Jindal Poly Films Ltd Q4 FY16 Earnings Call Analysis
Revenue, margin, capex, fundraise and order book outlook from management commentary.
Management growth scorecard
Revenue
Category 3
Margin
Category 3
Fundraise
Yes
Order
N/A
Capex
Yes
2 of 4 growth signals are positive.
Full analysisRevenue guidance
Category 3- The demand growth for Packaging Films and BOPP Films is robust, estimated at about 12-14% annually.
- With the economy recovering, further growth in demand is expected.
- New capacity expansions in India and overseas (Europe and America) are planned, including a 41,000 Tpa BOPP line in India and two 60,000 Tpa BOPP lines overseas by mid-2017.
- Demand growth is anticipated to justify the capacity increases, with new lines coming online in gaps of about 8 months to a year.
- The global market is growing steadily, and the company expects new capacity additions to be absorbed within two years.
- Overseas operations focus on value-added specialty films, expected to maintain or improve operating margins with new efficient machines and debottlenecking CAPEX.
- India operations capacity utilization is more than 80%, with expectations to grow further with new capacity.
- No plans currently for BOPET capacity expansion; focus remains mostly on BOPP capacity.
See what Jindal Poly Films Ltd management said on margin guidance — free account, 30 seconds.
Fundraise plans
Yes- No firm plans for raising equity through QIP currently; only an enabling resolution for QIP is in place.
- For the Rs.1,000 crore expansion, the funding breakup is expected to be 70% debt and 30% equity.
- Debt funding will be through ECA loans (costing ~2% per annum) and long-term project loans.
- ECA loans have long repayment tenures (8.5 to 10 years) and come at a low cost.
- Equity portion will be funded through operational surplus flows.
- There is no mention of any immediate plans for additional fundraising beyond these.
See what Jindal Poly Films Ltd management said on order book — free account, 30 seconds.
Capex plans
Yes- Jindal Poly Films has announced a total CAPEX plan of Rs. 1,000 crores.
- In FY'16, Rs. 150 crores was spent in India and Rs. 65 crores advances paid overseas.
- Approximately Rs. 600 crores is expected to be spent in FY'17.
- The remaining Rs. 285 crores will be spent subsequently, with a debt-equity mix of 70:30 (equity from operation surplus).
- New BOPP capacity additions include:
- - 41,000 Tpa capacity in India, expected operational within two months.
- - 120,000 Tpa (two lines of 60,000 Tpa each) capacity overseas (Europe and America), targeted for mid-2017.
- Additional metallizing and coating capacities have also been commissioned in Q4FY'16.
- No current plans for BOPET capacity expansion.
- Continuous efficiency improvements and small debottlenecking CAPEX are planned.
- The company aims to replace inefficient equipment with newer lines to improve margins and capacity.
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Margin guidance
Category 3- New capacity in India (41,000 Tpa) to be operational within two months, adding 20% to existing capacity, supporting volume growth.
- Overseas capacity expansion (120,000 Tpa) by mid-2017 expected to enhance operating margins due to higher efficiency and specialty product mix.
- Demand growth for packaging and BOPP films remains robust at 12-14% in India; overseas growth around 6.5%, indicating strong volume and revenue prospects.
- EBITDA improvement seen overseas with current margins expected to be maintained or improved with new CAPEX and debottlenecking efforts.
- One-off maintenance costs in Q4 FY16 affected standalone margins; normalization expected.
- No firm guidance on FY17 EBITDA, but incremental capacity expansion and operational efficiencies are expected to drive earnings growth.
- The company targets payback on major projects within 3-5 years, indicating anticipated profitability improvements post-CAPEX.
- Dividend payout remains conservative, focusing on reinvestment for growth potential and share price appreciation.
Order book
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