Sintex- Highlights OF Q2FY11 financials by IDFC research

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Highlights OF Q2FY11 financials
• Consolidated EBITDA at Rs1.72bn (up 25%qoq) was in line with our estimates of Rs 1.73bn. Operating margin
increased qoq by 350bps to 18.6%, largely led by (a) execution of profitable orders in monolithic and prefab segments
(b) improving EBIT margins in textile segment which came at 13.6% (up 200bps qoq)

• Consolidated PAT of Rs1.0bn was higher than our estimates of Rs927m led by (a) a higher than expected other income
which came at Rs272m (up 34%qoq), against our estimates of Rs202m (b) marginal qoq decline in depreciation which
came at Rs357m (our estimates of Rs363m). The positive surprise in other income was led by a one-time foreign
exchange gain of Rs 160m (attributable to forex gains on outstanding FCCB’s).
• Revenues at Rs 9.2bn (up 1.4%qoq) was largely in line with our estimates. Revenues for building materials segment at
Rs4.1bn (up 15%qoq) was marginally above estimates, led by a stronger than expected performance by Monolithic
segment. However the above was offset by 8%qoq decline in consolidated custom molding revenues which were
Rs4.1bn (our estimates of Rs4.5bn).
• The management indicated that fresh investments of Rs 1.4bn were parked in mutual funds and that loan & advances
still include ~Rs 3.5–4bn in escrow account which will be utilised for further acquisitions
• Investments into unrelated business: Sintex is likely to be investing as a minority partner in the new ventures by the
promoters - primarily into oil & gas exploration and power generation. According to the latest annual report, a new
100% subsidiary Sintex Oil and Gas has been incorporated which has already won exploration rights in three onshore
blocks in the NELP-VIII auctions. The company would sign the production and sharing contracts with the
government soon.


􀂉 Maintain Outperformer
Growing order book and improving margins in the monolithic business coupled with a sustained revival in the
prefabricated and textile businesses continue to bode well for the stock. Further, we expect steady improvement in
Sintex’s consolidated operating margins, as benefits of manufacturing from low cost destinations gradually materialize.
We maintain our earnings estimates for FY11 and FY12 at Rs30.9/share and Rs38.0/share respectively. Our price target of
Rs 456 per share remains unchanged, valuing the company at 12x FY12EPS