Polyplex Corporation – 2QFY2011 Result Update- Angel Broking

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Polyplex Corporation – 2QFY2011 Result Update

Angel Broking maintains a Neutral on Polyplex Corporation.

Polyplex Corporation (PCL) reported strong set of numbers for 2QFY2011. Net

sales grew a whopping 108.7% yoy to `606cr (`290cr). The company reported

1,765bp expansion in OPM yoy to 36.2% (18.5%). Net profit surged 486.4% yoy

to `122cr (`21cr) on strong demand. Owing to the recent run-up, we maintain

our Neutral view on the stock.

Strong overall performance: PCL reported 108.7% yoy growth to `606cr (`290cr)

in top-line on higher capacity utilisation, commencement of the new BOPP and

PET plants in India and higher selling price due to favourable market conditions

and strong demand. PCL reported OPM of 36.2% (18.5%) for the quarter, an

expansion of 1,765bp yoy as the company was able to increase the product

prices without incurring any increase in the raw material prices. Thus, net profit

surged 486.4% yoy to `122cr (`21cr) on higher top-line and OPM expansion.

Outlook and Valuation: The polyester films segment cycle is on an uptrend and is

witnessing strong demand. We believe that PCL is well placed to service such

burgeoning demand on account of having one the largest PET film production

capacities in the world, which is complemented by its excellent geographical

reach through its plants in Thailand, Turkey and India. We have revised upwards

our top-line and bottom-line estimates for FY2011 and FY2012 to reflect the

same. Accordingly, we expect PCL to register 43% and 86% CAGR in net sales to

`2,506cr and net profit to `316cr respectively, over FY2010-12. Post the recent

run-up, at current levels, the stock is trading at 1.2x P/BV FY2012E. We remain

Neutral on the stock.

Investment Rationale

Capacity expansion driving robust growth in revenues: PCL recently forayed into

the lucrative and high-growth BOPP and CPP segments. To carter to the growing

demand, PCL set up the new BOPP capacity of 35,000tpa in India as well as a

new 10,000tpa CPP plant in Thailand. In PET films, PCL increased capacity in India

by 155% in FY2010. Overall, on the back of the company's capacity expansion

moves, we expect it to post 43% CAGR in consolidated sales over FY2010-12.

Outlook and Valuation

The polyester films segment cycle is on an uptrend and is witnessing strong

demand. We believe that PCL is well placed to service such burgeoning demand

on account of having one the largest PET film production capacities in the world,

which is complemented by its excellent geographical reach through its plants in

Thailand, Turkey and India. We have revised upwards our top-line and bottom-line

estimates for FY2011 and FY2012 to reflect the same. Accordingly, we expect PCL

to register 43% and 86% CAGR in net sales to `2,506cr and net profit to `316cr

respectively, over FY2010-12. Post the recent run-up, at current levels, the stock is

trading at 1.2x P/BV FY2012E. We remain Neutral on the stock.