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Uflex Ltd. has reported numbers for the quarter and half year ended Sept’21. Following are the highlights of the result.

* Packaging Films production witnessed a jump of 33.5% YoY to reach 124,670 MT in Q2FY22, while Packaging Films sales witnessed an increase of 41.6% YoY to reach 122,321 MT. Overall sales volume for the quarter was up by 31.5% YoY.

* Newly commissioned plants in Hungary, Egypt, Russia & Poland are operating at near full capacity, while the plant in Nigeria (10.63 meter BOPET with capacity of 45,000 TPA) is ramping up fast and will achieve full capacity utilization in next 1-2 quarters. However, the quarter witnessed heightened cost pressures with frequent increases in raw material prices, higher shipping & energy costs, and consequently a strong order book position only meant servicing these customers at increased input prices, thus affecting the margins. However, given the strong demand momentum, once the raw material prices stabilize, the margins are expected to become better.

OUTLOOK AND VALUATION

We expect the company to deliver sales growth of 12% & 10% respectively in FY22E and FY23E. In addition to the growth in the revenue, we expect the company to deliver strong EBITDA and PAT margins of 21.0% and 10.6% respectively for FY23E. EPS for FY23E is projected to be ~Rs. 153.9. We have assigned a P/E multiple of ~4.8x and arrived at a target price of ~Rs. 731 which provides an upside of ~40% from the current market price of Rs. 523 within an investment horizon of 12-18 months. Hence, we maintain our rating at ‘BUY’.

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