JBF_Inds_CRISIL_150711

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JBF Industries Ltd

Enhancing investment decisions

Detailed Report


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CRISIL Limited. All Rights Reserved.

Exp lana t ion o f CRI SI L Fundam en ta l and Va lua t ion ( CFV) m a t r i x

The CFV Matrix (CRISIL Fundamental and Valuation Matrix) addresses the two important analysis of an investment making process

Analysis of Fundamentals (addressed through Fundamental Grade) and Analysis of Returns (Valuation Grade) The fundamental

grade is assigned on a five-point scale from grade 5 (indicating Excellent fundamentals) to grade 1 (Poor fundamentals) The

valuation grade is assigned on a five-point scale from grade 5 (indicating strong upside from the current market price (CMP)) to

grade 1 (strong downside from the CMP).

CRISILFundam enta l Grade

Assessm ent CRI SI LValuat ion Grade

Assessment

5/5 Excellent fundamentals 5/5 Strong upside (>25% from CMP)

4/5 Superior fundamentals 4/5 Upside (10-25% from CMP)

3/5 Good fundamentals 3/5 Align (+-10% from CMP)

2/5 Moderate fundamentals 2/5 Downside (negative 10-25% from CMP)

1/5 Poor fundamentals 1/5 Strong downside (


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CRISIL Limited. All Rights Reserved. CRISIL EQUITIES | 1

Ju ly 11 , 2011

Fair Value Rs 229CMP Rs 16 2

Fu n d a m e n t a l Gr a d e 4 / 5 ( S t r o n g f u n d a m e n t a l s)

Va lu a t io n Gra d e 5 / 5 (C MP h a s s t ro n g u p s id e )

I n d u s t r y I n f o r m a t i o n t e c h n o lo g y

Po la r i s So f t w a re Lim i ted Bus iness m omen t um rema ins i n tac t

Fu n d a m e n t a l G r ad e 3 / 5 ( G o od f u n d a m e n t a l s )

Va lu a t io n Gra d e 5 / 5 (C MP h a s s t ro n g u p s id e )

In d u s t r y C h e mica ls

JBF I nd us t r ies Lt dGo i n g b ackw a r d t o m o ve f o r w a r d

JBF Industries (JBF) is amongst the largest polyester chip manufacturers in the

world with a capacity of around 1 million tonnes per annum, catering topolyester filament and bottle manufacturers. The location of its plants gives it

easy access to raw material suppliers and end consumers, thereby making it

cost competitive. We maintain our fundamental grade of 3 / 5 , indicating thatits fundamentals are g o o d relative to other listed securities in India.

Af te r f o rw a rd in te g ra t io n , JBF p la n n in g t o g o b a ckw a r dThe company expanded its chip capacity in India to 550,800 tpa in FY09 from

216,000 tpa. As a de-risking strategy, the company has forward integrated

into filament yarn manufacturing and is using its own chip capacity for the

same. JBF is now planning to set up a purified terephthalic acid (PTA) plant of

1.12 mn tonnes per annum in Mangalore SEZ by mid 2014. PTA is one of the

major raw materials for polyester chip manufacturing; by FY15, output from

this plant will suffice JBFs requirement of around 1 mn tonnes of PTA and will

lead to better margins.

U AE su b s id ia ry t o b e co me a s ig n i f i ca n t co n t r ib u t o r t o re ve n u e sJBF RAK LLC, the 100% UAE-based subsidiary, has a 1,100 tonne per day

(tpd) polymerisation plant that produces bottle-grade PET chips (900 tpd) and

polyester films (200 tpd). Its share in consolidated revenues rose to 45% in

FY11 from 20% in FY08 on account of capacity additions in the chips and film

segments; it is expected to remain the major contributor going forward,

supported by the fast-growing Middle East market.

P ol y e st e r d e m a n d t o g r o w a t 8 - 9 % , co m p e t i t i o n t o r e m a i n in t e n s eWe expect demand for polyester to grow at a CAGR of 8-9% from FY11 to

FY16, on account of rising per capita consumption of textiles and better

competitiveness of polyester filament as compared to cotton yarn. However,

the polyester market will also continue to witness intense price competition.

Ke y r i sk p r i ce vo lat i l i t y a n d e xe cu t io n o f PTA p la n t

Volatility in raw material prices, intense competition, JBFs exposure to foreign

exchange risk, and project execution risks are some of the concerns facing the

company.

R ev e n u es t o g r o w a t 1 0 % ; m a r g i n s t o d e c li n eWe expect JBFs top line to grow at a CAGR of 10%, from Rs 64.7 bn in FY11

to Rs 79 bn in FY13E. EBITDA margin rose to historical highs on account of

higher realisation in polyester films. Going forward, we believe film prices will

decline, and we expect EBITDA margin to return to sub 12% in FY12 and FY13.

Va lu a t io n : Cu r r e n t m a rke t p r i ce h a s s t ro n g u p s id eWe have used the discounted cash flow method to value JBF and arrived at a

fair value of Rs 229. At this value, the implied P/E multiples are 5.5 FY12E and4.5 FY13E earnings.

KEY FORECAST

(Rs m n) FY09 FY10 FY11# FY12E FY13EOperating income 43,119 49,369 64,704 71,290 78,832

EBITDA 5,316 4,721 9,578 7,829 9,013

Adj Net income 2,202 1,346 5,454 2,983 3,699

Adj EPS-Rs 35.4 21.6 76.2 41.7 51.7

EPS growth (%) 67.3 (29.4) 211.3 (45.3) 24.0

Dividend yield (%) 4.4 3.0 4.9 4.9 5.4

RoCE(%) 22.1 14.3 27.7 17.2 16.6

RoE(%) 21.7 11.5 40.3 18.7 19.8

PE (x) 3.7 10.8 2.1 3.9 3.2

P/BV (x) 0.7 1.2 0.8 0.7 0.6

EV/EBITDA (x) 3.7 5.7 3.0 4.0 4.3

#- based on abridged financial

So u rce : C o mp a n y , C RI SI L Eq u i t i e s e s t im a te

CFV MATRI X

KEY STOCK STATI STI CSNIFTY/SENSEX 5616 / 18721

NSE/BSE ticker JBFIND

Face Value (Rs per share) 10

Shares outstanding (mn) 71.5

Market cap (Rs mn)/(US$ mn) 11,651/ 263

Enterprise value (Rs mn) /(US$ mn) 28,360 /640

52-week range (Rs) (H/L) 201 / 152

Beta 1.14

Free float (%) 58.8%

Avg daily volumes (30-days) 121,044

SHAREHOLDI NG PATTERN

PERFORMANCE VI S--VI S MARKETR e tu rn s

1 - m 3 - m 6 - m 1 2 - m

JBF -3% -10% -12% 15%

NIFTY 2% -3% -4% 7%

AN ALYTI CAL CONTACT

Sudhir Nair (Head) [email protected]

Arun Vasu [email protected]

Vinay Chhawchharia [email protected]

Cl ien t se rv ic ing desk

+91 22 3342 3561 [email protected]

1 2 3 4 5

1

2

3

4

5

Valua t ion Grade

Fundam

entalGrade

Poor

Fundamenta ls

Excel lent

Fundamenta ls

S

trong

Do

w

nside

S

trong

U

pside

47.5%41.5% 41.3% 41.2%

1.3%8.4% 10.0% 10.5%

5.7%13.0%

18.5%17.9%

45.5%37.1%

30.3% 30.4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Jun-10 Sep-10 Dec-10 Mar-11

Promoter FII DII Others


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JBF I ndu s t r ies Lt d

Table 1 : Overv iew o f bus iness segm ents

P r od u c t / Se g m e n t

Bo t t l e & F ib re g ra d e ch ip s -

I n d i a P OY - I n d i a

Bo t t l e g ra d e ch ip s -

UA E

Po lye ste r f i lm s -

UA E

R eve n u e co n t r ib u t io n

(FY11)

29% 25% 28% 18%

R eve n u e co n t r ib u t io n(FY13)

34% 24% 26% 16%

P r od u c t / s e r v i ce

o f f e r in g

The product range includes

semi dull, bright, semi bright,

and cationic dyeable chips.

45% of the chips

produced is used for

captive consumption

for producing POY.

Supply bottle-grade pet

chips, which is mainly

used for manufacturing

packaged water and soft

drinks bottles.

Thick films and

commodity film.

Currently 70% of

the revenue comes

from commodity

films

After captive consumption for

POY, the remaining 35% is

bottle grade and 65% is fibre

grade chips

POY is supplied to

small independent

texturiser in and

around Silvassa

regionJBF has flexibility to convert

some portion of its fibre grade

capacity into film gradecapacity

Geograph ic p resence Bottle grade chips - domestic

(50%) and export (50%)

Fibre grade chips - domestic -

supplying to small players in

and around Silvassa

Majority of revenue

comes from domestic

market.

Supply POY to

texturiser in and

around Silvassa and

Surat region

70% is sold in the spot

market, mainly to the GCC

(Gulf Cooperation Council)

countries. 30% sold on

contract basis to

established clients such as

Coca- Cola, Pepsi, and

Nestle, on a fixed-margin

basis.

EU countries and

Middle East

Ma rke t p o s i t i o n Largest player in fibre grade

chips in India

Ranks among the top

five POY

manufacturers

One of the largest players

in the UAE market;

however, in global

context, JBF is a small

player in bottle grade

chips segment

JBF is a small player

in the polyester film

industry

Third largest player in bottle

grade chips in India

Also has marginal

presence in value

added products like

FDY and dyed yarn

To add 36,000 tpa

in this fiscal taking

total capacity to 0.1

mn tonnes per

annum

I n d u st r y g r o w t h

e xp e c ta t io n s

Domestic bottle grade chips

demand to grow at healthy

rate over next 2-3 years.

Polyester filament will be a

leading demand driver for

fibre grade chips

CRISIL Equities

expects POY demand

to grow at a CAGR of

8-9% from FY11 to

FY16

Global bottle grade chips

demand to grow at 5-6%

over next 2-3 years.

Demand from Middle East

and African countries to

grow at faster pace.

Demand for

polyester film to

rise, as it finds

application in newer

areas like solar

panel, LCD panel,

flexible packaging

Sa le s g ro w th

( FY09-FY11 2 -y r CAGR)

17% 24% 3% 215%

Sales f o recast

( FY11-FY13 2 -y r CAGR)

20% 7% 6% 4%

D e ma n d d r i ve rs Demand for bottle grade chips

to grow owing to growth in

FMCG sector.

Demand from RMG,

home textile and

technical textile in

domestic as well as

export markets

The Middle East and Africa

are fast- growing markets

for bottle-grade chips,

where company has a

presence

Volume growth in

packaging industry

Demand for POY will lead to

demand for fibre grade chips

Ma rg in d r i ve rs Close to end user market

Close proximity to port, resulting in lower logistic cost

of raw material

Close to end user market

Abundant raw material availability

Tax benefitKe y co mp e t i t o rs Reliance Industries, Indo Rama Synthetic Limited, Alok Industries, Dhunseri Petrochem and Tea Ltd

and global manufacturers of chips and films

Source : Com pany, CRI SI L Equ i t ies


5/26



Grad in g Rat ion a le

One o f the la rges t ch ip manu fac tu r e rs

JBF Industries (JBF) is one of the largest polyester chip manufacturers with

capacity of 955,300 tpa (India and UAE combined) in FY11. JBF manufactures

different varieties of chips like textile, bottle, film and specialty grades.

Of the total capacity, 60% is produced in India and the rest through its UAE

subsidiary. JBFs revenue has grown at a three year CAGR of 32% from Rs. 29

bn in FY08 to Rs. 64.7 bn in FY11.

Figur e 2 : Revenue m ix


12,751

14,349 16,029 19,623

10,353

11,058 11,359 17,077

5,860

17,96117,905

18,925

1,176

4,579 11,700

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

FY08 FY09 FY10 FY11

Polyester chips POY Bottle grade chips Polyester Film

Figur e 1 : Segm enta l snapshot o f JBF


JBF

India UAE

Bottle GradeChips(110,000

tonnes)

Polyester GradeChips(455,300

tonnes)

220,000 tonnessold in external

market

235,300 tonnesconsumed

internally forPOY

Bottle GradeChips(390,000

tonnes)

324,000 tonnessold in external

market

66,000 tonnesconsumed

internally forfilms


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JBF leads the domes t i c ch ip ma rke t w i th ove r 30%

sha re

JBF is the leader in the domestic chip market, with over 30% market share by

volume. JBF has expanded its chip capacity from 118,800 in FY05 to 334,800

tpa in FY08 to 565,300 tpa in FY11. Of the total capacity, around 80% is fibre

grade chips and the remaining is bottle grade chips. JBF is carrying out

debottlenecking of its continuous polymerisation plant, which is expected to

increase capacity by around 60,000 tpa, taking total chip capacity to 626,000

tpa.

Figur e 3 : Trend in ch ip capac i ty and u t i l isa t ion ra tes


JBF is the largest manufacturer of textile (fibre) grade chips in India with a

capacity of around 455,300 tpa. The company utilises a portion of fibre grade

chips as raw material for its own POY production, and surplus chips are sold to

small POY manufacturers.

Out of the total fibre grade chips capacity, 235,320 tpa is used in-house for

manufacturing partially oriented yarn (POY), fully drawn yarn (FDY) and other

speciality yarn. The remaining is sold to small POY manufacturers, in and

around Silvassa and Vapi, who buy chips to extrude filament (as a continuous

polymerisation plant for manufacturing POY is very capital intensive).

JBF also has the flexibility of switching between fibre and film grade chips

manufacturing, depending upon the demand-supply of fibre and film grade

chips.

Table 2 : Dom est ic f ib re ch ip p layers

JBF I n d u s t r ie s Ga rd e n Si l k M i l l s I n d o R am a Syn th e t i cs

Chip

Chip capacity Tonnes 455,300 416,000 87,500

Chip production Tonnes 378,400 358,758 10,745

Capacity utilisation % 86 56 12

Note: Numbers for JBF are adjusted for bottle grade chips

JBF, IRSL numbers are for FY11 and Garden Silk is for FY10.

So u rce : C o mp a n y , C RI SI L Eq u i t i e s e s t im a te

334,800 334,800

550,800 550,800 565,300

73

102

73

78

86

0

10

20

30

40

50

60

70

80

90

100

110

0

100,000

200,000

300,000

400,000

500,000

600,000

FY07 FY08 FY09 FY10 FY11

( % )(Tonnes )

Capacity Capacity Utilisation (RHS)

JBFs easy access t o r aw

mat e r ia l and end consumers

mak e i t cos t compe t i t i ve


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Forw ard in t egra t ion in t o POY reduces dependence on ch ips

m a r k e t

In FY08, JBF sold 60% of its chips to the external market; however, with

forward integration into POY and other yarn segments, it now sells less than

45% to the external market.

Most standalone POY texturiser players around Silvassa and Vapi, having

backward integrated from texturising into chip-based polyester making facilities,

offer a ready consumer market to JBF to sell its textile-grade polyester chips.

But in the past three-four years, bigger consumers like Alok Industries, Sumeet

Industries, Bhilosa Industries, etc. have backward integrated into POY

production through the continuous polymerisation method.

JBFs major polyester chip clients, who accounted for 20-25% of the demand,

have backward integrated, resulting in a contraction in polyester chips demand.

However, in the past two years, JBF has also forward integrated to expand its

POY capacity by 72,000 tpa. This forward integration thus largely de-risks it

from depending on the external market.

Further, JBFs flexibility to convert fibre grade chips to film grade chips, and

export the same to its UAE facility for film production fortifies JBF against any

risky exposure to the domestic chips market.

Bo t t le g rade ch ips I nd ia

JBF is the third largest domestic player in bottle grade chip manufacturing with

capacity of 110,000 tpa. The domestic and the export markets contribute

equally to JBFs total revenue from bottle grade chips.

Wh at is PET? Figur e 4 : 3 rd la rgest in dom est ic PET m arket

PET (polyethylene terephthalate) is a clear, strong

and lightweight engineering plastic belonging to the

polyester family. PET has become the worlds

packaging choice for many foods and beverages

because of its distinct characteristics - hygienic,

lightweight, unbreakable, non-reactive, economical

and freshness-retentive.

So u rce : I n d u s t r y , CR IS I L Eq u i t i e s So u rce : I n d u s t r y , CR IS I L Eq u i t i e s

Reliance49%

Dhunseri33%

JBF

18%

Forw ard in teg ra t ion w i l l

increase in terna l consumpt ion

of ch ips , reduc ing dependenceon the ch ip marke t


8/26



Robus t dom es t i c dem and to d r i ve g row th

On the back of strong growth in end-user industries, especially the FMCG sector,

and a preference for polyethylene terephthalate (PET) as packaging material

has PET demand has increased by nearly 35% during FY05-FY10E. Indian

packaging market is of about Rs 775 bn as of FY10; up uniformly by ~15%

yoy in the past five years. Despite a steep rise in consumption, Indias per

capita PET consumption is very low at 0.3 kg compared to the global average of

~2 kg, which leaves tremendous room for further growth.

Figur e 5 : Packag ing indust ry dr iv e PET dem and Figur e 6 : Market segment s fo r PET ch ips in I nd ia

MT: Metric tonnes


Par t ia l l y o r ien ted ya rn c lose to consuming m arke tJBF expanded its POY capacity from 163,200 in FY08 to 235,320 tpa in FY11.

Production from this capacity is sold to texturisers who convert them into

texturised yarn (DTY). This yarn is largely used in shirts, suits, saris, womens

dress materials and knitwear.

The texturising industry is fragmented, with Bhiwandi, Silvassa, Daman and

Surat being the major texturising centres. Silvassa has a large number of

texturising units, since the government had offered a 15-year sales tax holiday

and cash subsidies for units set up in this region during 1984-1998. Thus, JBF

benefits from its presence in the Silvassa region.

The POY segment is dominated by Reliance Industries Ltd with 40% of the

domestic installed capacity, followed by Indo Rama Synthetics. JBF is among the

top five players with 8% of the market share in terms of capacity (235,320 tpa

in FY11).

61 99 123 147 221 274

62%

24%20%

50%

24%

0%

10%

20%

30%

40%

50%

60%

70%

-

50

100

150

200

250

300

FY05 FY06 FY07 FY08 FY09 FY10E

( 0 0 0 m t )

Domestic demand Growth y-o-y% (RHS)

Liquor, 20%

Pharma, 20%

EdibleOil, 13%

FMCG, 26%

Pesticide, 7%

PersonnelCare, 5%

Others, 9%

JBFs pr esence in Si lv assa

m akes i t r ead i ly accessib le to

th e POY m arket


9/26



Figur e 7 : 3 rd la rgest p layer in POY ( by Capaci ty ) Figur e 8 : Trend in POY capac i ty and u t i l isa t ion ra tes

So u rce : I n d u s t r y , CR IS I L Eq u i t i e s So u rce : Co mp a n y , CR IS I L Eq u i t i e s

JBF also has a presence in the fully-drawn yarn segment (FDY) following itsacquisition of Microsynth Fabrics (India) Ltd and speciality yarn; however, this

segment contributes less than 3% to revenue.

P o lyes te r dem and to acce le ra te , m a in l y suppor ted by

dom es t i c m ark e t

Growth in POY demand will be mainly supported by the domestic market.

CRISIL Equities expects POY demand (domestic and derived) will grow at a

CAGR of 8-9% from FY11 to FY16, higher than previous five years CAGR of

5.2% (FY06 to FY11), mainly driven by:

Price competitiveness as compared to spun yarn Overall growth in domestic textile consumptionThe delta between cotton yarn and polyester yarn increased from Rs 25 per kg

in FY05 to Rs 60 per kg in FY10 and then to Rs 90 per kg in FY11. We expect

this gap to remain in FY12 and FY13. This gap between polyester and cotton

yarn prices will enhance the price competitiveness of polyester, leading to better

growth of the same.

CRISIL Equities expects the domestic textile (readymade garments and home

textile) market to grow at a CAGR of 7-8% in the next two years (FY11 to

FY13). Within the domestic market, growth will be led by rural markets. The

growth in rural markets can be primarily attributed to rising rural incomes, and

preference for cheaper fabric (100% non cotton fabric). This will support the

demand for POY and fibre grade chips.

162.45

200

235.32

259

822.725

0 200 400 600 800 1,000

Garden Silk Mills

Alok Industries

JBF Industries

Indo RamaSynthetics

RelianceIndustries

( 0 0 0 ' t o n n e s)

150,

000

163,

200

163,

200

201,

200

235,

320

235,

320

92%

79%

93% 93% 95% 99%

0%

20%

40%

60%

80%

100%

120%

0

50,000

100,000

150,000

200,000

250,000

FY07 FY08 FY09 FY10 FY11 FY12P

(Tonnes )



10/26



Figur e 9 : Demand for PFY to grow a t hea l thy ra te F igur e 10: Trend in POY capac i ty and u t i l isa t ion


Ut i l i sa t ion ra t es to rem ain s tab le in FY12

Utilisation rates of POY producers declined from 72% in FY08 for two

consecutive years, before reviving to 76% in FY11. Improvement in utilisation

rate was largely due to no capacity addition and healthy demand for polyester in

the domestic market. Going forward, CRISIL Equities expects utilisation rate to

improve marginally from FY11 levels, as no major capacity addition is expected

and demand is expected to grow by 7-8%. Utilisation levels will fall to 73% in

FY13 as capacity of around 350 mn kg is expected and demand grows by

around 7-8%. However, JBF will continue to operate at a healthy rate of above

85% in FY12 and FY13 owing to close proximity to the end user market.

UAE subsid ia ry a key revenue con t r ibu to r

The UAE subsidiary contributed nearly 45% to total revenues in FY11, and the

trend is expected to continue. Around 60% of the total UAE revenue comes from

bottle grade PET chips and the remaining from polyester films. We expect UAE

operations will continue to be the key revenue contributor, and its share in total

revenue will continue to remain over 40%.

Within the UAE operation, bottle-grade chips will continue to dominate the

revenue mix, while polyester films will see its share in the pie increasing. Share

of films has grown from 6% in FY09 to 38% in FY11. At UAE, JBF has a bottle

grade chips manufacturing capacity of 390,000 tpa and 66,240 tpa of polyester

film capacity. JBF is planning to increase the capacity of bottle grade chips to

430,000 tpa and of polyester films to 102,200 tpa by FY12.

Tab le 3 : Hea l thy u t i l i sat ion r a tes in bo th segmen ts

FY09 FY10 FY11

Bottle grade chips Capacity (tonnes) 324,000 360,000 390,000

Utilisation rate 95.3% 100.1% 86.9%

Polyester films Capacity (tonnes) 60000 66000 66240Utilisation rate 23% 83% 114%


1,

041

1,0

73

1,

162

1,

281

1,3

42

1,3

27

1,3

77

1,4

56

1,5

60

0

200

400

600

800

1,000

1,200

1,400

1,600

FY-

05

FY-

06

FY-

07

FY-

08

FY-

09

FY-10

FY-11

FY-12

FY-13

( M n K g )

Domestic & derived demand

2,0

29

2,0

58

2,0

58

2,2

25

2,5

72

1,3

50

1,4

35

1,5

64

1,6

89

1,8

24

67

70

7677

73

40

45

50

55

60

65

70

75

80

1,000

1,200

1,400

1,600

1,800

2,000

2,200

2,400

2,600


( % )( M n . K g )

Capacity Production Op.rate (RHS)


11/26



JBFs enhanced focus on the M idd le East market to boost

bo t t l e -g rade ch ip vo lum es

JBFs UAE operation mainly focuses on bottle-grade chips. The demand for

bottle- grade PET chips is mainly dependent on the demand for packaged water,

soft drinks and other beverages.

JBF is enhancing its capacity in this segment by 40,000 tpa in FY12 to reach

430,000 tpa. Around 30% of companys PET chip sales are on contract basis

with established clients like Coca- Cola, Pepsi, Nestle, San Benedetto, Masafi,

Al-Ain, etc. This is on a fixed-margin basis -- that is, the delta between the raw

material price and the final product price is fixed. This allows the company to

maintain its tolling margins; however, its bargaining power with clients is

limited. The remaining 70% of PET chips are sold in the spot market, mainly to

the GCC (Gulf Cooperation Council) countries, where the company has better

pricing flexibility and hence, higher margins.

In future, the company will focus on increasing the share of GCC in the sales

mix, as it is a growing market and offers better pricing flexibility. The Middle

East and Africa are fast-growing markets for bottle-grade chips, and are

expected to grow at a CAGR of 10-12% from 2010 to 2015.

Figu re 11 : Opera t ing ra tes to be f i rm pos t 2011 Figu re 12 : Globa l demand m ix o f bo t t le g rade ch ips

So u rce : I n d u s t r y So u rce : I n d u s t r y

PET is one of the fastest growing polyester applications, having logged a CAGR

of 6% in the past five years. This holds out bright prospects for the PET resin

industry catalysed by population growth, widening applications and the

replacement of container/glass bottles. The long-term prospects of the PET resin

industry appear upbeat owing to product convenience and characteristics.

Over the next five years, global operating rates are expected to improve from

an estimated 77% in 2010 to around 82% in 2015 though intermittent periods

could see some excess supply.

14 16 18 19 18 20 21 22 22 22 23

82%

79% 78%

73%

75%

78%

76% 77%77%

81%

82%

68%

70%

72%

74%

76%

78%

80%

82%

84%

0

5

10

15

20

25

2005

2006

2007

2008

2009

2010E

2011E

2012E

2013E

2014E

2015E

(MMT)

Global Capacity Operating Rate (RHS)Asia29%

North America26%

European

Union22%

MiddleEast/Africa

8%

SouthAmerica

8%Central

Europe7%

Midd le East is a fas t -gr ow ing

mark e t fo r bo t t le -g rade PET

ch ips


12/26



Figur e 13: PET ch ips capac i ty and u t i l isa t ion F igur e 14: Globa l end-user indust ry fo r PET

So u rce : Co m p a n y , CR IS I L Eq u i t i e s Es t im a te So u rce : I n d u s t r y

JBF has been operating at a healthy rate of above 95% for the past two years;however, this year, despite healthy demand, JBFs operating rates declined,

owing to supply constraint in PTA - one of the major raw materials for

manufacturing chips.

Po lyes te r f i lm f i nd ing w ide r app l i ca t i ons

JBF started its UAE operation in FY09, with 60,000 MTPA of polyester films.

Contribution from this segment has increased from 6% in FY09 to 38% in FY11.

Demand for polyester films, largely due to their use for LCD panel and

photovoltaic cells, was robust during the year, which resulted in operating rates

improving from 83% in FY10 to 114% in FY11. Profit from this segment was

also at its peak as prices of films surged to US$4000 per tonne.

Polyester f i lm s - app l ica t ion Figur e 15: Trend in f i lm capac i ty and u t i l isa t ion

Polyester film is manufactured from polyethylene

terephthalate chips. Film grade PET chips are used for

printing and lamination, metallization, embossing,holograms, thermal lamination, etc.

So u rce : I n d u s t r y , CR IS I L Eq u i t i e s So u rce : Co mp a n y , CR IS I L Eq u i t i e s

JBF is expanding its film capacity by another 36,000 tpa in FY12. Current mix of

commodity film and specialty film is 70:30; post expansion it will move towards

50:50, enabling improvement in margin. Production from this additional

capacity is expected from December, 2011.

324,000360,000

390,000

95100

87

0

10

20

30

40

50

60

70

80

90

100

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

FY09 FY10 FY11

( % )(Tonnes )

Capacity Capacity Ut ilisation (RHS)

Carbonated

softdrinks, 19%

Non-Food

containers,29%Food

containers,28%

Other

drinks, 24%

60,000 66,000 66,240

23

83

114

0

20

40

60

80

100

120

50,000

54,000

58,000

62,000

66,000

70,000

74,000

FY09 FY10 FY11

( % )(Tonnes )



13/26



Global demand for films is expected to grow at 7-8% CAGR during 2010-15;

also, the operating rates are expected to strengthen as capacity addition lags

demand growth; utilisation rates are expected to remain over 90% post 2011.

K ey deve lopm en ts

PTA p lan t JBF, as part of its backward integration plan, is setting up a PTA

plant at Mangalore (SEZ), whose 1.12 million tonnes of PTA will be used for

captive consumption. The project will entail a capex of Rs 30 bn, with debt

equity mix of 70:30. The company has already finalised the land and applied for

necessary environmental clearances. Production from this unit is expected to

start in mid 2014.

In FY10, JBF had planned that it would set up a PTA plant in Oman, with 30%

equity from the Oman group and 70% from JBF. JBF has scrapped its project at

Oman and shifted the location to Mangalore; with 100% JBF equity, projectspecification and technology partners remain the same.

The PTA plant will ensure raw material supply for both the Indian and the UAE

operations, and thus boost operating margins.

For the Mangalore SEZ plant, JBF is planning to source paraxylene (PX) from

ONGC Mangalore Petrochemicals Ltd. However, in case of any delay in supply

from the ONGC plant, the company is also open to importing PX as the SEZ is

very close to port.

Belg ium PET p lan t The company is planning to set up 390,000 tpa PET plant

in Belgium at the British Petroleum (BP) compound. This project will require

capex of around Rs 7 bn with debt-equity mix of 70:30. PTA will be procured

from the adjacent BP plant. However, this project has been on the anvil for the

past three years; so we have not considered this project in our projections.


14/26



Key Risks

A v a il a b il i t y o f r a w m a t e r i al

In FY11, the company faced difficulties in procuring raw material, especially

PTA, which resulted in lower operating rates for the chip division. Going forward,

we expect tightness in PTA supply on the back of capacities being commissioned

in China; however, any delay in new PTA capacities will strain supply and impact

production of polyester products.

T ime ly execu t ion o f p roposed expans ions

JBFs planned 1.12-MTPA PTA plant at Mangalore SEZ is expected to start

production in FY15. As this is not only a large capacity expansion but also a new

area of operation for the company, execution remains a key challenge.

Vo la t i l i t y i n c rude o i l p r i ces

The company manufactures fibre, bottle and film grade chips, for which the

major raw material are PTA and MEG. These two key raw materials account for

~80% of the total operating costs. Historically, PTA and MEG prices have

remained volatile and are currently on an upward trend following a rise in crude

oil prices (PTA and MEG are crude oil derivatives). PTA prices are directly linked

to naphtha prices, while MEG prices are linked to ethylene prices, both of which

are volatile in nature.

Hence, the companys EBITDA margins are sensitive to the movement in raw

material prices especially in a down cycle.

Forex f l uc tua t ions

In order to hedge against foreign currency fluctuations (UAE subsidiary and raw

material and finished goods prices), the company has entered into derivative

contracts.

The company has witnessed forex losses of Rs 633.7 mn and Rs 1446.3 mn in

FY10 and FY11, respectively, which it had not accounted for. These losses were

around 25% of its PBT in each of these two years. JBF has recognised forex loss

of around Rs 840.1 mn in FY11 on one of the derivative contracts, which expired

in FY11.

Hence, any wide fluctuations in forex rates will continue to adversely affect JBFs

net margins. We have considered the same in our projections for FY12 and

FY13. Going forward, net profit will continue to remain highly vulnerable to

foreign exchange fluctuations.


15/26



Financ ia l Out look

Revenues to g row a t a 2 - year CAGR o f 10%

We expect JBFs total revenues to grow at a two-year CAGR of 10% to Rs 79 bn

in FY13 from Rs 67 bn in FY11 driven by expansion at the UAE subsidiary and

debottlenecking of its India-based chip capacity.

On the domestic front, JBF added 72,000 tpa of extrusion capacity over the past

two years, and also expanded its chip capacity by 14,500 tpa in FY11. Going

forward, JBF will increase its polyester films (36,000 tpa FY12) and PET chips

(40,000 tpa FY12 UAE) capacities; debottlenecking of the Indian chip

operation will increase capacity by around 60,000 tpa.

The UAE units share in JBFs total revenue has risen from 20% in FY08 to 45%

in FY11, and we expect its share to remain over 40% till FY13.

Figur e 16: Revenu e and revenue gr ow th Figur e 17: EBI TDA t r end

Source : CRISI L Equ i t ies Est im ates Source : CRISI L Equ i t ies Est im ates

EB I TDA m ar g in t o dec li ne f r om cu r ren t l eve ls

The companys cost structure is dominated by raw material costs (PTA and

MEG) as they account for more than 80% of revenues. We expect prices of both

PTA and MEG to increase in FY12 leading to higher input cost for polyester.

However, the rise in feed stock prices will be partially passed on to consumers

because of softening cotton and cotton yarn prices. However, utilisation rates in

the industry are at healthy levels, thereby limiting the downside. Also JBFs

operating margins were higher in FY11 on account of higher margins from its

polyester film business. Going forward we expect polyester film prices to come

down - already visible from Apr-June 2011 price trend; therefore we expect

EBITDA margin to decline in FY12 by 350 bps to 11.3% and remain at the same

level in FY13.

43 49 65 71 79

54%

14%

31%

10% 11%

0%

10%

20%

30%

40%

50%

60%

0

10

20

30

40

50

60

70

80

90

FY09 FY10 FY11E FY12E FY13E

( % )( R s b n )

Revenues Growth (RHS)

5.3 4.7 9.6 7.8 9.0

12.3%

9.6%

14.8%

11.0%11.4%

0%

2%

4%

6%

8%

10%

12%

14%

16%

0

2

4

6

8

10

12


( % )( R s b n )

EBITDA EBITDA Margin (RHS)

Revenues to g row a t a 2 -yea r

CAGR of 10% to r each Rs 79

bn by FY13

Opera t ing m arg ins to

dec l ine on account o f

vu lne rab i l i t y to raw

m ate r ia l p r i ces


16/26



PA T m arg ins t o r em a in subdued

We expect JBFs PAT margins to decline significantly, on account of lower

EBITDA margin and derivative losses that the company will incur in FY12 and

FY13 as the contract matures. We have added Rs 800 mn to FY12 and FY13

interest costs to reflect those losses. As a result, PAT margin will fall to 4.5% in

FY12 and improve to 4.8% in FY13; current PAT margins are 8.4%

Figur e 18: PAT m arg in t rend Figur e 19: EPS and ROE

Source : CRISI L Equ i t ies Est im ates Source : CRISI L Equ i t ies Est im ates

We expect JBFs EPS to be Rs 41.7 in FY12 and Rs 51.7 in FY13, down from

Rs 76.2 in FY11. Also, we expect its RoE to dip to 40% in FY11 from 19% in

FY11, and stabilise at 19-21% going forward.

2.2 1.3 5.5 3.0 3.7

5%

3%

8%

4% 5%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

0

1

2

3

4

5

6


( % )( R s b n )

PAT PAT Margin (RHS)

35.4 21.6

76.2

41.7

51.7

21.7%

11.5%

40.1%

20.2% 19.4%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

-

10

20

30

40

50

60

70

80

FY09 FY10E FY11E FY12E FY13E

EPS RoE (RHS)


17/26



Managem en t Eva lua t ion

CRISIL's fundamental grading methodology includes a broad assessment of

management quality, apart from other key factors such as industry and

business prospects, and financial performance. Overall, we believe that the

management has an established track record with moderate appetite for risk.

Good exper ience and es tab l i shed t rack record

JBFs management, led by Mr. Bhagirath C. Arya, brings to the table sound

business knowledge and leadership, as well as long years of relevant

experience. He started his career in the textile industry and has more than three

decades of experience in various segments of the textile sector. Mr Arya has

been instrumental in setting up the UAE subsidiary. Mr Rakesh Gothi, managing

director and CEO, is responsible for the domestic operations and has been with

the company since 1997. Mr. Gothi is a technocrat with 30 years of experience

in the industry, having earlier worked as vice-president with J.K. Synthetics and

as general manager with Nirlon.

M odera te r i sk appe t i t e

Over the years, JBFs management has exhibited moderate risk-taking appetite

with increased focus on growth through the inorganic route. Its risk-taking

ability is reflected from its acquisitions of Microsynth Fabrics India Ltd in FY08

as well as its investment in the UAE subsidiary. The management has funded

JBFs expansion plans both through internal accruals and debt.

JBF Ind us t r ies m anagemen t

has an es tab l ished t r ack

record and t hree decades o f

expe r ience in the t ex t i l e

indus t ry


18/26



Corp ora t e Gover nance

CRISIL Equities fundamental grading methodology includes a broad assessment

of corporate governance and management quality, apart from other key factors

such as industry and business prospects, and financial performance. In this

context, CRISIL Equities analyses the shareholding structure, board

composition, typical board processes, disclosure standards and related-party

transactions. Any qualifications by regulators or auditors also serve as useful

inputs while assessing a companys corporate governance.

Overall, JBFs board represents a fair mix of experienced directors who have

experience in various fields of business and are well qualified. The board

processes and structures broadly conform to the minimum standards. CRISIL

Equities has assessed the companys disclosure levels, based on balance sheet

and profit and loss account disclosures, etc, and is of the opinion that the

corporate governance of the company conforms to minimum disclosure

requirements. However, the website of the company has not been updated with

the latest information.

Bo a rd co m p o s i t i o n : JBFs board comprises eleven members, six of whomare

independent directors. This is in line with the minimum stipulated requirements

in the SEBI listing guidelines.

Board p rocesses: Based on the disclosures, the processes appear to be well

structured, and audit committees and other committees like grievance

committee are in place. The audit committee is chaired by an independent

director, Mr B. R. Gupta. Further, the position of chairman is independent from

that of the managing director/CEO.

The board comprises people with varied experience and professional diversity.

The processes of the board meet the minimum acceptance level. The disclosure

level of the company is sufficient to gauge many aspects of the business.

JBF fo l low s fa i r ly g ood

co rpo ra te gove rnance

pract ices


19/26



Valua t ion Grad ing Grade : 5 / 5

We have used DCF (discounted cash flow) to value the consolidated cash flows

of JBFs India and UAE operations. Based on our DCF approach, we have arrived

at the value of Rs 229 per share.

Our fair value of Rs 229 per share imply a valuation grade of5 / 5 that the CMP

(Rs 162 as on July 11, 2011) has strong upside from the current levels. The

implied PE multiples at our fair value is 41.7 FY12E EPS and 51.7 FY13E EPS.

Key DCF assum pt ions

We have considered the discounted value of the firms estimated free cashflow from FY13 to FY20.

We have assumed maintenance capex of Rs 3,500 mn in the terminal year.

The company incurred a mark-to-market loss of Rs 1,446 million in FY11;we have accounted for the same in our projections and spread it over FY12

and FY13.

We have added foreign currency risk premium of 50 bps in our cost ofequity, as over 40% of revenue will be contributed by the UAE subsidiary.

WACC com put a t ion

FY1 3 -2 2 Te rmin a l va lu e

Cost of equity 18.5% 18.5%

Cost of debt (post tax) 8.0% 8.0%

WACC 1 3 .0 % 1 3 .3 %

Terminal growth rate 3.00%

T er m i n a l g r o w t h r a t e

TerminalWACC

1 .0 % 2 .0 % 3 .0 % 4 .0 % 5 .0 %

1 1 .5 % 260 307 364 437 533

1 2 .5 % 200 236 280 334 402

1 3 .3 % 162 192 2 2 9 273 327

1 4 .5 % 111 134 161 193 231

1 5 .5 % 78 96 118 143 173


20/26



One-yea r fo rw ard P / E band One-yea r fo rw ard EV / EB ITDA band

Source : NSE, Com pany , CRI SIL Equ i t ies Source : NSE, Com pany, CRI SIL Equ i t ies

P/ E p r e m iu m / d i sco u n t t o N I FTY P/ E m o v e m e n t

Source : NSE, Com pany , CRI SIL Equ i t ies Source : NSE, Com pany, CRI SIL Equ i t ies

0

50

100

150

200

250

300

350

400

May-

05

Aug-

05

Dec-

05

Apr-

06

Jul-06

Nov-

06

Mar-07

Jun-

07

Oct-07

Feb-

08

May-

08

Sep-

08

Jan-

09

Apr-

09

Aug-

09

Dec-

09

Mar-10

Jul-10

Nov-10

Feb-11

Jun-11

(Rs)

JBF 2.0x 3.0x 4.0x 5.0x

0

50

100

150

200

250

300

350

400

May-

05

Aug-

05

Dec-

05

Apr-

06

Ju

l-06

Nov-

06

Mar-

07

Jun-

07

Oc

t-07

Fe

b-

08

May-

08

Sep-

08

Jan-

09

Apr-

09

Aug-

09

Dec-

09

Mar-

10

Ju

l-1

0

Nov-

10

Fe

b-

11

Jun-

11

(Rs)

JBF 2.0x 3.0x 4.0x 5.0x

-100%

-90%

-80%

-70%

-60%

-50%

-40%

-30%

-20%

May-0

5

Aug-0

5

Dec-0

5

Apr-

06

Ju

l-06

Nov-0

6

Mar-0

7

Jun-0

7

Oc

t-0

7

Fe

b-0

8

May-0

8

Sep-0

8

Jan-0

9

Apr-

09

Aug-0

9

Dec-0

9

Mar-1

0

Ju

l-1

0

Nov-1

0

Fe

b-1

1

Jun-1

1

Premium/Discount to NIFTY Median

0

2

4

6

8

10

12

14

May-0

5

Aug-0

5

Dec-0

5

Apr-0

6

Ju

l-0

6

Nov-0

6

Mar-0

7

Jun-0

7

Oc

t-0

7

Fe

b-0

8

May-0

8

Sep-0

8

Jan-0

9

Apr-0

9

Aug-0

9

Dec-0

9

Mar-1

0

Ju

l-1

0

Nov-1

0

Fe

b-1

1

Jun-1

1

(T imes)

1yr Fwd PE (x) Median PE

+1 std dev

-1 std dev


21/26



Com pany Ove rv iew

JBF is one o f the key p layers in the po lyes te r

segmen t

JBF is one of the key players in the polyester segment. JBF has since its

inception, focused on the polyester part of the textile value chain. The company

is present in polyester chips and polyester partially-oriented yarn segments, and

is now increasing its presence in the processed yarn space by forward

integrating in the domestic market. Also, it has ventured into related businesses

- bottle-grade PET chips and polyester film through its UAE subsidiary, JBF

RAK LLC.

JBF forward integrated into processed yarn with the acquisition of Microsynth

Fabrics (India) Ltd, a manufacturer of speciality yarns, in FY08. JBF is now

planning to backward integrate by setting up a PTA plant in Mangalore.

JBF entered into a joint venture with the RAK Investment Authority, UAE in

September 2005 with the ownership ratio of 60:40 to set up a plant in the Ras

Al Khaimah zone, UAE. In 2007-08, the ownership of the JV was transferred to

its 67.4% subsidiary, JBF Global PTE, Singapore.

During 2008-09, JBF Global PTE raised its stake in the company to 100%,

taking full ownership of JBF RAK L.L.C. Later JBF Industries raised its stake in

JBF Global PTE to 100% by buying 32.6% from CVCIGPII Client Rosehill Ltd and

CVCIGPII Employee Rosehill Ltd (CVCIGPII) for a consideration of US$104 mn.

JBF I ndus t r ies company s t r uc tu re

Source : Company

1 0 0 %

JBF I ndus t r i es ( I nd i a)

JBF Globa l PTE

JBF RAK L.L.C.

1 0 0 %

JBF, a key p lay er in t he

po lyester segm ent , has a lsoexpanded in to re la ted

bus inesses o f bo t t l e -grade

PET chip s and po lyest er

f i lm s


22/26



Table 4 : Key Mi les tones

1 9 8 2 JBF Industries Ltd began operations as a private limited company with the

objective to manufacture synthetic textiles.

1 9 8 5 The company commenced production of dyed yarn and fabrics.

1 9 8 6 It became a public limited company under the name JBF Synthetics Ltd.

1 9 8 7 The texturising facilities of the company began production.

1 9 8 9 The company changed its name to the present one JBF Industries Ltd.

1 9 9 3 The company sold its dyes and dye intermediate business.

1 9 9 6 Set up partially - oriented yarn spinning at Silvassa.

2 0 0 1 The company backward integrated into polyester chips and the plant was set up

at Silvassa.

2 0 0 4 It obtained certification under Environment Management System, which fulfils

the requirements of standard ISO 14001:1996.

2 0 0 5 The company entered into a joint venture with RAK Investment authority, UAE

to set up a bottle-grade PET chips plant.

2 0 0 7 The UAE subsidiary started its commercial production. The company acquired

Microsynth Fabrics (India) Ltd.

2 0 0 8 The scheme of amalgamation of Microsynth Fabrics (India) Ltd into JBF

Industries was completed.

2 0 0 9 The company completed the deal of buy back and cancellation of Foreign

Currency Convertible Bonds (FCCBs) of US$14.3 million, out of the outstanding

FCCBs of US$ 21.3 million at a discount of 32.3% face value.

2 0 1 1 Acquired 100% holding in JBF Global PTE

Source : Company


23/26



Ann exur e : Financ ia ls

#FY11- based on abridged financial

Source : CRISIL Equ i t ies est imates

I n co m e s t a t e m e n t Ba l a n ce Sh e e t

( Rs m n ) FY0 9 FY1 0 FY1 1 # FY1 2 E FY1 3 E ( Rs m n ) FY0 9 FY1 0 FY1 1 # FY1 2 E FY13 E

Op e r a t i n g i n c o m e 4 3 ,1 1 9 4 9 ,3 6 9 6 4 ,7 0 4 7 1 ,2 9 0 7 8 ,8 3 2 Lia b i l i t i e s

EBI TDA 5 ,3 1 6 4 ,7 2 1 9 ,5 7 8 7 ,8 2 9 9 ,0 1 3 Equity share capital 622 622 716 716 716

EBI TDA m a r g in 1 2 .3 % 9 .6 % 1 4 .8 % 1 1 .0 % 1 1 .4 % Reserves 10,543 11,714 14,046 16,463 19,533Depreciation 779 1,173 1,314 1,571 1,632 Minorities - - - - -

EBI T 4 ,5 3 6 3 ,5 4 8 8 ,2 6 3 6 ,2 5 8 7 ,3 8 0 Ne t w o r t h 1 1 ,1 6 6 1 2 ,3 3 7 1 4 ,7 6 2 1 7 ,1 7 8 2 0 ,2 4 9

Interest 1,702 1,138 2,366 2,614 2,854 Convertible debt - - - - -

Op e r a t i n g PBT 2 ,8 3 4 2 ,4 1 0 5 ,8 9 7 3 ,6 4 3 4 ,5 2 6 Other debt 12,414 13,644 18,848 21,848 29,848

Other income 48 28 159 86 98 To t a l d e b t 1 2 ,4 1 4 1 3 ,6 4 4 1 8 ,8 4 8 2 1 ,8 4 8 2 9 ,8 4 8

Exceptional inc/(exp) (45) 177 - - - Deferred tax liability (net) 1,226 1,337 1,430 1,530 1,630

PBT 2 ,8 3 7 2 ,6 1 6 6 ,0 5 6 3 ,7 2 9 4 ,6 2 4 To t a l l i a b i l i t i e s 2 4 ,8 0 6 2 7 ,3 1 7 3 5 ,0 4 0 4 0 ,5 5 7 5 1 ,7 2 7

Tax provision 456 540 602 746 925 A sse ts

Minority interest 224 553.00 - - - Net fixed assets 17,475 19,807 22,917 27,596 27,324

PA T ( Re p o r t e d ) 2 ,1 5 7 1 ,5 2 3 5 ,4 5 4 2 ,9 8 3 3 ,6 9 9 Capital WIP 3,149 1,081 1,581 581 10,781

Less: Exceptionals (45) 177 - - - To t a l f i x e d ass e t s 2 0 ,6 2 4 2 0 ,8 8 8 2 4 ,4 9 8 2 8 ,1 7 7 3 8 ,1 0 5

Ad j u st e d PAT 2 ,2 0 2 1 ,3 4 6 5 ,4 5 4 2 ,9 8 3 3 ,6 9 9 I n v e s t m e n t s 3 6 1 1 , 3 1 0 1 ,2 7 9 1 ,2 7 9 1 ,2 7 9

Cu r re n t a sse ts

Rat ios Inventory 3,966 5,132 7,445 7,813 9,071

FY0 9 FY1 0 FY1 1 # FY1 2 E FY1 3 E Sundry debtors 3,735 4,674 6,914 7,813 8,639

G ro wth Loans and advances 1,886 2,596 3,882 4,277 4,730

Operating income (%) 54.3 14.5 31.1 10.2 10.6 Cash & bank balance 899 999 2,139 2,449 2,408EBITDA (%) 95.9 (11.2) 102.9 (18.3) 15.1 Marketable securities - - - - -

Adj PAT (%) 68.9 (38.9) 305.3 (45.3) 24.0 To t a l cu r r e n t a sse t s 1 0 ,4 8 5 1 3 ,4 0 1 2 0 ,3 8 0 2 2 ,3 5 1 2 4 ,8 4 8

Adj EPS (%) 68.4 (38.9) 252.3 (45.3) 24.0 To t a l cu r r e n t l i a b i l i t i e s 6 ,8 7 6 8 , 5 5 7 1 2 ,3 8 5 1 2 ,5 1 8 1 3 ,7 7 3

Ne t cu r r e n t a sse t s 3 ,6 0 9 4 , 8 4 3 7 ,9 9 6 9 ,8 3 3 1 1 ,0 7 5

Pr o f i t a b i l i t y I n t a n g ib l es / Mi sc. e x p e nd i t u r e 2 1 3 2 7 7 1 ,2 6 8 1 ,2 6 8 1 ,2 6 8

EBITDA margin (%) 12.3 9.6 14.8 11.0 11.4 To t a l a s se t s 2 4 ,8 0 6 2 7 ,3 1 7 3 5 ,0 4 0 4 0 ,5 5 7 5 1 ,7 2 7

Adj PAT Margin (%) 5.1 2.7 8.4 4.2 4.7

RoE (%) 21.7 11.5 40.3 18.7 19.8 Ca sh f l o w

RoCE (%) 22.1 14.3 27.7 17.2 16.6 ( Rs m n ) FY0 9 FY1 0 FY1 1 # FY1 2 E FY1 3 E

RoIC (%) 23.3 13.3 29.6 17.4 16.3 Pre-tax profit 2,882 2,439 6,056 3,729 4,624

Total tax paid (212) (429) (509) (646) (825)

V a lu a t i o n s Depreciation 779 1,173 1,314 1,571 1,632

Price-earnings (x) 3.7 10.8 2.1 3.9 3.2 Working capital changes (1,577) (1,134) (2,012) (1,528) (1,283)

Price-book (x) 0.7 1.2 0.8 0.7 0.6 Ne t ca s h f r o m o p e r a t io ns 1 ,8 7 3 2 , 0 4 8 4 ,8 5 0 3 ,1 2 6 4 ,1 4 8

EV/EBITDA (x) 3.7 5.7 3.0 4.0 4.3 Ca s h f r o m i n v e s t m e n t s

EV/Sales (x) 0.5 0.5 0.4 0.4 0.5 Capital expenditure (8,255) (1,500) (5,916) (5,250) (11,560)

Dividend payout ratio (%) 16.9 28.7 10.5 19.0 17.0 Investments and others 234 (949) 31 - -

Dividend yield (%) 4.4 3.0 4.9 4.9 5.4 Ne t ca s h f ro m in v est me n t s ( 8,0 2 1) ( 2 , 4 4 9 ) ( 5 , 8 8 5 ) ( 5 , 2 5 0 ) ( 1 1 , 5 6 0 )

Ca s h f r o m f i n a n c i n g

B/ S r a t i o s Equity raised/(repaid) (34) 79 1,181 - -

Inventory days 40 44 49 45 47 Debt raised/(repaid) 4,049 1,229 5,204 3,000 8,000

Creditors days 60 64 73 63 63 Dividend (incl. tax) (364) (437) (573) (567) (629)

Debtor days 31 33 37 38 38 Others (incl extraordinaries) 44 (370) (3,637) - -

Working capital days 16 24 27 34 37 N e t c a s h f r o m f i n a n c i n g 3 , 6 9 5 5 0 2 2 ,1 7 6 2 ,4 3 3 7 ,3 7 1

Gross asset turnover (x) 2.6 2.2 2.4 2.2 2.2 Change in cash position (2,454) 100 1,140 310 (41)

Net asset turnover (x) 3.2 2.6 3.0 2.8 2.9 Closing cash 899 999 2,139 2,449 2,408

Sales/operating assets (x) 2.5 2.4 2.9 2.7 2.4

Current ratio (x) 1.5 1.6 1.6 1.8 1.8 Qu a r t e r l y f i n a n c i a l s

Debt-equity (x) 1.1 1.11 1.3 1.27 1.47 ( Rs m n ) Q4 FY1 0 Q1 FY1 1 Q2 FY1 1 Q3 FY1 1 Q4 FY1 1

Net debt/equity (x) 1.0 1.0 1.1 1.1 1.4 Ne t Sa le s 1 3 ,0 1 0 1 4 ,1 4 5 1 4 ,1 1 6 1 7 ,1 1 7 1 9 ,3 3 3

Interest coverage 2.7 3.1 3.5 2.4 2.6 Change (q-o-q) 9% 8.7% 0% 21.3% 13%

EBI TDA 1 ,6 5 1 1 , 5 5 8 2 ,2 6 1 3 ,0 3 3 2 ,7 3 2

Pe r s h a r e Change (q-o-q) 59% -6% 45% 34% -10%FY0 9 FY1 0 FY1 1 # FY1 2 E FY1 3 E EBI TDA m a r g in 1 2 .7 % 1 1 .0 % 1 6 .0 % 1 7 .7 % 1 4 .1 %

Adj EPS (Rs) 35.4 21.6 76.2 41.7 51.7 PAT 761 549 1,020 1,856 1,636

CEPS 47.9 40.5 94.5 63.6 74.5 A d j PA T 7 6 1 5 4 9 1 ,0 2 0 1 ,8 5 6 1 ,6 3 6

Book value 179.4 198.2 206.2 239.9 282.8 Change (q-o-q) 171% -27.9% 86% 82.0% -11.8%

Dividend (Rs) 5.8 7.0 8.0 7.9 8.8 A d j PA T m a r g in 5 .9 % 3 .9 % 7 .2 % 1 0 .8 % 8 .5 %

Actual o/s shares (mn) 62.2 62.2 71.6 71.6 71.6 A d j EPS 1 2 .2 7 .7 14.2 2 5 .9 2 2 .8


24/26



Focus Char t s

Revenue m ix Trend in ch ip capac i ty and u t i l isa t ion ra t es

Source : Com pany, CRI SI L Equ i t ies Source : Com pany , CRI SI L Equ i t ies

3r d la rgest in dom est ic PET m arket 3r d la rgest p layer in POY


PAT m arg in t rend Shareho ld ing pa t te rn ove r the qua r te rs


12,751

14,349 16,029 19,623

10,353

11,058 11,359 17,077

5,860

17,96117,905

18,925

1,1764,579

11,700

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

FY08 FY09 FY10 FY11

Po lyester ch ips POY Bottle grade chips Polyeste r F ilm

334,800 334,800

550,800 550,800 565,300

73

102

7378

86

0

10

20

30

40

50

60

70

80

90

100

110

0

100,000

200,000

300,000

400,000

500,000

600,000


(% )(Tonnes)


Reliance

49%

Dhunseri

33%

JBF

18%

162.45

200

235.32

259

822.725

0 200 400 600 800 1,000

Garden Silk Mills

Alok Industries

JBF Industries

Indo Rama

Synthetics

Reliance

Industries

( 0 0 0 ' t o n n e s)

2.2 1.3 5.5 3.0 3.7

5%

3%

8%

4% 5%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

0

1

2

3

4

5

6


( % )( R s b n )

PAT PAT Margin (RHS)

47.5%41.5% 41.3% 41.2%

1.3%8.4% 10.0% 10.5%

5.7%13.0%

18.5%17.9%

45.5%37.1%

30.3%30.4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Jun-10 Sep-10 Dec-10 Mar-11

Promoter FII DII Others


25/26

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