Anand Rathi Polyplex Industries-Sector To Re-Rate post Q2 Results BUY
Based on the broad estimates of earnings for FY11 we find POLYPLEX to be the most attractive pick right now in the industry and we suggest a BUY.
Industry as a whole will perform extremely well, so we suggest a hold on GARWARE POLSTER, UFLEX, & JBF IND. While to get better out performance within sector, we suggest switch from ESTER & JINDAL POLYSTER to POLYPLEX.
POLYSTER FILM - SECTOR UPDATE: We were bullish on Polyster Film Industry since December 2009; when we first recommended JBF Ind. (@ Rs.99/- in December 2009), after visiting JBF-RAK, Dubai facilities, engaged in Polyster Film manufacturing. There after in March 2010 we recommended Garware Polyster (@ Rs. 53.50) based on improving realisation for polyster films on month-on-month basis.
Again based on further improvement in realisation of Ployster Films we suggested an intregated flexible packaging player UFLEX (@ Rs. 125 in May 2010) which is big player in Polyster Film and having global manufacturing facilities also.
There after we suggested to buy ESTER IND. (@ Rs.30in July 2010). Since then we are tracking the price realisation in this sector along with trends in input cost which are as follows.
Price Trends
Standard PET film prices risen Month on Month since Feb'10 as follows - Rs.98/Kg in Feb'10 to Rs.101 March ;Rs.106 April ;Rs. 113 May ;Rs.125, from Mid-June ;Rs.140 in late June and Rs.145 in July'10. Now industry insiders suggest a further significant (Rs.15-20/ kg) hike in Polyster Film prices from September 2010.
This suggests that average realization which was Rs.114/ Kg for June'10 Qtr may go up to Rs 140 plus in Sept Qtr , so next Qtr performance will be extremely good for the industry. (Much much better than June Qtr.)
This is so because inputs (MEG & PTA) prices were more or less stable since last eight months due to abundant supplies in global markets and now weak Oil prices.
We are expecting a quantum jump in September quarter PAT and in most cases it will be double or more then double of June quarter PAT.
Improving cash flow for industry will make their balance sheet much healthier (Reduction in debt burden) going forward and interest burden will come done significantly for the industry as a whole.
Considering the overall trend we expect the sector to be re-rate in next couple of quarters, due to extra-ordinary healthy margins, improved debt profile and good growth prospects.
Safe Harbor Statement: Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints. Nothing in this article is, or should be construed as, investment advice. |
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