packaging
metallic yarn, cables, transformers, capacitors, audio/video tape, hot stamping foils,
release films, decorative ribbons and labels.


Better moisture retention properties render BOPP Film more suitable for food
products like snack foods, biscuits, pasta, dried foods and meat. Further, BOPP Film

also finds application in wrapping cigarette cartons, ready-made garment bags,
adhesive tapes and print lamination.

The market for BOPP Film in India, unlike the rest of the world is underdeveloped.
Due to existence of popular low quality, cheap alternative in the form of TQPP
(Tubular Quenched Polypropylene Film) which is being replaced by BOPP. Growing
preference for premium and sophisticated packaging however is driving growth in
India with increased availability of BOPP, TQPP is being fast replaced by BOPP.

Packaging Raw Materials - Poly Condensation (PET Chips)

PET chips are mainly classified as polyester chips of film grade, yarn grade and bottle
grade. These chips are used as raw material for manufacturing of polyester films,
polyester yarn and PET bottles.

The yarn grade chips market in India is going through a dull and difficult phase.
Though, there has been demand for yarn grade chips, the falling price and margins
and competition from countries like China and Indonesia have made it quite
unprofitable. The market for bottle chips in India is very competitive with
exceptionally low margins. The Company has therefore, strategically decided to
mainly concentrate on production of film grade polyester chips and also decided to
maintain a balance in product mix of commodity and specialty chips for specialty

Packaging Raw Materials - Inks & Adhesives

Printing ink is coloring material in the form of a fluid or paste which is used for
printing on a substrate and then dried. Depending on the process and end use, inks
are classified into letterpress, lithographic, flexographic, rotogravure and others.
Although most of the raw materials used in ink manufacture are available in India,
but certain specialty items are imported. The growth of the printing ink sector has
been very rapid. The market leaders in printing ink manufacture are USA, Europe
and Japan. The demand for printing inks is expected to show an annual growth of
more than 2-3%in Western Europe, North America and Japan. The world market

trend     points   towards    environ-friendly   inks.    Majority   of    the      countries        are
concentrating on water based and UV-cured inks. The very few small scale industries
are capable of incorporating technological advancements in the manufacturing
process. The requirements of printing inks of the future should have features like
high gloss, instant setting, high speed, quick drying, etc. Development work towards
modification of resins, structural vehicles, water based inks, environ-friendly inks
etc. needs to be undertaken vigorously. Quality control is an area which needs
special attention. The R&D of printing ink encompasses several fields which includes
chemistry, production technology and product range. The majority of the large units
have in-house R&D facilities. There is scope for improving the future of the printing
ink industry through proper efforts in research and development.

The growth rate for Lamination Adhesive in terms of volume is approximately 15%
per annum.

Packaging Machinery

The Indian capital industry has to play key role in achieving the industrial growth.

Indian Capital Goods sector is characterized by a wide range of products (almost all
major capital goods are domestically manufactured) - a legacy of import-substitution

Most Indian manufacturers define quality of capital goods largely by performance
parameters and dimensional accuracy and not in terms of aesthetics of finished
goods. Most Indian capital goods are functionally at par with equipment made
elsewhere in the world, but they rank poorly as far as finish is concerned. This has
adversely    impacted   the    competitiveness    of     the   Indian     capital    goods      in    a
discriminating and sophisticated export market.


Flexible Packaging Film

India continues to lag behind the world, in usage of flexible packaging film with one
of the lowest per capita consumption rates globally. Nevertheless, the momentum
from applications in packaging continues to be strong driving growth in both BOPET
Film and BOPP Film markets. The growth is also driven by an increase in the export
of flexible packaging laminates from India as converting operations are shifting from
Europe and USA to India.


As much as 80% of the sales of BOPET Film can be attributed to applications in
packaging. Rapid economic growth being witnessed in India & China is creating
larger opportunities for the use of flexible packaging film in consumer products, hot
stamping foils, metallic yarns, telecom, electronics and other electrical applications.
The Asian region is expected to account for 60% of worldwide BOPET Film sales over
the next two years expanding at a rate of 12%. Meanwhile, estimated growth for thin
films in the global markets is at 8%.

BOPP Films

The BOPP Film market in India is increasing mainly on account of greater prevalence
of modern format retailing and higher preference for hygienically packed, convenient
forms of food articles amongst customers. Moreover, the replacement of TQPP Film is
expected to intensify with lowering of cost differentials with BOPP Film, better
availability of superior quality BOPP Film and creation of novel application areas for
BOPP Film. Growth in Indian demand for BOPP Film over the next few years is being
projected at 15% compared to 6% globally.

________________                   ____             _________________________
This document prepared by our research analysts does not constitute an offer or solicitation
for the purchase or sale of any financial instrument or as an official confirmation of any
transaction. The information contained herein is from publicly available data or other
sources believed to be reliable but do not represent that it is accurate or complete and it
should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s
affiliates shall not be in any way responsible for any loss or damage that may arise to any
person from any inadvertent error in the information contained in this report. This document
is provide for assistance only and is not intended to be and must not alone be taken as the
basis for an investment decision.

Firstcall India Equity Research: Email – info@firstcallindia.com
C.V.S.L.Kameswari                              Pharma
U. Janaki Rao                                  Capital Goods
D. Ashakirankumar                              Automobile
A. Rajesh Babu                                 FMCG
H.Lavanya                                      Oil & Gas
T.Joshna Devi                                  Diversified
Dheeraj Bhatia                                 Diversified
Manoj kotian                                   Diversified
Nimesh Gada                                    Diversified
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