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SINTEX
OUTPERFORMER (RS148, MCAP: RS40BN / US$885M)
• The current order book for the monolithic construction business is Rs26bn (executable over the next two years). The
company has maintained its revenue guidance of Rs11bn-12bn in FY11 from the monolithic business. The recent
acquisition of Durha construction (DCPL) would help the company grow and strengthen its monolithic and prefab
business and expand its building product offerings in the infrastructure and industrial space. The company expects
DCPL’s revenue CAGR to be in excess of 20% and an EBITDA margin of ~20% over the next 2-3 years. Sintex has
reiterated that while government spending and orders have been slow, it has not seen any major slowdown in orders.
• The management has clarified that the company would not invest in any IPP of the promoters or otherwise. Sintex’s
current requirement at PEAK load at its 19 different locations is ~78MW, of which ~37MW is accounted for by the
Kalol plant where it has a captive plant. Sintex may opt for one of the following three options: 1) a group Captive
Power Plant (CPP) scheme with an investment of Rs0.8bn-1.4bn. Sintex will not hold more than 24% stake; 2) invest in
setting up a dedicated transmission line connected to the grid at a cost of ~Rs0.2bn; and 3) change the captive turbine
unit in Kalol at a cost of ~Rs 1.5bn. Since this has to be implemented by 2014, the management would decide on one of
the above options within the next year. Sintex Oil & Gas Pvt Ltd (a wholly owned subsidiary) has emerged as a
successful bidder for three oil & gas blocks. Sintex has assured that the total investment in the subsidiary would be
negligible. It has assured that this investment would not stay on the balance sheet beyond the next 12 to 15 months;
NELP guidelines do not permit immediate selling of stake in these blocks before a three-year lock in period.
• Maintain estimates; reiterate Outperformer: Sintex’s operational performance is on track and the building products
segment is gaining traction. We maintain our FY11 and FY12 EPS estimates of Rs15.5 and Rs19 respectively. At 10.8x
and 8.8x FY11E and FY12E earnings respectively, the stock trades at a considerable discount to historical multiples.
With growth returning and visibility on RoE expansion increasing, we expect earnings multiples to rebound. Maintain
Outperformer with a price target of Rs228 per share.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
SINTEX
OUTPERFORMER (RS148, MCAP: RS40BN / US$885M)
• The current order book for the monolithic construction business is Rs26bn (executable over the next two years). The
company has maintained its revenue guidance of Rs11bn-12bn in FY11 from the monolithic business. The recent
acquisition of Durha construction (DCPL) would help the company grow and strengthen its monolithic and prefab
business and expand its building product offerings in the infrastructure and industrial space. The company expects
DCPL’s revenue CAGR to be in excess of 20% and an EBITDA margin of ~20% over the next 2-3 years. Sintex has
reiterated that while government spending and orders have been slow, it has not seen any major slowdown in orders.
• The management has clarified that the company would not invest in any IPP of the promoters or otherwise. Sintex’s
current requirement at PEAK load at its 19 different locations is ~78MW, of which ~37MW is accounted for by the
Kalol plant where it has a captive plant. Sintex may opt for one of the following three options: 1) a group Captive
Power Plant (CPP) scheme with an investment of Rs0.8bn-1.4bn. Sintex will not hold more than 24% stake; 2) invest in
setting up a dedicated transmission line connected to the grid at a cost of ~Rs0.2bn; and 3) change the captive turbine
unit in Kalol at a cost of ~Rs 1.5bn. Since this has to be implemented by 2014, the management would decide on one of
the above options within the next year. Sintex Oil & Gas Pvt Ltd (a wholly owned subsidiary) has emerged as a
successful bidder for three oil & gas blocks. Sintex has assured that the total investment in the subsidiary would be
negligible. It has assured that this investment would not stay on the balance sheet beyond the next 12 to 15 months;
NELP guidelines do not permit immediate selling of stake in these blocks before a three-year lock in period.
• Maintain estimates; reiterate Outperformer: Sintex’s operational performance is on track and the building products
segment is gaining traction. We maintain our FY11 and FY12 EPS estimates of Rs15.5 and Rs19 respectively. At 10.8x
and 8.8x FY11E and FY12E earnings respectively, the stock trades at a considerable discount to historical multiples.
With growth returning and visibility on RoE expansion increasing, we expect earnings multiples to rebound. Maintain
Outperformer with a price target of Rs228 per share.
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