Jindal Poly Films Ltd’s PAT down 69.02% YoY to 97 Cr

Company Overview:

Jindal Poly Films Ltd (JPFL), established in 1974, is a prominent player in the packaging industry, specializing in packaging films, non-woven fabrics, and label solutions. Their product portfolio encompasses a wide range, including BOPP, BOPET, CPP, Lamination Metallized films, Coated films, Thermal Lamination Films, and capacitor Films. Notably, JPFL boasts the world’s largest manufacturing plant for BOPET and BOPP films located in Nasik. The company operates across three key segments:

Presence in three segments:

 1. Packaging Films: JPFL’s core business revolves around packaging films with a substantial production capacity. They produce BOPP, BOPET, and CPP films, among others, at their Nasik plant, with capacities of 2,94,200 TPA for BOPP, 1,70,000 TPA for BOPET, and 33,600 TPA for CPP.
2. Non-woven Fabrics: In the non-woven fabrics segment, JPFL manufactures spunmelt and spun bond fabrics with a total production capacity of 58,000 MT. These fabrics find applications in various sectors, including hygiene, medical, and industrial, serving multinational clients in the personal care domain.
3. Labelling Solutions: The company, through its subsidiary, has ventured into the labeling solutions business, positioning itself as a pioneer in innovative, environmentally friendly products that promote carbon neutrality for brands.

Industry Overview:

Packaging Films Industry: This sector is anticipated to achieve a CAGR of 4.1% from 2023 to 2033, reaching a market value of $223.5 billion by 2033. Growth factors include rising disposable incomes, improved living standards, and evolving consumer preferences.
Non-woven Fabrics Industry: Valued at $30.76 billion in 2022, this industry is projected to reach $60.23 billion by 2032, with a CAGR of 7%. The demand for non-woven fabrics is driven by their applications in manufacturing interlinings, insulation, protective clothing, and more.
Labelling Solutions Industry: This sector is expected to reach a valuation of $41.75 billion at a CAGR of 4.9% from 2023 to 2033, driven by increased demand for labels due to the growth of e-commerce and digitization.

Valuation and Key Ratios:

JPFL’s stock is currently trading at a multiple of 29.13x EPS 23.2, with a market price of 676 Rs, while the industry PE stands at 26x. The stock is trading at 0.70 times its book value of 961 Rs per share. The company reports an ROE of 6.63% and an ROCE of 12.5%, indicating moderate profitability. Additionally, the interest coverage ratio at 3.43% reflects the company’s high solvency, with earnings covering its interest costs threefold. The EV/EBITDA ratio stands at 7.08x, suggesting a reasonable valuation.

Q1FY24 Results Update: Consolidated

In Q1FY24, JPFL faced challenges as revenue decreased by 47.76% YoY (+2.74% QoQ) to 832 Cr, primarily due to a slowdown in the packaging business, which declined by 53.32% YoY. EBITDA decreased significantly by 96.55% YoY (-50.46% QoQ) to 13 Cr, resulting in EBITDA margins declining by 21.84% YoY to 1.54%. EBIT reached -37 Cr, down by 111.29% YoY, primarily due to a 17.16% YoY increase in depreciation. Despite these challenges, PAT showed positive results, supported by other income, standing at 198 Cr, with PAT at 97 Cr, down by 69.02% YoY. PAT margins declined by 8.05% YoY, standing at 11.74% in Q1FY24. EPS for the quarter stands at 22.29 Rs, marking a significant growth of 125.36% QoQ.

Conclusions:

Jindal Poly Films Ltd operates in industries with promising growth prospects, although it faced challenges in Q1FY24. The company’s diversified product portfolio and strong manufacturing capacities position it well for future growth opportunities. Investors should monitor its ability to address the challenges in the packaging business and capitalize on the growth potential in the non-woven fabrics and labelling solutions segments. Additionally, the valuation metrics indicate a reasonably priced stock in the current market context.