Polyplex Corporation (PCL) posted a revenue uptick of 42% year-on-year (YoY) in Q3FY22, led by 3% YoY volume growth and realisation rising 37% YoY owing to cost pass-throughs. With this, EBITDA margin grew 333 bps on a sequential basis, with EBITDA up 6% YoY. Also, the company added 60,000MT of BOPP capacity in December.
With strong earnings, domestic brokerage and research firm Edelweiss has upgraded the company’s EBIDTA estimates by 10%/8% each in FY22/23. But, has maintain ‘HOLD’ on the multibagger stock, that has rallied over 143% in a year, with a revised target price of ₹2,038 per share, seeing more upside from current levels.
While demand is anticipated to grow at a 6% compound annual growth rate (CAGR) for the industry over CY20-23E, spreads are estimated to soften in FY23, with incremental capacity addition through CY24 for the BOPET industry.
“While supply has been delayed, the compnany’s BOPET supply CAGR of 13% at industry level over CY20–22E should result in margin pressures in FY23. Hence PCL’s capacity addition should drive volume CAGR of 13%, but EBITDA CAGR would be lower at 9% over FY22–24,” the brokerage note added.
Further, the 50 ktpa US capacity would come on stream towards 2H FY24, propping volume growth of 10% in FY24E. Capex of $154 mn over two years should be supported by a robust net cash position of $ 54 mn annually, Edelweiss highlighted.
However, With BOPET supply delayed at industry level from H2FY22 to H1FY23, the hit on gross margins could be lower in FY23. “While incoming capacities for the BOPET industry are delayed, declining overall spreads should result in EBITDA CAGR of 9% over FY22–24, despite 13% CAGR in volumes,” the note added.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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