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Uflex Ltd. has reported numbers for the quarter and nine months ended Dec’21. Following are the highlights of the result.

* Total production volume surpassed its previous record to reach 153,441 MT in Q3FY22 witnessing a jump of 38% YoY whereas total sales volume mirrored the 38% YoY increase to reach 154,224 MT. The increase in volumes was primarily due to increase utilizations and debottlenecking of plants.

* Utilization levels for all the plants is 95% except Nigerian facility which has a utilization of ~65%. The plants especially have a scope of growth through debottlenecking of plants and their utilizations can be ramped up to 105%.

* The managements expects that the next round of growth will be coming from expansion projects of Aseptic Liquid Packaging in Sanand (Completion by Q1FY23), in Dubai (Completion by Q1FY23) and in Dharwad (Completion by Q3FY23).

* Fluctuations in RM prices have changed the companies approach in booking orders. They now follow a dynamic approach for realizing orders rather than the traditional approach of booking long term orders. This will give the company more flexibility to deal with temporary RM price fluctuations.

* Pet prices increase by 50% in India and BOPP prices have also increased by 30%-35%.

* As on 31st Dec, 2021 the debt in the books of the company in ~Rs. 3,500 cr.

OUTLOOK AND VALUATION

We expect the company to deliver sales growth of 5% in FY23E over FY22 sales. In addition to the growth in the revenue, we expect the company to deliver EBITDA and PAT margins of 17.1% and 8.5% respectively for FY23E. EPS for FY23E is projected to be ~Rs. 157.5. We have assigned a P/E multiple of ~4.7x and arrived at a target price of ~Rs. 731 which provides an upside of ~29% from the current market price of Rs. 567 within an investment horizon of 12-18 months. Hence, we maintain our rating at ‘BUY’.

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