JBF Industries Ltd - Research Report

 

Private Client Research

Rating

Buy

Sector

Textile

Company

JBF Industries Ltd

Reco Price
Rs. 228
Price Target (12 Months)
Rs. 410
Upside
79.82%

Date

02 December 2014
Sensex
28444.01
CNX Nifty
8524.7

Exchange

Code

NSE
JBFIND
BSE
514034

New Capacity will bring down its debt considering strong cash flow generating from it.

Top Producer:
JBF industries are amongst the top 10 producers of PET chips and of BOPET films globally. Company currently operates in 3 domestic facilities, 1 in Gujarat and 2 in Silvassa, and 3 overseas facilities in Ras AL khaimah, UAE, Belgium & Bahrain. JBF is amongst the largest domestic manufacturers of textile and bottle grade chips as well as polyester yarn.

Strategically Located:
Company’s facilities are located in close proximity to each other, the raw material supplier and also to the major textile hub of Surat. This ensure flexibility in operations, working capital requirement, optimization and low logistic cost.

Value addition by Mangalore capacity:
JBF 1.25 MMT capacity PTA plant which will be the 2nd largest in India after Reliance. The facility will have working capital advantage as it will save $40-$50 per ton in freight for its RAK facility, due to reduction in logistic costs. Out of full capacity JBF will utilize 80% of the production internally and rest is sold to others. The PTA plant is strategically located near the petrochemical complex of ONGC and MRPL to source its key raw material paraxylene. Currently imports to JBF RAK and India takes approximately 3-4 weeks delivery time, which would reduce to 3-5 days to RAK and 1-2 days to India. This expansion is a major backward integration project and will increase margins substantially going forward.

Lowering Capex:
Aggressive capex done in the past 2 years would start providing healthy growth both in terms of revenue/profitability in next two years. The polyester film capacity at Bahrain and Polyester chip capacity at Belgium got commercialized and commercial delivery has commenced. It is also expected to bring down its debt going forwards considering good cash flow from the new capacities which have commenced and start generating profits expecting from Q3 FY16E. This can be a major trigger for re rating in stock for next two years.

Capacity expansion to drive growth:
JBF has started commercial production at its polyethylene terephthalate (PET) project at Geel, Belgium. The 3,90,000 tpa project, which is co-located on the BP Aromatics site. With this, two out of three projects which JBF was implementing have started commercial production. The third project to manufacture purified terephthalic acid (PTA) at SEZ Mangalore is progressing as per plan and production is expected by second half of 2015. The PTA plant will have 1.25 mn metric tonnes per annum capacity, which JBF claims to be among the largest in India. JBF is well positioned to reap the benefits of capacity expansion and favorable industry scenario and emerge as fully integrated polyester player.

Diversified Products:
Company is engaged in the production of products in the polyster value chain such as Polyethylene terephthalate chips which are of bottle grade , textile grade and film grade; polyster yarn such as partially oriented yarn, polyester filament yarn , full drawn yarn and other specialized yarn and PET films, which are of thin grade , thick grade and metalized grade. Hence company has strong diversified product portfolio to drive the future growth.Thus company continues to diversify its product mix to cater market requirements by way of variety of chips and yarn as well as continue to produce products with relatively higher margins.

Strong Demand:
JBF is developing a 90kt p.a. BOPET films plant at Bahrain International Investment Park, a free trade zone with significant support from Bahrain Government. Demand for thick films continues to remain strong with average deltas between $1000 – 1200 / ton. With increasing demand of solar panels and new usage of thick films being found, and no significant capacities being added, deltas for films are expected to continue to remain strong.

Stock Data

CMP (Rs)
234.9
Face value (Rs)
10
52 Week Range (Rs)
237.20 - 64.10
Market cap (Rs Crores)
1538.53
Price To Book Value (x)
0.77
P/E Ratio (x)
529.09
EV/EBIDTA (x)
5.33

One Year indexed Stock Performance

JBF Industries LtdSensex
JBF Industries Ltd
Performance (%)
1m
6m
12m
Absolute
56.50
101.98
188.04
Sensex
2.09
15.23
36.11

Shareholders

(in %)
30-Sep
Promoter
57.49
FII
11.59
DII
4.82
Others
26.1
Total
100

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Polyester Industry

In India, the demand of Polyester is estimated to increase as there is limited supply of cotton and price advantage of polyester vis-à-vis cotton. Also going forward, synthetic fibre consumption is expected to grow with increase in demand for apparels, home textiles and technical textiles. Demand for PET , for end use applications has been forecasted very high following increasing demand from water packaging and carbonated soft drink applications. Besides the demand for Polyester Films, is also expected to increase with new product innovation in LCDs, solar panels, photovoltaic cells, touch screens, etc.

Profile

JBF Industries was established in 1982.It was founded by Mr Bhagirath Arya as a Yarn texturising company, the company has since backward integrated into the polyster value chain. Company is currently engaged in the production of products in the polyster value chain such as Polyethylene terephthalate chips which are of bottle grade , textile grade and film grade; polyster yarn such as partially oriented yarn, polyester filament yarn , full drawn yarn and other specialized yarn and PET films, which are of thin grade , thick grade and metalized grade. It commenced its international operations in 2006 by foraying into the PET chips and PET film business by setting up plant at Ras-Al-Khaimah UAE. Currently JBF has 3 plants internationally in RAK, Bahrain and Belgium.

Profit & Loss Statement:- (Consolidated)
(Rs Crores)
Particulars
Mar 12
Mar 13
Mar 14
Mar 15E
Mar 16E
Income:-
  • Net Sales
  • Growth (%)
  • Total Expenditure
  • EBIDTA
  • EBIDTA Margin (%)
  • Other Income
  • Operating Profit
  • Interest
  • PBDT
  • Depreciation
  • Profit Before Taxation & Exceptional Items
  • Exceptional Income / Expenses
  • Profit Before Tax
  • Provision for Tax
  • Tax Rate (%)
  • Profit After Tax
  • Pat Margin (%)
  • Adjusted EPS
  • 7179.25
  • -
  • 6759.26
  • 419.99
  • 5.85
  • 127.12
  • 547.11
  • 192.14
  • 354.97
  • 152.46
  • 202.51
  • -
  • 202.51
  • -20.47
  • -10.11
  • 222.98
  • 3.11
  • 30.86
  • 7455.82
  • 3.85
  • 6896.03
  • 559.79
  • 7.51
  • 45.51
  • 605.30
  • 254.52
  • 350.78
  • 200.24
  • 150.54
  • -
  • 150.54
  • 37.06
  • 24.62
  • 113.48
  • 1.52
  • 15.32
  • 8567.73
  • 14.91
  • 7979.41
  • 588.32
  • 6.87
  • 41.02
  • 629.34
  • 346.37
  • 282.97
  • 245.05
  • 37.92
  • -17.94
  • 19.98
  • 14.27
  • 37.63
  • 5.71
  • 0.07
  • 0.44
  • 9550.00
  • 11.46
  • 8490.00
  • 1060.00
  • 11.10
  • 40.00
  • 1100.00
  • 425.00
  • 675.00
  • 285.00
  • 390.00
  • -
  • 390.00
  • 145.06
  • 37.19
  • 244.94
  • 2.56
  • 37.39
  • 12900.00
  • 35.08
  • 11500.00
  • 1400
  • 10.85
  • 40.00
  • 1440.00
  • 400.50
  • 1039.50
  • 350.00
  • 689.50
  • -
  • 689.50
  • 295.05
  • 42.79
  • 394.45
  • 3.06
  • 60.22
Source: Stockaxis Research, Company Data

Valuation

Aggressive capex done in the past 2 years would start providing healthy growth both in terms of revenue/profitability in next two years. Also we expect debt coming down going forwards considering good cash flow from the new capacities which have commenced and start generating profits expecting from Q3 FY16E.Hence we assign valuation of 6.80x to FY 2016E indicating target price of Rs 410 with long term horizon.

 

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