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SYNOPSIS

Jindal Poly Films (JPFL) is India’s leading producer of flexible packaging films.

Jindal Poly Films Ltd is a part of Rs 30 Billion B C Jindal Group, A 50-Year Old Industrial Group Offering a Wide Range of Products.

During the quarter the company has incorporated three wholly owned subsidiaries.

Jindal Poly Subsidiary Awarded Coal Block in Mozambique.

Jindal Metal and Mining Limited have entered into a joint venture agreement for prospecting, exploration and mining of coal.

Net Sales and PAT of the company are expected to grow at a CAGR of 31% and 88% over 2009 to 2012E respectively.

Years Net sales EBITDA Net Profit EPS P/E

FY 10 15866.80 4015.60 2051.50 89.12 4.74

FY 11E 27739.54 11684.53 7324.30 159.09 2.66

FY 12E 31623.08 13307.78 8371.01 181.82 2.33

Stock Data:

Sector: Packaging

Face Value Rs. 10.00

52 wk. High/Low (Rs.) 700.00/180.00

Volume (2 wk. Avg.) 91,000

BSE Code 500227

Market Cap (Rs.In mn) 19468.01

Share Holding Pattern

1 Year Comparative Graph

BSE SENSEX JINDAL POLY FILMS LTD

C.M.P: Rs. 422.85 Target Price: Rs. 486.00 Date: April 23rd 2011 BUY

JINDAL POLY FILMS Ltd Result Update: Q3 FY 11

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Peer Group Comparison

Name of the company CMP(Rs.) Market

Cap.(Rs.Mn.) EPS(Rs.) P/E(x) P/Bv(x) Dividend (%)

Jindal Poly Films Ltd 422.85 19468.01 115.25 3.67 1.82 100.00

Cosmo Films 106.15 2063.6 24.19 4.39 0.71 50.00

Uflex 178.25 12866.2 32.74 5.44 1.61 50.00

Polyplex Corporation 234.30 7494.0 52.27 4.48 4.21 80.00

As on 22/04/2011

Investment Highlights

� Q3 FY11 Results Update

Jindal Poly Films reported a rise of 88% sales in the standalone net sales for

the quarter ended December 2010. During the quarter, the company disclosed

a standalone profit of Rs. 2210.90 million as against of Rs. 348.50 million for

the quarter ended December 31, 2009. Net sales are increased by 88% to Rs.

7290.40 million from Rs. 3869.80 million in the same quarter previous year.

Total income of the company was at Rs7440.00 million, a rise of 88% over the

prior year period. Company EPS is stood at Rs.48.02 for the quarter ended

December 2010.

Quarterly Results - Standalone (Rs in mn)

As At Dec-10 Dec-09 %change

Net sales 7290.40 3869.80 88

PAT 2210.90 348.50 534

Basic EPS 48.02 15.14 217

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� Break up of Expenditure

� Subsidiary companies are incorporated

Company’s two wholly owned subsidiary companies namely (1) Jindal Metal

and Mining Limited (2) Jindal Poly films Investment Limited were incorporated.

Further one Subsidiary company in Mozambique namely Jindal Resources

Limitada was also incorporated.

� Arm Awarded Coal Block in Mozambique

Jindal Resources Limitada, a subsidiary of Jindal Poly Films Limited

participated in the tenders issued by Ministry of Mineral Resources,

Government of Mozambique for auction of coal blocks for geological prospecting

and exploration of coal in Mozambique. The company has been allotted Block-2

situated in Moatize district, Tete Province. The license covers an area of 1.480

hectares, which may have a potential to contain a resource of 150 million tons

of coal including coking / thermal coal.

� Forms Joint venture agreement

Jindal Metal and Mining Limited, a wholly subsidiary of Jindal Poly Films

Limited has entered into a joint venture agreement with a Mozambique

entrepreneur for prospecting, exploration and mining of coal. The exploration

license is situated around 80 Km south west of Tete town in Changara district,

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Tete Province. The license may have a potential to contain a resource of 300

million tons of coal including coking/thermal coal.

Company Profile

Jindal Poly Films (JPFL) is a part of Rs 30 billion B C Jindal group, a 50-year old

industrial group offering a wide range of products. The group has promoted a number

of companies over the years and is involved in diverse activities including

manufacturing of polyester film, polypropylene film, steel pipes and photographic

products.

JPFL is the largest manufacturer of BOPET and BOPP films in India. The company

produces BOPET film, BOPP film, metalized BOPET film and BOPP film, coated

BOPET and BOPP films, polyester chips (for captive consumption in the BOPET film)

From being only a polyester yarn producer in 1985, JPFL diversified in 1996 into

BOPET film production. In 2003, JPFL commenced production of BOPP film and

metallised film. JPFL commenced production of coated film products by July 2005.

JPFL capabilities were strengthened by the acquisition in November 2003 of Rexor

SAS, in France, which produces metallised and coated films as well as tear tape,

stamping foil, security thread and other high-value products. JPFL plant at Nasik,

Maharashtra is the world’s largest single location plant for the manufacture of

BOPET and BOPP films.

The company is the world's 5th largest BOPET Film manufacturers in the world. It is

in the league of top five producers of BOPP Films in the world after the expansion.

Rexor makes and sells a broad range of metallised and coated BOPET films for

preserving food products and is a market leading producer of “tear tape” for easy

opening of cheese portions and laminated films used in the packaging of luxury

products such as cosmetics and perfumes. It is the leading independent producer of

security threads for bank notes. The company also produces film for decoration,

insulation, aeronautics and sun protection. It holds proprietary technologies for laser

demetallisation of security threads and other bank note security applications and for

slitting films into widths as short as 0.20 millimeters.

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Products:

1. PET Films

Polyester film commonly known as PET film is a versatile film, which has a vast range

of applications. The film provides a strong barrier to moisture, odour and gases

making it suitable for use in flexible packaging. Its high tensile strength, thermal and

chemical stability makes it suitable for a multitude of applications in electric

insulation, office supplies, graphic arts, magnetic media imaging, metallic yarn and

industrial applications.

2. BOPP Films

Polypropylene film commonly known as BOPP is widely used for food packaging,

textile bags, overwraps for cigarette and personal products, adhesive tapes and

labels. BOPP film possesses dimensional stability, high tensile strength, good

stiffness, high clarity, excellent printability and most importantly, heat sealability.

3. Metalized Films

JPFL has four wide width metallizers with plasma treatment facilities for enhanced

shelf life and barrier properties. Two more metallizers of 2850 mm width are being

installed by Jan & March 2008.

4. Coated Films

As a part of the forward integration of BOPP and PET Films, JPFL installed two

coating lines for manufacturing of entire range of specialty coated films like PVdC,

Acrylic, Low Temperature Seal and High Seal Integrity coatings.

5. Poly Chips

Jindal Group stands for the highest Polyester films, polyester chips and resins

production facilities, with plants located at Nasik to cater to captive consumption.

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Expansion Plans:

PET

3 lines of 8.7 mtrs width with an annual capacity of 90000 MT will be commissioned

by financial Year 2012-2013.

Metalizer

10 metalizers with an annual capacity of 80000 MT will be commissioned by financial

year 2012-2013.

BOPP

4 new Line of BOPP Film with an annual capacity of 132000 MT will be

commissioned by Financial Year 2012-2013.

Subsidiary Companies

• Jindal Metal and Mining Limited

• Jindal Poly films Investment Limited

• Jindal Resources Limitada

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Financials Results

12 Months Ended Profit & Loss Account (Standalone)

Value(Rs.in.mn) FY09 FY10 FY11E FY12E

Description 12m 12m 12m 12m

Net Sales 14208.90 15866.80 27739.54 31623.08

Other Income 216.70 435.90 582.79 658.55

Total Income 14425.60 16302.70 28322.33 32281.63

Expenditure -11656.80 -12287.10 -16637.80 -18973.85

Operating Profit 2768.80 4015.60 11684.53 13307.78

Interest -196.50 -273.90 -298.21 -330.49

Gross profit 2572.30 3741.70 11386.33 12977.29

Depreciation -688.20 -797.60 -879.30 -967.23

Profit Before Tax 1884.10 2944.10 10507.02 12010.05

Tax -619.20 -892.60 -3182.72 -3639.05

Net Profit 1264.90 2051.50 7324.30 8371.01

Equity capital 258.20 230.20 460.40 460.40

Reserves 9472.60 10462.10 17786.40 26157.41

Face Value 10.00 10.00 10.00 10.00

Total No. of Shares 25.82 23.02 46.04 46.04

EPS 48.99 89.12 159.09 181.82

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Quarterly Ended Profit & Loss Account (Standalone)

Value(Rs.in.mn) 30-Jun-10 30-Sep-10 31-Dec-10 31-Mar-11E

Description 3m 3m 3m 3m

Net sales 5556.30 6873.40 7290.40 8019.44

Other income 110.10 169.00 149.60 154.09

Total Income 5666.40 7042.40 7440.00 8173.53

Expenditure -4318.50 -4052.20 -3936.60 -4330.50

Operating profit 1347.90 2990.20 3503.40 3843.03

Interest -67.50 -81.50 -73.50 -75.71

Gross profit 1280.40 2908.70 3429.90 3767.33

Depreciation -217.40 -218.90 -220.40 -222.60

Profit Before Tax 1063.00 2689.80 3209.50 3544.72

Tax -228.20 -892.50 -998.60 -1063.42

Net Profit 834.80 1797.30 2210.90 2481.30

Equity capital 230.20 230.20 460.40 460.40

Face Value 10.00 10.00 10.00 10.00

Total No. of Shares 23.02 23.02 46.04 46.04

EPS 36.26 78.08 48.02 53.89

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Key Ratio

Particulars FY09 A FY10 A FY11 E FY12 E

EBIDTA % 19% 25% 42% 42%

PAT % 9% 13% 26% 26%

P/E ratio (x) 8.63 4.74 2.66 2.33

ROE - % 13% 19% 40% 31%

ROCE - % 14% 21% 46% 39%

EV/EBIDITA (x) 2.61 2.13 1.87 1.83

Debt Equity Ratio 0.49 0.45 0.28 0.20

Book Value(Rs.) 376.87 464.48 396.33 578.15

Price/Book Value 0.74 0.91 1.07 0.73

Charts:

• Net sales & PAT

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• P/E Ratio (x)

• P/BV (X)

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• EV/EBITDA(X)

Outlook and Conclusion

At the current market price of Rs.422.85, the stock is trading at 2.66 x FY11E

and 2.33 x FY12E respectively.

Earning per share (EPS) of the company for the earnings for FY11E and FY12E

is seen at Rs.159.09 and Rs.181.82 respectively.

Net Sales and PAT of the company are expected to grow at a CAGR of 31% and

88% over 2009 to 2012E respectively.

On the basis of EV/EBITDA, the stock trades at 1.87 x for FY11E and 1.83 x for

FY12E.

Price to Book Value of the stock is expected to be at 1.07 x and 0.73 x

respectively for FY11E and FY12E.

We expect that the company will keep its growth story in the coming quarters

also. We recommend ‘BUY’ in this particular scrip with a target price of

Rs.486.00 for Medium to Long term investment.

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Industry Overview

Flexible Packaging

The fiscal year 2009-10 was a challenging year for the Indian economy. India

witnessed a significant revival in economic activity following the moderation in fiscal

2009. The economic recovery was evident across a wide range of sectors with the

momentum gaining strength in the second half of fiscal 2010. The growth in Gross

Domestic Product (GDP) during the first half of fiscal 2010 was 7.0% compared to

6.0% during the second half of fiscal 2009. However, during the third quarter of fiscal

2010, GDP growth moderated to 6.0% mainly due to decline in agricultural output

following below normal monsoons and moderation in services sector growth to 6.6%.

Reflecting the overall improvement in the economy, the Central Statistical

Organization (CSO) has placed advance estimates of GDP growth for fiscal 2010 at

7.2%.

Flexible packaging industry is the fastest growing segment of the packaging industry

worldwide and growing about 5.5% to 6% annually. Asia is growing faster than North

America and Western Europe and will emerge as the world's largest regional flexible

packaging market by 2013. The area will account for more than one-third of total

demand. China on its own will have 10% of global demand - up from 8% in 2008.

Over the last five years, all regions except Western Europe experienced growth

ranging from around 4% per annum in North America to 9% in South-East Asia and

Oceania as well as in Eastern Europe. China and India were the most dynamic

markets, growing in value terms by around 12% and 17% respectively.

At a compound annual growth rate of 17 percent, the flexible packaging market is

one of the most dynamic and fastest growing in the Country. As the advantage of

flexible packaging of lesser storage space, easy handling, cost effectiveness with

better aesthetic factors becomes increasingly appreciated, traditional rigid packaging

will take a backseat. Flexible packaging scores better over traditional packaging for

such reasons.

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Flexible packaging also offers the advantage of packing smaller quantities compared

to traditional packaging and hence, middle class consumers, who comprise of a

major section of the Indian society, have the choice of purchasing just the required

products.

The flexible packaging market has excellent growth potential in the food and

processed food, personal care, FMCG and retail sector. The demand for smaller

packaging and increasing consumerism due to higher purchasing power has been a

boon for the flexible packaging market. However, there is a certain lack of quality

consciousness among some end users and they tend to gravitate towards low-grade

products, thereby restricting the growth of flexible packaging materials.

With the introduction of innovative and new products, Indian Flexible Packaging

Industry will lead to faster growth at a rate of around 25% annually. With the advent

of newer plastic films, other novel materials and new technologies, the industry will

be looking at better quality of the products and thereby, increased sales volumes. In

fact, the market is expected to treble its output in the next few years owing to the

greater demand from the food and processed food and retail segments.

BOPET Film

BOPET Film is a versatile product broadly classified according to thickness of the

film. Thick Films (50-350 microns in thickness) find application in photographic/X-

ray, electronics, printing, textile, pre-press back up films for photo voltaic cells used

for generating solar power and office supplies, motor insulations and document

lamination. Thin Films (10-36 microns in thickness) are used in flexible packaging

metallic yarn, cables, transformers, capacitors, audio/video tape, hot stamping foils,

release films, decorative ribbons and labels.

BOPP Film

Better moisture retention properties render BOPP Film more suitable for food

products like snack foods, biscuits, pasta, dried foods and meat. Further, BOPP Film

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also finds application in wrapping cigarette cartons, ready-made garment bags,

adhesive tapes and print lamination.

The market for BOPP Film in India, unlike the rest of the world is underdeveloped.

Due to existence of popular low quality, cheap alternative in the form of TQPP

(Tubular Quenched Polypropylene Film) which is being replaced by BOPP. Growing

preference for premium and sophisticated packaging however is driving growth in

India with increased availability of BOPP, TQPP is being fast replaced by BOPP.

Packaging Raw Materials - Poly Condensation (PET Chips)

PET chips are mainly classified as polyester chips of film grade, yarn grade and bottle

grade. These chips are used as raw material for manufacturing of polyester films,

polyester yarn and PET bottles.

The yarn grade chips market in India is going through a dull and difficult phase.

Though, there has been demand for yarn grade chips, the falling price and margins

and competition from countries like China and Indonesia have made it quite

unprofitable. The market for bottle chips in India is very competitive with

exceptionally low margins. The Company has therefore, strategically decided to

mainly concentrate on production of film grade polyester chips and also decided to

maintain a balance in product mix of commodity and specialty chips for specialty

films.

Packaging Raw Materials - Inks & Adhesives

Printing ink is coloring material in the form of a fluid or paste which is used for

printing on a substrate and then dried. Depending on the process and end use, inks

are classified into letterpress, lithographic, flexographic, rotogravure and others.

Although most of the raw materials used in ink manufacture are available in India,

but certain specialty items are imported. The growth of the printing ink sector has

been very rapid. The market leaders in printing ink manufacture are USA, Europe

and Japan. The demand for printing inks is expected to show an annual growth of

more than 2-3%in Western Europe, North America and Japan. The world market

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trend points towards environ-friendly inks. Majority of the countries are

concentrating on water based and UV-cured inks. The very few small scale industries

are capable of incorporating technological advancements in the manufacturing

process. The requirements of printing inks of the future should have features like

high gloss, instant setting, high speed, quick drying, etc. Development work towards

modification of resins, structural vehicles, water based inks, environ-friendly inks

etc. needs to be undertaken vigorously. Quality control is an area which needs

special attention. The R&D of printing ink encompasses several fields which includes

chemistry, production technology and product range. The majority of the large units

have in-house R&D facilities. There is scope for improving the future of the printing

ink industry through proper efforts in research and development.

The growth rate for Lamination Adhesive in terms of volume is approximately 15%

per annum.

Packaging Machinery

The Indian capital industry has to play key role in achieving the industrial growth.

Indian Capital Goods sector is characterized by a wide range of products (almost all

major capital goods are domestically manufactured) - a legacy of import-substitution

policy.

Most Indian manufacturers define quality of capital goods largely by performance

parameters and dimensional accuracy and not in terms of aesthetics of finished

goods. Most Indian capital goods are functionally at par with equipment made

elsewhere in the world, but they rank poorly as far as finish is concerned. This has

adversely impacted the competitiveness of the Indian capital goods in a

discriminating and sophisticated export market.

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OUTLOOK

Flexible Packaging Film

India continues to lag behind the world, in usage of flexible packaging film with one

of the lowest per capita consumption rates globally. Nevertheless, the momentum

from applications in packaging continues to be strong driving growth in both BOPET

Film and BOPP Film markets. The growth is also driven by an increase in the export

of flexible packaging laminates from India as converting operations are shifting from

Europe and USA to India.

BOPET Films

As much as 80% of the sales of BOPET Film can be attributed to applications in

packaging. Rapid economic growth being witnessed in India & China is creating

larger opportunities for the use of flexible packaging film in consumer products, hot

stamping foils, metallic yarns, telecom, electronics and other electrical applications.

The Asian region is expected to account for 60% of worldwide BOPET Film sales over

the next two years expanding at a rate of 12%. Meanwhile, estimated growth for thin

films in the global markets is at 8%.

BOPP Films

The BOPP Film market in India is increasing mainly on account of greater prevalence

of modern format retailing and higher preference for hygienically packed, convenient

forms of food articles amongst customers. Moreover, the replacement of TQPP Film is

expected to intensify with lowering of cost differentials with BOPP Film, better

availability of superior quality BOPP Film and creation of novel application areas for

BOPP Film. Growth in Indian demand for BOPP Film over the next few years is being

projected at 15% compared to 6% globally.

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________________ ____ _________________________ Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation

for the purchase or sale of any financial instrument or as an official confirmation of any

transaction. The information contained herein is from publicly available data or other

sources believed to be reliable but do not represent that it is accurate or complete and it

should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s

affiliates shall not be in any way responsible for any loss or damage that may arise to any

person from any inadvertent error in the information contained in this report. This document

is provide for assistance only and is not intended to be and must not alone be taken as the

basis for an investment decision.

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