In FY09, JPFL bought back shares for INR 604Mn and INR 845Mn in FY10.

For FY12 and FY13, we expect JPFL financial gearing at 0.3x each. This supported with higher profitability and cash, makes its balance-sheet risk averse and strong. Despite the fact that JPFL plans capex through debt, we believe that JPFL balance-sheet remains sound. Lower gearing also enables JPFL to raise fund comfortably and at a competitive rate for product development, capex, plant renewal, modernization and other inorganic growth opportunities.

We see JPFL's revenue and profit to grow at a CAGR of 14% and 1% respectively over FY11e-13e. With low debt and equity base, we expect JPFL to earn 27.1% on its equity
(RoE) in FY13.

Peer Valuation

Stock within the packaging industry for BOPET and BOPP historically trades ~2-3x its one year forward earning. Given the a) firm and sustainable demand b) diversification of JPFL at subsidiary level into power business and c) higher RoCE compared to its peers, we believe that going forward, JPFL would trade at higher PE multiple.

Valuation and Outlook

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.