Sintex Industries- Track WC cycle, free cash & mono margins; Accumulate :: Emkay

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Sintex Industries Ltd

Track WC cycle, free cash & mono margins; Accumulate

ACCUMULATE

CMP: Rs 175                                       Target Price: Rs 215

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n     Sintex’s Q4FY11 PAT was better than est. mainly due to better margins in most of the standalone businesses (standalone margins stood at 27.1% vs 20.7% yoy).

n     Free cash flow to equity was marginally positive (Rs175mn) in FY11P mainly due to reduction in overall working capital led by reduction in escrow, ICDs and tightening.

n     3 areas to look at (1) WC cycle (128days - FY11P end, should incr. as mono. is contri. to gr.), (2) free cash to eq. to be positive in FY12E (Rs1bn), If FY12E Capex is Rs3bn (Avg of 3 yr mgmt number) & (3) mono. Margins

n     Marginally upgrade our FY12E earnings to Rs20.6/Share and introduce FY13E earnings of Rs24.1/share; Stock trading at 8.5xFY12E EPS. Avg 5 yr PE 12x but WC cycle higher now. Maintain accumulate with PT of Rs215 (10.5xFY12E earnings)