CRISIL maintains fair value of Rs 194 to JBF Industries

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CRISIL maintains fair value of Rs 194 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 March 5, 2012 report.

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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 March 5, 2012  report.

JBF Industries Ltd's (JBF's) Q3FY12 (consolidated) revenues were in line with CRISIL Research's expectations while operating profitability was lower than expectation due to firm raw material prices. Both the Indian and the UAE operations performed well on the revenue front but faced contraction in margins. The company continued to report significant forex and derivative losses (Rs ~1,126 mn in Q3FY12); it still does not have any provision for mark-to-market losses of Rs ~1,770 mn (12% of FY11 net worth), which remains a key concern. However, due to 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, we are maintaining the fundamental grade of 3/5 for the company.

Q3FY12 result analysis
• Revenues grew by 8% y-o-y to Rs 18 bn backed by higher realisations. The Indian operation grew at a faster pace, up ~32% y-o-y, supported by the chips division. JBF India's chip division had added capacity of 60,000 tonnes per annum (TPA) in Q2FY12 which registered 24% volume growth backed by ~20% higher realisation. Contribution from UAE to total revenue declined to 38% in the current quarter from 50% in Q3FY11 due to 20% (y-o-y) decline in realisation in the film division.

• EBITDA margin contracted by ~630 bps to 9.7% y-o-y on account of higher raw material cost (increased to 77.1% from 70.2% in Q3FY11). Also Q3FY11 was an exceptionally good year for the polyester film division, which posted margin of ~25%.

• The company continued to suffer heavy forex and derivative losses. It incurred loss of Rs 1,126 mn in the current quarter as compared to Rs 629 mn in Q2FY12. The company also reported huge exceptional item of Rs 703 mn, due to which reported PAT declined only 6% q-o-q. Adj. EPS stood at Rs 0.1 as compared to Rs 26.1 in Q3FY11.

Key developments
• The company has signed an MOU with the Industry and Commerce Ministry of Bahrain to set up a polyester film plant of 200,000 tonnes.

Earnings estimates revised downwards for FY12
We maintain our revenue estimates for FY12 and FY13 but lower our earnings estimates for FY12 due to the company's inability to pass on higher raw material prices and huge derivative and forex losses.

Valuations: Current market price has strong upside
We continue to use the discounted cash flow method to value JBF. Currently we maintain the fair value at Rs 194 per share. Based on the current market price, our valuation grade is 5/5.

To read the full report click on the attachment

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.

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