Buy JBF Industries; target of Rs 169: Nirmal Bang

Nirmal Bang is bullish on JBF Industries and has recommended buy rating on the stock with a target of Rs 169 in its August 09, 2012 research report.

“JBF Industries’ operating profit grew 18.1%/14.0% YoY/QoQ, respectively, to Rs1,893mn, 9.6% higher than our estimate. With the commissioning of PET film capacity at RAK unit in 4QFY12, consolidated interest costs and depreciation rose 49.7%/37.8% YoY, while forex loss increased 32.1% YoY although down 25.8% QoQ. Even after higher interest costs and depreciation, net profit increased 43.2% QoQ to Rs337mn, in line with our estimate of Rs333mn. With the commissioning of 36,000tpa thick film capacity in 4QFY12, operating profits of RAK unit are expected to improve 13.2% in FY13E, while forex losses on derivatives contract may reduce drastically from August 2012, driving net profit up 102.2% to Rs3,064mn. We retain our Buy rating on JBF with a target price of Rs169 based on 4.0x FY13E P/E.”
“The company paid 20% of the principal of its loan associated with derivative loss in July 2012 and 60% of the principal amount in July 2012. Following a 80% reduction in the outstanding loan related to derivatives contract, derivatives loss would reduce substantially from 2QFY13. We expect forex loss on the derivatives contract to reduce from Rs1,677mn in FY12 to Rs680mn in FY13E. Even in FY13, with a lower principal from August 2012, forex loss on derivatives contract would be lower in 2HFY13 compared to 1HFY13. Likely lower forex loss and low risk associated to currency fluctuations are expected to drive up valuation in the near term. JBF has entered into a pact with BP for licensing its latest PTA production technology to set up a PTA facility at Mangalore SEZ. With the benefit of latest technology, JBF would be able to increase the capacity of its PTA venture to 1.25mtpa, from 1.10mtpa planned earlier, at the same cost of US$600mn.”
“JBF has announced a dividend of Rs8/share, a yield of 5.7%. The stock is trading attractively at 3.3x/3.7x FY13E P/E and EV/EBITDA and at 0.5x BV of Rs269,” says Nirmal Bang research report.         Shares held by Financial Institutions/Banks Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions. To read the full report click on the attachment

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