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Buy
Sintex Industries (SNTX.BO)
Return Potential: 32% Equity Research
Strong business outlook, attractive valuations – reiterate Buy
Source of opportunity
Sintex continues to deliver on execution (5 consecutive quarters of +25%
rev growth) while the risks around working capital (down to 103 days from
150 a year back) and non-core investments have fallen. Given better
visibility in the monolithic segment and improving margin prospects in
overseas custom molding segments, we revise our FY12-13E EPS upwards
by 22-27%. Sintex has also reiterated post its Q4 FY11 call that the power
segment investments will only be for captive purposes, removing a key
potential risk for the stock. We reiterate our Buy rating on the stock with a
new TP of Rs 236 (vs. Rs 202 earlier), implying 32% potential upside.
Catalyst
1) Stronger margin performance in the custom molding subsidiaries in
FY12 – we expect 150bps improvement over next 12-m, 2) Improvement in
working capital efficiency by c. 10% benefitting cash flow generation for
this year, 3) New order wins for the monolithic business, 4) India’s
continued spend on social infrastructure (education and healthcare).
Valuation
Our TP of Rs236, is based on 11X FY12E EPS (vs. 11.5X earlier) in-line with
the 5-yr mean 12m fwd P/E.
The stock currently trades at FY12E P/E of 8.3X – vs. its 5-yr mean 12m fwd
P/E multiple of 11X and vs. MSCI India 12-m fwd PE of 14.4X. The stock
also trades at a discount on PB multiples – 15% vs. its 5-yr mean and 25%
vs. MSCI India. We also introduce our FY14 revenue and earnings
estimates.
Key risks
1) Prolonged weakness in Wausaukee’s performance, 2) Entry into noncore businesses, 3) Any execution delays or working capital escalation in
the monolithic construction segment, 4) Steep rise in raw material prices.
INVESTMENT LIST MEMBERSHIP
Asia Pacific Buy List
Coverage View: Neutral
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Buy
Sintex Industries (SNTX.BO)
Return Potential: 32% Equity Research
Strong business outlook, attractive valuations – reiterate Buy
Source of opportunity
Sintex continues to deliver on execution (5 consecutive quarters of +25%
rev growth) while the risks around working capital (down to 103 days from
150 a year back) and non-core investments have fallen. Given better
visibility in the monolithic segment and improving margin prospects in
overseas custom molding segments, we revise our FY12-13E EPS upwards
by 22-27%. Sintex has also reiterated post its Q4 FY11 call that the power
segment investments will only be for captive purposes, removing a key
potential risk for the stock. We reiterate our Buy rating on the stock with a
new TP of Rs 236 (vs. Rs 202 earlier), implying 32% potential upside.
Catalyst
1) Stronger margin performance in the custom molding subsidiaries in
FY12 – we expect 150bps improvement over next 12-m, 2) Improvement in
working capital efficiency by c. 10% benefitting cash flow generation for
this year, 3) New order wins for the monolithic business, 4) India’s
continued spend on social infrastructure (education and healthcare).
Valuation
Our TP of Rs236, is based on 11X FY12E EPS (vs. 11.5X earlier) in-line with
the 5-yr mean 12m fwd P/E.
The stock currently trades at FY12E P/E of 8.3X – vs. its 5-yr mean 12m fwd
P/E multiple of 11X and vs. MSCI India 12-m fwd PE of 14.4X. The stock
also trades at a discount on PB multiples – 15% vs. its 5-yr mean and 25%
vs. MSCI India. We also introduce our FY14 revenue and earnings
estimates.
Key risks
1) Prolonged weakness in Wausaukee’s performance, 2) Entry into noncore businesses, 3) Any execution delays or working capital escalation in
the monolithic construction segment, 4) Steep rise in raw material prices.
INVESTMENT LIST MEMBERSHIP
Asia Pacific Buy List
Coverage View: Neutral
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