Sintex Industries Ltd
Management upbeat on building products business
We recently had a conference call with Amit Patel, Managing Director of Sintex
Industries (SINT), to discuss the roadmap ahead for the company’s core
verticals, namely monolithic and prefabricated construction. The call further
strengthened our positive outlook on the company and we see a high
probability of upgrades (on both revenues and EPS) for FY11/FY12 as SINT
continues to execute ahead of expectations. In our view, our current EPS
estimates of Rs 30.2/37.4 could see upgrades in the region of 5–10%. We
remain positive on the company with a potential share upside of 40% over the
next 12 months—SINT is one of our top mid cap picks in the Indian
stock universe.
Monolithic business: The management is confident of achieving a turnover of
~Rs 12bn in the monolithic segment in FY11 and Rs 16bn in FY12, with
operating margins of 18.5–19% (against our estimate of Rs 11bn/Rs 15bn with
18% margins). SINT has also entered the new market of Uttar Pradesh with an
order of ~Rs 6.6bn.
Prefabricated business: In the prefab segment, SINT expects to achieve revenue
growth of 35% in FY11, in line with our estimates. However, the management
has guided for EBITDA margins of 19–20%, which is 100–150bps higher than
our numbers.
Potential for earnings upgrades: We see a possibility of earnings upgrades given
that the management guidance implies overall revenues of Rs 43bn and
Rs 53bn for FY11 and FY12 respectively, compared to our estimates of Rs 40bn
and Rs 49bn. This together with the higher guided margins could increase our
EPS estimate for FY11 from Rs 30 to Rs 32, while that for FY12 could rise to
Rs 40 from Rs 37.4. Consensus estimates for revenue are Rs 39bn and Rs 47bn in
each of these years respectively, with EPS at Rs 29.5 and Rs 35.9.
Maintain BUY: The stock is currently trading at a P/E multiple of 9.5x on FY12E.
We have valued the company at 13x FY12E earnings to arrive at a price target of
Rs 490 (40% upside). We believe strong results over the next 2–3 quarters could
drive upgrades to consensus as well as our estimates and recommend a BUY on
the stock.
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