Healthy Gross Profit Growth, But Other Costs Higher; Retain Buy Following the decline in crude oil prices, realisation of JBF Industries (JBF) reduced and therefore revenue grew by a mere 8.8% in 1QFY16 despite a healthy volume growth because of new capacity addition. Gross profit grew by a healthy 29.8% to Rs6,888mn, in line with our estimate of Rs6,807mn. However, employee costs/other expenses increased 65.3%/34.9%, respectively, because of commissioning of two new ventures of US$200mn each in 3QFY15. As all costs are booked in P&L; account ,ramp-up will take time, as a result of which when compared to 29.8% growth in gross profit, operating profit grew at a lower pace of 15.5% to Rs2,401mn,...

Repairs Balance Sheet With Limited Equity Dilution As per the outcome of JBF Industries' (JBF) board meeting held on 31 July 2015, KKR Jupiter Investors will invest US$150mn in JBF, Rs4.9bn at the parent level for a 25% equity stake (pre-dilution) and Rs4.7bn in JBF Global, the Singapore subsidiary, for a 17% stake. We believe JBF got a very good deal by raising Rs9.6bn, half of its current market capitalisation, through a mere 25% equity dilution at the parent level by structuring the deal in such a manner where it maximised the value of its subsidiary. KKR valued the Singapore arm alone at Rs27.8bn (Rs424/share) compared to...

Strong EBITDA Growth, But Forex Losses Play Spoilsport; Retain Buy With lower production at domestic operations and a fall in realisation linked to crude oil prices, JBF Industries (JBF) reported a low single-digit revenue growth of 2.2% to Rs21,417mn in 4QFY15, 5.2% below our estimate, led by a 33.4% fall at Indian operations. However, consolidated operating profit grew by a healthy 16.5% to Rs2,304mn, in line with our estimate of Rs2,337mn. On account of forex loss of Rs989mn on restatement of US dollarlinked borrowing in euro by its subsidiary in Belgium because of a steep depreciation of the euro against the US dollar, JBF reported a loss of Rs541mn against an...

Benefits From Capex, Lower Crude Oil Prices; Upgrade To Buy Following better-than-expected operating profitability of Indian and RAK operations, and also ramp-up at new ventures, JBF Industries (JBF) posted a 78.9% rise in 3QFY15 EBITDA to Rs2,679mn, 16.2% above our estimate. However, following a higher forex loss and also higher depreciation/interest costs because of capacity expansion at overseas operations, net profit fell 21.6% to Rs217mn against our estimate of Rs440mn. In the wake of a rise in interest costs/depreciation because of higher debt/capex and a weak PTA (Purified Terepthalic Acid) cycle, we have cut our net profit for FY15E/FY16E/FY17E by...