Report on JBF Ind by Anand Rathi

JBF Ind

CMP 170/-

Trend Update & Recommendation

With Polyster film prices improving significantly in last 6 months, we expect company’s Dubai subsidiary – JBF RAK to report excellent results. Based on the suberb growth in PAT for JBF RAK and improving scene for Polyster Yarn also; we are revising our earnings estimate and price target for company. We expect consolidated EPS to cross Rs 70/- for FY’11 and raise the price target to Rs 250/- in next 12 months.

·         Company is leading Polyester chips & amongst top three players in Polyster Yarns also. Its subsidiary JBF RAK in Dubai, has 72,000 MTs capacity to produce PET[Polyster] films.

·         Company is gradually moving up in value chain from Polyester Chips maker to Yarn & Film maker. This is boosting the margins further. Now Polyester Chips forms just 32% of the sales, while rest 68% comes from value added products like Yarn & Films.

·         Now to integrate backward, to secure raw materials at cheaper cost, its subsidiary JBF RAK, Dubai is planning to set up a 1.2 mill MTs capacity of key input – PTA. This will be under JV with Oman oil [10% stake], who will provide Paraxylene [input for PTA].

·         Funding of this project will be managed by JBF RAK by internal generation, QIP issue and Term loans. JBF RAK may be listed on Singapore exchange also.

·         Looking to improving fundamentals for Polyster Films and Yarns, we expect the performance of company should improve significantly in current year. We expect consolidated earnings of over Rs 70/- for FY’11 and raise the target to Rs 250/- . BUY.