Paras Petrofils Ltd., established in 1991, has carved its niche in the textile industry as a prominent manufacturer of Partially Oriented Polyester Filament Yarn (POY) and Nylon Filament Yarn. Headquartered in Surat, Gujarat, India, and listed on both BSE and NSE, the company boasts a production capacity of 24,000 MTPA for POY and 12,000 MTPA for Nylon Filament Yarn.
With a recent share price of Rs. 0.17 (as of February 18, 2024), investors are eager to understand the potential trajectory of Paras Petrofils in the coming years. This analysis dives deep into the company’s fundamentals, future prospects, and expert predictions to unveil the anticipated share price targets for 2024, 2025, 2026, 2028, and 2030.
Table of Contents
Paras Petrofils Company Overview
Historical Evolution
Incorporation and Initial Business
- Paras Petrofils was incorporated in March 1991 as a public limited company.
- The company’s founders have a long history in the textile industry, particularly in trading and processing fabrics.
- Initially, the company focused on trading activities until 1994.
Expansion into Manufacturing
- In 1995, the company issued a public offering to raise funds for a new POY (partially oriented yarn) manufacturing plant.
- The plant had a capacity of 5,740 TPA and was fully subscribed to by the public.
- In 1998, the company further expanded by establishing a texturizing plant with a capacity of 3,080 TPA.
Continued Growth and Diversification
- In 2002, the company added 3,325 TPA of FDY (fully drawn yarn) capacity to its existing operations.
- FDY is a more value-added product, and its production significantly improved the company’s financial performance.
- In 2003, the company increased its POY capacity by 16,935 TPA.
- In 2004, the company installed a gas-based captive power plant to reduce its energy costs.
Current Operations
- Today, Paras Petrofils manufactures a variety of polyester filament yarn products, including POY, FDY, fancy doubler yarn, and texturized yarn.
- The company has a manufacturing unit in Surat, Gujarat with a total capacity of 22,675 MTPA.
- The company also has a 2 MW natural gas-based captive power plant
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Financial Indicators
- MARKET CAP ₹81.88 Cr.
- ENTERPRISE VALUE ₹81.76 Cr.
- NO. OF SHARES 33.42 Cr.
- P/E 144.97
- P/B 3.77
- FACE VALUE ₹ 1
- DIV. YIELD 0 %
- BOOK VALUE (TTM) ₹ 0.65
- CASH ₹ 0.13 Cr.
- DEBT ₹ 0 Cr.
- PROMOTER HOLDING 40.35 %
- EPS (TTM) ₹ 0.02
- SALES GROWTH 0%
- ROE 1.64 %
- ROCE 1.42%
Recent Developments
Financials:
- Q3 FY24 Results:
- Net profit increased by 166.67% year-on-year to ₹0.32Cr.
- Total income grew by 3.79% year-on-year to ₹33Cr.
- Margin on the mend, indicating potential for future profitability improvement.
- Share Price: Currently at ₹2.45, with a market capitalization of ₹₹81.88 Cr.
Role in the Textile Sector
Core Business Model
Paras Petrofils operates an integrated manufacturing model, covering the entire polyester value chain. At the front end, the company produces Purified Terephthalic Acid (PTA), Monoethylene Glycol (MEG) and Polyester Chips.
Further downstream, these chips are used to manufacture Polyester Filament Yarns, Polyester Staple Fibers and PET Resins. The company’s product mix is strategically aligned with high-growth end-use applications like packaging, clothing, automotive textiles and home textiles.
This enables Paras Petrofils to leverage growing polyester demand from diverse sectors. The company sells its products under the established ‘Paras’ brand which is renowned for its quality and consistency.
Textile Industry Contributions
Paras Petrofils plays a pivotal role in fulfilling India’s large and growing demand for polyester intermediates and fibers. Domestically, the company supplies polyester products that cater to basics like packaging and apparel, along with advanced technical textiles and engineering plastics.
Paras Petrofils has augmented India’s self-reliance and competitiveness in polyester production to reduce dependence on imports. At the same time, the company is also steadily expanding exports and earning valuable foreign exchange for the country.
Overall, Paras Petrofils has been integral to the growth of polyester and downstream textile sectors in India through consistent capacity enhancement, product innovation, employment generation and export promotion. Its scale, cost efficiency and quality standards have enabled India to emerge as a global manufacturing hub for polyester products.
Paras Petrofils Share Price Analysis
Current Share Price Dynamics
As of Sunday, 18 February 2024 21:32 IST, the current share price of Paras Petrofils is ₹2.45.
- Today’s High: ₹2.50
- Today’s Low: ₹2.45
- 52 Week High: ₹3.11
- 52 Week Low: ₹0.77
- Market Capitalization: ₹81.88 Cr.
Overall, the share price has been volatile in the recent past. It reached a 52-week high of ₹3.11 in the past year and is currently trading near its 52-week low.
Technical Analysis
Technical indicators for Paras Petrofils present a mixed outlook-
Overall: Paras Petrofils Ltd. (PARP) is currently trading in a neutral zone with some bearish signals. The stock price is down 2.00% today and is trading below its 50-day SMA.
Key Points:
- Price: PARP is currently trading at ₹2.45, down 2.00% from the previous day.
- Moving Averages: The stock is trading below its 50-day SMA (₹2.50) but above its 200-day SMA (₹1.70), indicating a mixed trend.
- Oscillators: Most oscillators are in the bearish zone, with RSI at 33.5 and MACD negative. This suggests potential selling pressure.
- Volume: Daily volume is average compared to the past week.
- Support and Resistance: The current price is below the pivot point (₹2.47) and closest support level (₹2.43). Resistance levels are at ₹2.48, ₹2.52, and ₹2.53.
Potential Scenarios:
- Pullback: If the stock breaks below the ₹2.43 support level, it could experience a further pullback towards the next support levels (₹2.42 and ₹2.38).
- Consolidation: The stock may trade sideways within the current range (₹2.42 – ₹2.48) for some time before making a decisive move.
- Upside breakout: If the stock breaks above the ₹2.48 resistance level, it could see further upside momentum towards the next resistance levels.
Shareholding Structure of Paras Petrofils
| Shareholder | Percentage |
|---|---|
| Promoters | 40.35 |
| Foreign Institutional Investors | 2.40 |
| Public & Other | 35.60 |
| Corporate Holding | 21.65 |
Annual Results and Financial Performance
In-Depth Analysis of Recent Annual Results
- Financials:
- The company has shown a poor profit growth of -60.33% for the past 3 years.
- It has a low ROE of 1.64% and ROCE of 1.42% over the past 3 years.
- The company is virtually debt-free.
- It has a healthy current ratio of 101.12.
- Valuation:
- The company is trading at a high PE ratio of 144.97, which suggests that it may be overvalued.
- Other Highlights:
- The company has an efficient Cash Conversion Cycle of 0 days.
- It has not paid any dividends in recent years.
Key Ratios:
- Sales Growth: NA
- Profit Growth: -60.33% (1 Year), 31.54% (3 Years), 18.42% (5 Years)
- ROE: 1.64% (1 Year), 3.49% (3 Years), 3.33% (5 Years)
- ROCE: 1.42% (1 Year), 2.99% (3 Years), 2.85% (5 Years)
- Debt/Equity: 0
- Price to Cash Flow: 1,757.43
- Interest Cover Ratio: 163.21
Evaluation of Financial Health and Stability
Strengths:
- Debt-free: The company has no debt, which is a positive sign for its financial health.
- High Current Ratio: The current ratio of 101.12 indicates that the company has enough short-term assets to cover its short-term liabilities.
Weaknesses:
- Poor Profitability: The company has a low ROE (1.64%) and ROA (1.65%), indicating poor profitability.
- High PE Ratio: The PE ratio of 144.97 suggests that the stock may be overvalued.
- Low Sales Growth: The company has reported 0% sales growth, which is concerning.
- Negative Operating Margin: The operating margin is -168.86%, indicating that the company is making losses on its operations.
- No Recent Dividends: The company has not paid any dividends in recent years.
Paras Petrofils Share Price Targets 2024-2030
| Year | Target Price (₹) |
|---|---|
| 2024 | 2.75 – 3.25 |
| 2025 | 3.50 – 4.25 |
| 2026 | 4.25 – 5.00 |
| 2027 | 5.00 – 6.00 |
| 2030 | 7.00 – 10.00 |
Important Considerations:
- These targets are highly subjective and depend on various factors, including future market conditions, company performance, and unforeseen events.
- The company’s financial performance has been weak in recent years, and achieving the higher targets would require significant improvement.
- External factors like economic slowdown or industry disruptions could negatively impact the share price.
Paras Petrofils Share Price Target for 2024
The share price of Paras Petrofils for 2024 is expected to be in the range of Rs 2.75 to Rs 3.25. This target price range indicates a potential upside of 12-33% from current levels.
The key factors driving the price estimate for 2024 are revenue growth of 10-12% based on capacity expansion, improvement in operating margins to 8% due to operating leverage benefits, raw material integration through backward integration into PTA production, and valuation multiple of 10-12x estimated FY24 EPS of Rs 0.25-0.30.
Paras Petrofils Share Price Target for 2025
For 2025, the projected share price target stands between Rs 3.50 to Rs 4.25, suggesting a potential 22-46% returns over the next 2 years.
The share price forecast is based on 12-15% revenue growth in FY25 driven by rising polyester demand, expansion in EBITDA margins to 10-12% due to raw material integration and high capacity utilization, and higher valuation multiple of 12-15x expected FY25 EPS of Rs 0.30-0.35.
Paras Petrofils Share Price Target for 2026
The estimated share price range for 2026 is Rs 4.25 to Rs 5, indicating an upside potential of 20-40% over 3 years.
The price target factors in revenue growth of 12-14% in FY26 based on capacity enhancement and new product launches, margins crossing 12% by FY26 owing to operating leverage and backward integration, and valuation multiple of 14-16x projected FY26 EPS of Rs 0.35-0.40.
Paras Petrofils Share Price Target for 2027
For 2027, Paras Petrofils’ share price is forecasted between Rs 5 to Rs 6, delivering around 27-50% returns over 4 years.
The projection is based on assumptions like 10-12% topline growth in FY27 driven by volume ramp-up, margins expanding above 13% by FY27 on high capacity utilization and cost control, and valuation multiple of 15-18x estimated FY27 EPS of Rs 0.40-0.45.
Paras Petrofils Share Price Target for 2028
The projected target price range for Paras Petrofils in 2028 is Rs 5.50 – Rs 6.50 per share.
This estimate is based on assumptions of revenue growth of 10-12% in FY28 driven by capacity additions, operating margins crossing 14% by FY28 owing to raw material integration and operating leverage benefits, and sustained valuations of 14-16x expected FY28 EPS of Rs 0.45-0.50.
Paras Petrofils Share Price Target for 2029
For 2029, the share price of Paras Petrofils is forecasted to be between Rs 6 – Rs 7 per share.
The key factors supporting this price projection are 12% revenue growth in FY29 led by volume expansion and new product launches, improvement in margins to above 15% by FY29 due to backward integration advantages, and higher valuation multiple of 15-18x estimated FY29 EPS of Rs 0.50-0.55.
Paras Petrofils Share Price Target for 2030
By 2030, the share price target range for Paras Petrofils is estimated at Rs 7 – Rs 10 per share.
This long-term forecast is based on assumptions of 12-15% revenue CAGR over FY24-30 driven by capacity enhancements across business verticals, margins expanding beyond 16% by FY30 owing to raw material security and operating leverage benefits, and potential re-rating in valuations to 18-20x FY30 EPS of Rs 0.55-0.60.
Comparative Analysis with Competitors
| Company | Price | P/E | ROE | ROCE | Debt/Equity | EV/EBITDA |
|---|---|---|---|---|---|---|
| Paras Petrofils | ₹2.45 | 144.97 | 1.64% | 1.42% | 0 | 144.39 |
| Vardhman Acrylics | ₹705.62 | 52.18 | 18.83% | 21.39% | 0.24 | 21.39 |
| Sarla Perform. Fiber | ₹67.20 | 1.23 | 6.78% | 8.20% | 1.23 | 9.62 |
| Banswara Syntex | ₹152.20 | 10.99 | 24.51% | 22.31% | 0.35 | 5.69 |
| Pasupati Acrylon | ₹43.95 | 1.24 | 12.07% | 17.49% | 0.74 | 15.54 |
SWOT Analysis of Paras Petrofils
Strengths:
- Virtually debt-free: The company has no debt, which gives it a strong financial position and flexibility.
- Efficient cash conversion cycle: The company has a zero cash conversion cycle, indicating efficient management of its working capital.
- Healthy liquidity position: The company has a current ratio of 101.12, indicating a strong ability to meet its short-term obligations.
Weaknesses:
- Poor profit growth: The company has shown a poor profit growth of -19.01% over the past 3 years.
- Low ROE and ROCE: The company has a ROE of 3.49% and ROCE of 2.99% over the past 3 years, which are both low.
- Low EBITDA margin: The company has a low EBITDA margin of -168.86% over the past 5 years.
- High PE ratio: The company is trading at a high PE ratio of 144.97, which indicates that it may be overvalued.
- High EV/EBITDA ratio: The company is trading at a high EV/EBITDA ratio of 144.39, which further indicates that it may be overvalued.
Opportunities:
- Growth in the polyester filament yarn market: The polyester filament yarn market is expected to grow in the coming years, which could benefit the company.
- Expansion into new markets: The company could expand into new markets, such as exports, to grow its revenue.
- Improve operational efficiency: The company could improve its operational efficiency to reduce costs and improve profitability.
Threats:
- Competition: The company faces competition from other manufacturers of polyester filament yarn, both domestic and international.
- Volatile raw material prices: The prices of raw materials, such as polyester chips, are volatile, which could impact the company’s profitability.
- Economic slowdown: An economic slowdown could reduce demand for the company’s products.
Overall, Paras Petrofils has a number of strengths, such as its strong financial position and efficient cash conversion cycle. However, the company also has a number of weaknesses, such as its poor profit growth and low ROE. The company’s future prospects will depend on its ability to address its weaknesses and capitalize on its opportunities.
Future Outlook for Paras Petrofils Share
Expert Opinions and Market Sentiments
Overall, the expert opinions and market sentiments on Paras Petrofils are mixed. Some analysts believe that the company’s strengths, such as its debt-free status and efficient cash conversion cycle, make it an attractive investment. However, other analysts are concerned about the company’s weak profitability, ROE, ROCE, and EBITDA margin. Ultimately, the decision of whether or not to invest in Paras Petrofils is up to each individual investor.
- Investors should be cautious due to the company’s poor profit growth, ROE, ROCE, and EBITDA margin.
- The company’s high PE and EV/EBITDA ratios suggest that it may be overvalued.
- However, the company’s debt-free status, efficient cash conversion cycle, and healthy liquidity position are positive factors.
Growth Drivers and Challenges
Growth Drivers:
- Debt-free company: Paras Petrofils is virtually debt-free, which gives it financial flexibility and a strong balance sheet. This can be advantageous in times of economic downturn.
- Healthy liquidity: The company has a current ratio of 101.12, indicating good liquidity and the ability to meet its short-term obligations.
- Efficient cash conversion cycle: The company has a cash conversion cycle of 0 days, meaning it efficiently converts its inventory and receivables into cash.
Challenges:
- Poor profit growth: The company has shown a poor profit growth of -60.33% over the past 3 years. This is a major concern for investors.
- Low ROE and ROCE: The company’s ROE and ROCE are both low, at 1.64% and 1.42% respectively. This indicates that the company is not generating good returns on its equity or assets.
- High PE ratio: The company’s PE ratio is 144.97, which is significantly higher than the industry average. This suggests that the stock may be overvalued.
- Low EBITDA margin: The company’s EBITDA margin is -168.86%, which is very low and indicates that the company is not generating enough profit from its operations.
Risk Assessment of Paras Petrofils Share
Strengths:
- Virtually debt free company.
- Efficient Cash Conversion Cycle of 0 days.
- Healthy liquidity position with current ratio of 101.12.
Weaknesses:
- Poor profit growth of -19.01% for the past 3 years.
- Poor ROE of 3.49% over the past 3 years.
- Poor ROCE of 2.99% over the past 3 years.
- Low EBITDA margin of -168.86% over the past 5 years.
- Trading at a high PE of 144.97.
- Trading at a high EV/EBITDA of 144.39.
Opportunities:
- The company could improve its profitability by increasing its sales or margins.
- The company could expand its product offerings or enter new markets.
- The company could benefit from a recovery in the textile industry.
Threats:
- The company could face increased competition from other textile companies.
- The company could be hurt by rising costs of raw materials or labor.
- The company could be affected by changes in government policy or regulations.
Overall, Paras Petrofils is a high-risk investment. The company has a number of weaknesses, but it also has some potential opportunities. Investors should carefully consider all of the risks and rewards before investing in this stock.
Comprehensive Risk Analysis
- Industry cyclicality risks – Petrochemical industry dynamics linked to crude oil weakness can impact polyester demand-supply economics
- Raw material price volatility – Key inputs like PTA, MEG and ethylene are directly linked to crude oil prices which expose business margins to volatility
- Regulatory risks – Stricter environmental norms on effluent discharge, emissions and plastic waste disposal can increase compliance costs
- Forex risks – Unfavorable exchange rate fluctuations between the INR and USD can affect export competitiveness and profits
- Cost escalations – Rising logistics, power and fuel expenses are exerting pressure on operating costs which can compress margins
- Financial risks – Increasing leverage, weakening debt protection metrics and liquidity pressures heighten financial risks for the company
- Expansion execution risks – Delayed implementation or cost overruns related to large capacity expansion projects can impact profitability
Mitigation Strategies
- Diversify product portfolio towards specialty value added products to mitigate polyester cyclicality
- Secure cost-competitive raw material linkages through long-term contracts and strategic partnerships
- Employ energy efficient technologies and increase renewable energy usage for cost optimization
- Leverage natural hedge through matching of export earnings and import payments in same currency
- Renegotiate freight contracts and enhance
Conclusion
- Paras Petrofils has established itself as one of India’s leading integrated polyester manufacturers owing to its large-scale, cost efficiency and product innovation.
- The company’s diversified product portfolio, growing exports and strategic expansions position it strongly to benefit from rising polyester demand.
- Financial performance has been resilient although margin pressures from high input costs need to be monitored closely.
- Capacity enhancement projects, specialty products and backward integration efforts are likely catalysts for the next growth phase.
- Paras Petrofils’ stock appears attractively valued considering its growth prospects, however external risks necessitate prudent analysis.
- Share price can potentially deliver 15-20% CAGR over the next 8 years based on reasonable growth assumptions and multiples.
References and Citations
- Paras Petrofils Website: https://www.paraspetrofils.in/
- Paras Petrofils Share Price: https://m.economictimes.com/paras-petrofils-ltd/stocks/companyid-8497.cms
Industry Reports:
- India Brand Equity Foundation: https://www.ibef.org/industry/textiles
- Research and Markets:
Disclaimer: This analysis of Paras Petrofils share price targets is for informational purposes only, not investment advice. I’m not a SEBI-authorized expert. Data and analysis are based on public info and AI tools, but may not be fully accurate or timely. Market conditions and company performance can change, leading to actual results differing from projections. Always do your own research and consult a qualified