Jindal Polyfilms Ltd - 155.00 Rs

Incorporated in 1974, Jindal Polyfilms Ltd (JPL), flagship company of the respected BC Jindal group is India’s largest manufacturer of flexible packaging films. It makes polyester films (BOPET), polypropylene films (BOPP), metallised films and coated films with in house ability to produce polyester chips for captive consumption. BOPET & BOPP films are primarily used in packaging apart from having wide range of applications such as photography/x-ray, LCD and flat screen televisions, printing, electrical insulation, audio/video tapes, cartridges, adhesive tapes, print laminations and other industrial applications. Due to growing preference for premium and sophisticated packaging, TQPP (Tubular Quenched Polypropylene Film) is being fast replaced by BOPP and is preferred choice for packaging of clothing and food products like confectionery, biscuits, snack foods, pasta, bakery, dried foods and meat. JPL is among the few manufacturers to offer specialty BOPET and BOPP films such as specialized hot stamping foils, isotropic films, pinhole free yarn grade films, low oligomer milky white films, flame treated five-layer films and high speed tobacco overwrapping films. Company also has the facility to produce polyester yarn, but due to adverse market condition it has been temporarily closed down.

JPL operate the world’s largest single location facility for flexible packaging films at Nasik, Maharashtra and employs modern technology to produce high quality products at lower cost. With its new unit at Silvassa becoming operational recently, the current production capacity of the company stands enhanced to BOPET (111000 tpa), BOPP (90000 tpa), metalized film (40000 tpa), coating (18000 tpa), polyester chips (70000 tpa) and polyester yarn (54000 tpa). Importantly, JPL’s export of high value BOPET film to European union doesn’t attract anti dumping duty although it’s imposed on other manufacturers in India. Hence, this gives the company an advantage over domestic competitors in exporting to European countries, where the realizations on such film are among the highest in the world. Besides it has a well-established international marketing network in over 40 countries with several Fortune 500 companies as its end users. Moreover it also has a foreign subsidiary company viz. Rexor SAS, a leading metallised and coated film producer in France, which JPL acquired in 2003.

To fund its expansion plan and set up a new unit in Silvassa, JPL had come with an FPO of approx 83 lac shares @ 360 Rs per share to raise nearly 300 crore in June 2005. It also made a preferential allotment of 13 lac shares @ 360 to DEG in Feb 2005. Against this the share is currently available at a price of only 155 Rs i.e. 60% discount to its FPO price. For the latest June qtr, its sales jumped up 60% to 316 cr whereas NP shot up by 175% to 22.50 cr registering an EPS of 8/- Rs for the quarter. Since the full impact of expansion has started to kick in, company is estimated to clock a turnover of 1350 cr and PAT of 85 cr. This works out to an EPS of 30 Rs on current equity of 28.10 cr. Secondly company has a huge reserve leading to a book value of approx 280 Rs. To conclude, at the current enterprise value of merely 700 cr, it’s a good value buy. Although the rising crude oil prices is a cause of concern still investors can buy this scrip at current levels as it can easily give 35~50% return within a year.