CRISIL assigns valuation grade 5/5 to JBF Industries

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CRISIL assigns valuation grade 5/5 to JBF Industries

CRISIL Research has come out with its report on JBF Industries. The research firm has maintained the fundamental grade of 3/5 to the company in its November 10, 2011 report.

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JBF Industries BSE | NSE 31/05/12 Are Mutual Funds betting on JBF Industries?

CRISIL Research has come out with its report on JBF Industries . The research firm has maintained the fundamental grade of 3/5 to the company in its November 10, 2011 report.

JBF Industries Ltd's (JBF's) Q2FY12 (consolidated) revenues and operating profitability were higher than CRISIL Research's expectations. Revenues had increased higher than expected whereas contraction in operating margins was lower than expected. Both the Indian and the UAE operations performed well on revenue and profitability fronts. The company reported significant forex and derivative losses (Rs ~630 mn) during the quarter which lowered its PAT by ~25% y-o-y. JBF continues to make no provisions for mark-to-market losses to the tune of Rs ~2,300 mn (15% of FY11 net worth) which remains a key concern. However, its leading market position in the domestic polyester segment along with the growth in its end-user markets especially for bottle grade chips and films leads us to maintain the fundamental grade of 3/5 for the company. We may revisit our estimates post our interaction with the management.

Q2FY12 result analysis
• JBF's Q2FY12 revenues grew by 31% y-o-y to Rs 18.5 bn backed by higher realisations and capacity addition in the chips division. JBF's India's chip division added a capacity of 60,000 tonnes per annum (TPA) during Q2FY12. The Indian operation grew at a faster pace, up ~36% y-o-y, higher than the UAE operations (~23%). UAE operations accounted for 36% of total revenue.

• EBITDA margins contracted by ~500 bps to 11.4% y-o-y on account of higher raw material cost (increased to 77.4% from 70.5% in Q1FY11).

• The company continued to suffer heavy forex and derivative losses in Q2FY12. The loss was Rs 630 mn in the current quarter as compared to Rs 455 mn in Q1FY12. This resulted in a decline of ~25% in its reported PAT on a y-o-y basis. However, adjusted PAT rose by 22% y-o-y on account of higher revenues and lower interest outflow. Adj EPS stood at Rs 19.4 as against Rs 16.1 in Q1FY11.

Valuations: Current market price has strong upside
We continue to use the discounted cash flow method to value JBF. We may revisit our estimates after interaction with management; currently we maintain the fair value at Rs 229 per share. Based on the current market price, our valuation grade is 5/5.

Disclaimer: This report (Report) has been commissioned by the Company/Investor/Exchange and prepared by CRISIL. The report is based on data publicly available or from sources considered reliable by CRISIL (Data). However, CRISIL does not guarantee the accuracy, adequacy or completeness of the Data / Report and is not responsible for any errors or omissions or for the results obtained from the use of Data / Report. Opinions expressed herein are CRISIL's opinions as on the date of this Report.  The Data / Report are subject to change without any prior notice. Nothing in this Report constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The Report is not a recommendation to buy / sell or hold any securities of the Company. CRISIL especially states that it has no financial liability, whatsoever, to the subscribers / users of this Report. This Report is for the personal information of the authorized recipient only. This Report should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person or published or copied in whole or in part especially outside India, for any purpose.

© CRISIL Limited . All Rights Reserved. Published under permission from CRISIL"

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