Uflex caught our attention in June 2010 when it was languishing at Rs. 112. (See Uflex Ltd – Packaging Profits). When we saw Uflex‘s low PE, Price below Book Value, good dividend yield and good growth prospects, we got a little carried away and called Uflex the kind of share that master stock pickers like Rakesh Jhunjhunwala and Ramesh Damani are looking for in a share to add to their portfolio. It was surprising that though Uflex had reported splendid FY 2009-10 results, the stock market had just ignored the stock and let it languish unattended.
Well, fortunately, our optimism in Uflex has paid out big time (thanks to the steep rise in polymer prices, which we had not predicted) and the Uflex stock has returned an incredible 185% at the CMP of Rs. 320 in just 4 months!
As expected Uflex has reported block-buster results in Q2 FY 2011.
Uflex‘s sales in the second quarter of FY 2010-11, on a consolidated basis, jumped from Rs. 552 cr to Rs. 846 crs YOY while the EBITA increased 252% from Rs. 76 crs to Rs. 268 crs. Uflex‘s Net Profit increased 339% from Rs. 46 crs to Rs. 202 crs. Uflex‘s diluted EPS after Extraordinary items increased from Rs. 6.59 to Rs. 28.42. Uflex‘s diluted EPS for the half year ended 30.9.2010 was Rs. 36.96.
Uflex’s prospects in the medium term look very promising. Uflex has ambitious plans for expansion for the period of three years starting from April 2009 to March 2012, which is aggregating around USD 250 million. This is Uflex’s total expansion both in the domestic market as well as in the international market. Uflex has declared that it will invest USD 135 million into Uflex’s Egypt plant, which is being set up now in two phases. The second phase of Uflex’s Mexico plant is going to have additional investment of USD 65 million and the balance USD 50 million is approximately going to be invested by Uflex into the domestic market.
Uflex stated that the USD 250 million of investment would help Uflex achieve its target of revenue from half a billion dollar in March 2009 to a billion dollar company by March 2012.
Uflex also has surplus land in Noida Sector 4 (where its plant is situated) which has a substantial value (estimated at Rs 800 crore).
Uflex is a leading player in the business of flexible packaging in India. Uflex manufactures PET films, BOPP films (BOPET, BOPP and CPP-both in plain and metalized form), coated film, laminates, pouches, holographic films Gravure cylinders, Inks etc. Uflex also manufactures packaging products, pouches and packs. Uflex also manufactures flexi tubes, flexi bottles, carry bags, paper cups etc. These are used by FMCG companies like Hindustan Unilever, Britannia, Nestle, Cadbury etc.
So from all perspectives, Uflex continues to be a stock where the risk-reward ratio continues to be in favour of making an investment.