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Our Bureau

Mumbai , May 31

POLYESTER maker JBF Industries stock has been on an upward move on expectation of strong growth due to its expansion plans.

JBF is expanding capacity of polyester chips by 2 lakh tonnes to 3.2 lakh tonnes with investment of Rs 170 crore. The expansion is expected to go on stream in the first quarter of 2007 financial year.

The funding for the expansion would be done through equity and internal accruals.

In today's trading, the stock gained 11.51 per cent at Rs 72.15 on the BSE with volumes of 22.82 lakh shares; on the NSE, it closed at Rs 72.35, up 11.48 per cent, with volumes of 41.13 lakh shares.

According to analysts tracking the company, sales growth would drive earnings growth from 2007 despite dilution of equity.

"The company is increasing its capacity of polyester chips by 167 per cent in the next one year. This would add about Rs 70 crore to operating profit in fiscal 2007. We expect EPS to grow at compound annual growth rate of 44 per cent over the next two years from Rs 9.4 in 2005 to Rs 19.6 in 2007," says Refo-Sify Securities in a report on the company.

The interest in the stock price is also due to improvement in the profits margins in the polyester chips business in the first two months of current fiscal. The margins in the first two months at Rs 9.25 per kilogram are up 5.7 per cent compared to average of Rs 8.75 a kg in 2005 fiscal.

"Margins have improved from the lows in third quarter of 2005 financial year as cotton prices have recovered from their low in December 2004 and lower crude oil prices have led to lower raw material costs," Refco-Sify said.

Analysts feel that an unexpected growth for the company business could be seen if there is any increase in polyester textiles exports diverted from China to India.

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