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Sintex Industries Ltd — Balance sheet and
visibility to improve; reiterate Buy
Country Overview
Execution on track; Reiterate Buy on attractive valuations
Post speaking to Sintex MD Amit Patel this week, we reiterate Buy with PO of
INR250. An in line Q4 (12% yoy growth), improved balance sheet and visibility
can act as near term trigger. Stock is at 9x FY11e and 7.5x FY12e PE for ~27%
estimated EPS CAGR. We believe these are attractive valuations given i)
revenue visibility/ strong demand environment and ii) expected de-leveraging.
New states to drive prefab; Visibility in monolithic to go up
Company mentioned that it will extend prefab business to Assam, Bihar and
Orissa. This in addition to continued strength in orders from UP, will drive over
20% growth in prefabs in FY12. Additionally we expect over 10% qoq jump in
monolithic order book at the end of Q4 and hence better segmental visibility.
Addition of clients in custom molding to drive growth
In custom molding, Sintex’s strategy is i) to scale up existing clients, ii) improve
margins by shifting work to India and iii) to add 1 to 2 large clients every year.
While ‘Schneider’ scaled up in FY11, Sintex has likely closed similar deals with
two more clients who will ramp in FY12. Company is confident of beating our
expectation of ~10% consol. (including subsidiaries) growth in custom molding.
Expect balance sheet improvement; Upside risk to est.
We expect reported debt to equity to improve post Q4 as cash locked in escrow
accounts for acquisitions and bank guarantees related to large monolithic orders
is freed. Going ahead, Sintex plans to improve client mix in monolithic in favor of
lower debtor days. We see upside risks to our FY12/13 estimates from better than
expected execution/ margins in monolithic and prefabs. Reiterate Buy.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Sintex Industries Ltd — Balance sheet and
visibility to improve; reiterate Buy
Country Overview
Execution on track; Reiterate Buy on attractive valuations
Post speaking to Sintex MD Amit Patel this week, we reiterate Buy with PO of
INR250. An in line Q4 (12% yoy growth), improved balance sheet and visibility
can act as near term trigger. Stock is at 9x FY11e and 7.5x FY12e PE for ~27%
estimated EPS CAGR. We believe these are attractive valuations given i)
revenue visibility/ strong demand environment and ii) expected de-leveraging.
New states to drive prefab; Visibility in monolithic to go up
Company mentioned that it will extend prefab business to Assam, Bihar and
Orissa. This in addition to continued strength in orders from UP, will drive over
20% growth in prefabs in FY12. Additionally we expect over 10% qoq jump in
monolithic order book at the end of Q4 and hence better segmental visibility.
Addition of clients in custom molding to drive growth
In custom molding, Sintex’s strategy is i) to scale up existing clients, ii) improve
margins by shifting work to India and iii) to add 1 to 2 large clients every year.
While ‘Schneider’ scaled up in FY11, Sintex has likely closed similar deals with
two more clients who will ramp in FY12. Company is confident of beating our
expectation of ~10% consol. (including subsidiaries) growth in custom molding.
Expect balance sheet improvement; Upside risk to est.
We expect reported debt to equity to improve post Q4 as cash locked in escrow
accounts for acquisitions and bank guarantees related to large monolithic orders
is freed. Going ahead, Sintex plans to improve client mix in monolithic in favor of
lower debtor days. We see upside risks to our FY12/13 estimates from better than
expected execution/ margins in monolithic and prefabs. Reiterate Buy.
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