Religare: buy Sintex-, Monolithic and textile segments lead growth

Sintex Industries Ltd
Results in line, Monolithic and textile segments lead growth
Sintex Industries (SINT) has reported strong Q2FY11 results with topline growth
of 28.7% YoY to Rs 9.2bn and PAT growth of 49% YoY to Rs 950mn. The
company registered an all-round performance as revenues from the building
material and custom moulding businesses grew at 37% and 24% respectively.
We expect the buoyancy to continue in H2FY11 as the busy construction season
sets in. We introduce our FY13 estimates and roll forward our target P/E
multiple of 13x, giving us a revised December ’11 target price of Rs 540 (from
Rs 490 earlier). We maintain a BUY rating on the stock.
Monolithic, foreign subsidiaries and textile recovery lead revenue growth: SINT
reported strong topline growth of 28.7% YoY to Rs 9.2bn for the quarter, driven
by its monolithic and textile businesses which grew at 108% and 24%
respectively. Its various subsidiaries, namely Nief, Bright Autoplast and
Wausakee, also reported a strong performance, with revenues increasing by
24%, 50% and 29% respectively during the quarter. The company is likely to
continue its buoyant run in H2FY11 with the onset of the busy construction
season. It has a Rs 26bn order book in the monolithic segment which will drive
growth over the next 20 months.
EBITDA margins up 15bps YoY, 360bps QoQ: SINT reported EBITDA margin
expansion of 15bps YoY to 18.4%, driven by a strong recovery in textile margins.
Although reported PAT stood at Rs 1bn (versus our estimate of Rs 890mn), after
adjusting for a one-time foreign exchange gain of Rs 160mn, one-time interest
cost of Rs 40mn to ONGC, and Rs 70mn in prior year taxes, the adjusted PAT
stands at Rs 950mn.
Balance sheet concerns addressed; working capital management the key: In
response to concerns over higher investments and the status of funds under
loans & advances, the management indicated that the fresh investments of
Rs 1.4bn were parked in mutual funds and that loan & advances still include
Rs 3.5bn–4bn in escrow account which will be utilised for further acquisitions.
We believe working capital management will be a key issue for the management
to address going forward coupled with investment in non-core businesses.
Maintain BUY: We introduce our FY13 estimates and roll forward our target P/E
multiple of 13x, giving us a revised December ’11 target price of Rs 540.
Continued strength in the monolithic business and a sustained revival in the
prefabricated and textile businesses are likely to further drive stock momentum
going forward. We maintain our BUY rating on the stock.