JBF Industries: Revenues impacted, relief from forex losses
CRISIL Research has come out with its report on JBF Industries (JBF). The research firm has maintained the fair value at Rs 194 per share. Based on the current market price of Rs 128 and valuation grade at 5/5.
November 30, 2012 / 11:42 IST
CRISIL Research has come out with its report on JBF Industries (JBF). The research firm has maintained the fair value at Rs 194 per share. Based on the current market price of Rs 128 and valuation grade at 5/5.
JBF’s Q2FY13 (consolidated) revenues were in line while operating profitability was marginally lower than CRISIL Research’s expectations. Revenue share of the Indian operations (chips and polyester) decreased to 60% due to a short supply of PTA in the domestic market. EBITDA margin contracted sequentially on account of higher material cost and other expenses. The company reported lower forex and derivative loss (Rs 178 mn) as 60% of the contract expired in July 2012. Unaccounted mark-to-market loss also reduced drastically to Rs 514 mn (3% of FY12 net worth). We reduce our FY13 estimates and maintain our FY14 estimates. The backward integration and no further derivative contracts (only 20% or US$4mn) is likely to significantly improve JBF’s financials. We maintain our fundamental grade of 3/5.PTA short supply led revenue de-growth in domestic market and margin contraction
Similar to Q1FY13, a series of PTA plant shutdowns in Q2FY13 caused a short supply of PTA in the domestic market and led to under utilisation of polyester capacity; therefore, chip sales declined 19%, while polyester volumes remained flat.Overall revenues remained flat q-o-q (down 2.3% y-o-y) at Rs 18 bn. Domestic revenue declined by 12% q-o-q (down 9.5% y-o-y) due to inadequate raw material supply. UAE operations grew by 27% q-o-q (up 10% y-o-y) as there was shutdown of its chips plant in the previous quarter. Hence the share of the UAE subsidiary in overall revenue improved to 40% from 33% in Q1FY13.EBITDA margin contracted to 9.5% (down by 102 bps q-o-q and 190 bps y-o-y) on account of high PTA prices and rise in other expenses. Raw material cost increased to 76.7% from 75.9% q-o-q.PAT was up significantly (up 46.7% q-o-q) on account of lower forex and derivative loss. EPS was Rs 6.8 compared to Rs 4.7 in Q1FY13.Relief from derivative pain from Q3FY13
The company continued to suffer forex and derivative losses. It incurred a loss of Rs 178 mn in the reported quarter compared to Rs 572 mn in Q1FY13. The second tranche of US$12 mn (of the US$20 mn) has been settled in July 2012, reducing the outstanding derivative contract to US$4 mn, which will further reduce losses in Q3FY13.Valuations: Current market price has strong upside
We continue to use the discounted cash flow method to value JBF. We maintain the fair value at Rs 194 per share. Based on the current market price of Rs 128, our valuation grade is 5/5.To read the full report click on the attachmentDisclaimer: 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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