JPFL's expansion plans, strong balance sheet, healthy cash flows and expected sustainability of the buoyant BOPET film prices, make the company an attractive long term bet. At the CMP, stock trades at 4.5x its FY12e and 3.6x its FY13e earnings. Though, P/E remains quite attractive, considering the sharp run up in the stock price, revenue CAGR of 14% and earning CAGR of meager 1% over FY11-13e, we recommend Accumulate for target of INR 620 over next 24 months.

Company Description

Jindal Poly Films Limited (JPFL), a part of B. C. Jindal Group, is one of the leading producers of flexible packaging films in India and operates the world's largest single location facility for flexible packaging films at Nashik, Maharashtra. The company currently manufactures polyester chips and the complete range of packaging films, comprising both BOPET and BOPP. JPFL also has a strong presence in overseas market. Besides such films, JPFL also offers a range of metallised and coated film products to its customers. Industry Structure & Developments - BOPET Film

Biaxially-oriented polyethylene terephthalate (BOPET film) is a versatile product broadly classified on the basis of thickness. Thick Films (50-350 microns) are mostly used in photographic/X-ray, electronics, printing, textile, pre-press back up films for photo-voltaic cells consumed for generating solar power and office supplies, motor insulations and document lamination. Thin Films (10-36 microns) find wide applications in flexible packaging metallic yarn, cables, transformers, capacitors, audio/video tape, hot stamping foils, release films, decorative ribbons and labels etc.

With rapid growth of FMCG and Pharma Industry coupled with supplier's preference to pack its product with style and safety, there exists sustainable demand for BOPET film in both developed and emerging economies. Higher demand in the emerging market like India as well as lower production in mature markets (USA, Europe and Japan) due to fall in production capacities have resulted in sharp uptick in product prices in the recent past. Demand from current user Industry as well as incremental demand coming from alternate usage in electronic segment, especially in Solar Power augurs well for BOPET films. 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 8%.