Q3 PAT ZOOMS from 2.19Cr to 53Cr

JINDAL POLY FILMS LTD Rs 512:-Top Pre-Budget Pick

For quarter ended December 2015, JPFL has reported 2300% RISE as CONSOLIDATED NP stands at  Rs 52.92 crores as against NP of 2.19 crores in corresponding quarter of previous year.. It means EPS FOR 9 MONTH ENDED DEis Rs 89.65 before minority interest and Rs 70 after minority interest. JPFL IS LIKELY TO MAINTAIN SAME TREND FOR Q4 AS WELL(one of biggest beneficiary of slide in crude prices), thus Consolidated Eps for FY16 IS ESTIMATED TO BE Rs 105(before minority interest). CASH EPS MUCH MUCH HIGHER AS JPFL PROVIDES AROUND 225 CR FOR DEPRECIATION (Eq 42 cr). JPFL is trading at mere 4.87xFY16Eeps. PE Ratio after minority interest stands at 6.02.  Even if JPFL gets modest PERatio of 12, stock should be Rs 1200 in next 12-15 months (provided broader markets do not witness sharp fall and remain stagnant/bullish) on Eps calculated after minority interest 

1. Leading producer of Polyester and BOPP Films for Flexible packaging industry

2.Largest producer in the WORLD of BOPP films

3. Apart from India, two plants in U.S.A and three in Europe

4. FY15 Sales Rs 7284 crores and PAT of Rs 172 crores (after One-time provision of Rs 118 crores)

5. FY15 Eps (after one-off) Rs 43.22

6. 9M/FY16 PAT  Rs 377 crores (much higher than PAT of entire FY15) with Eps of Rs 90(before minority interest)

7. FY16 Eps CAN BE Rs 105

8. PE Ratio just 4.87 (FY16E earnings) despite being leading player in flexible packaging industry

9. QIP likely to be priced @ Rs 700+

10 Even if JPFL gets modest PE Ratio of 12 on Eps after minority interest (in a scenario where PE Ratio of 20-30 has become norm even for much much smaller companies), its stock can be Rs1200 next year

BACKGROUND:

JPFL is a leading producer of Polyester and BOPP films mainly used for the flexible packaging industry. The company's manufacturing facility at Nasik is world's single largest location factory for producing these plastic films. After acquiring BOPP films divison of ExxonMobil, JPFL has become largest producer of BOPP films in the world with combined capacity of 4.45 lac TPA.

BOPET Film:  BOPET Film is a versatile product broadly classified according to thickness of the film, Thick films find application in photographic/X-Ray, electronics, printing, textile, pre-press back up films, for hoto voltaic cells used for generating solar power and office supplies, motor insulations photopolymer plates and document

lamination. Thin films are used in flexible packaging metallic yarn, cables, transformers, capacitors, audio/video tape, hot stamping foils etc  JPFL has capacity to manufacture 1.27 lac TPA of BOPET film.

BOPP Film: Better moisture retention properties render BOPP film more suitable for food products like snack foods, biscuits, pasta, dried foods and woven polypropylene bags. Further, BOPP film also finds application in over wrapping fo cigarettes, CDs, adhesive tapes, readymade garment bags and print lamination. JPFL has capacity

manufacture 2.10 lac TPA of BOPP films

METALIZED FILMS: Vacuum deposition of Aluminium on BOPET and BOPP films increases the barrier properties of such films, Besides,flexible packaging metalized BOPET films is used for metallic yarn.Metalized BOPP is widely used for gift wrapping.

COATED FILMS: PVDC coated BOPP and BOPET films are used in the flexible packaging industry and co has capacity of 4500 TPA to manufacture3 PVDC, Acrylic and LTS coated films.

JPFL also produces various grades of BOPP films, like heat seal film,ape and textile film, metalized films, pearlized films, opaque film etc

JPFL also has in-house facility to produce polyester chips for its BOPET film business. Co has installed capacity of 1.76 lac TPA.

FINANCIALS:

                          2014-15

                            Rs/Cr

Sales                    7284

Interest                     82

Depreciation            226

One-Off                  117

PBT                       233

PAT                       172

Equity                    42.05

EPS Rs                 43.22

For FY15, JPFL reported Eps of Rs 43.22 after one-off provision of Rs 117 crores. But for same, Eps would have been Rs 65+.  JPFL made huge provision of 226 crores for depreciation which means CASH PROFIT OF

NEARLY Rs 400 crores.

CURRENT YEAR:

                                 2015-16E  9M/FY16

                                  Rs/Cr       Rs/Cr

Sales                          7000        5308

PAT                             442          377

Equity                         42.05      42.05

EPS Rs                        105           90

Eps(after minority Int)      85           70

JPFL's Indian operations are Debt-free. JPFL has resorted to borrowings for acquisition of 5 plants of ExxonMobil.  Now, company is planning to raise funds via QIP for raising production capacity by 1.60 lac tonnes. QIP is

likely to be priced @ Rs 700+ (substantial premium to its current market price).

JPFL IS CURRENTLY TRADING AT PE RATIO OF ONLY 4.87 and 6.02 (before minority interest and after minority interest respectively) DESPITE BEING LEADING PLAYER IN FLEXIBLE PACKAGING INDUSTRY.  These valuations are extremely low by any yardstick, particularly at a time when at Bse/Nse hundreds of companies (with much much smaller size/turnover) are trading at PE Ratio of 20-40.

JPFL is our Top Pre-Budget Pick. Stock is trading at 0.4xSales. FY16ECash profit 650 crores as against market cap of 2275 crores. Even if JPFL get very modest PE Ratio of 12, based upon estimated earnings for FY16, its stock price should be Rs1200 (if stock markets remain stable and do not tumble).

A large sized company available at very attractive valuations where downside is low and UPSIDE SHOULD BE HUGE