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SINT stock has corrected almost 17% over the past one week. It is now
trading at trough valuations (5.5x FY13E P/E), earlier seen during the 2008-
09 credit crisis. Stock price correction has accentuated in a weak market due
to expected MTM forex losses in 2QFY12 on account of un-hedged USD
denominated FCCB exposure. We expect operating profit in 2QFY12 to grow
18% yoy, driven by strong growth in prefabricated and monolithic businesses.
However, net profit is likely to decline 28% yoy on estimated Rs50MM MTM
forex loss. We reiterate our OW rating with PT of Rs250 based on 12x FY13E
P/E.
What to expect in 2QFY12: We estimate revenue growth of 18% driven
by strong growth for monolithic and prefabricated business (which we
expect to grow 25%-35% yoy). EBITDA margins are likely to remain
steady, driving EBITDA growth of 18% yoy. However, a MTM forex loss
of Rs500MM is likely to pare net profit growth. We estimate 2Q net profit
to decline 28% yoy to Rs721MM.
What has driven the forex loss? SINT has USD 100M of un-hedged USD
exposure on account of the USD225MM FCCB it raised in 2008. Of this,
USD60-65MM has been utilized on its overseas expansion and about
USD30-35MM is deployed in INR deposits. (The remaining amount is in
USD deposits). INR has depreciated almost 11% against the USD (from
Rs44.5/USD to Rs49.5/USD) over Jul-Sep 2011. SINT will be required to
provide for the notional MTM losses on account of the INR depreciation in
2QFY12.
SINT is trading at trough valuations seen during credit crisis. SINT
stock is trading at 5.5x FY13E P/E, at trough valuation levels earlier seen
during the 2008-09 credit crisis. We note that our EPS estimates for FY13E
are 9% below consensus, assuming a decline in European business revenues.
We maintain our OW rating with a Mar-12 price target of Rs250 based on
12x FY13E P/E. Key risks include dependence on govt. orders, significant
slowdown in Europe, high working capital and investments in non-core
businesses.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
SINT stock has corrected almost 17% over the past one week. It is now
trading at trough valuations (5.5x FY13E P/E), earlier seen during the 2008-
09 credit crisis. Stock price correction has accentuated in a weak market due
to expected MTM forex losses in 2QFY12 on account of un-hedged USD
denominated FCCB exposure. We expect operating profit in 2QFY12 to grow
18% yoy, driven by strong growth in prefabricated and monolithic businesses.
However, net profit is likely to decline 28% yoy on estimated Rs50MM MTM
forex loss. We reiterate our OW rating with PT of Rs250 based on 12x FY13E
P/E.
What to expect in 2QFY12: We estimate revenue growth of 18% driven
by strong growth for monolithic and prefabricated business (which we
expect to grow 25%-35% yoy). EBITDA margins are likely to remain
steady, driving EBITDA growth of 18% yoy. However, a MTM forex loss
of Rs500MM is likely to pare net profit growth. We estimate 2Q net profit
to decline 28% yoy to Rs721MM.
What has driven the forex loss? SINT has USD 100M of un-hedged USD
exposure on account of the USD225MM FCCB it raised in 2008. Of this,
USD60-65MM has been utilized on its overseas expansion and about
USD30-35MM is deployed in INR deposits. (The remaining amount is in
USD deposits). INR has depreciated almost 11% against the USD (from
Rs44.5/USD to Rs49.5/USD) over Jul-Sep 2011. SINT will be required to
provide for the notional MTM losses on account of the INR depreciation in
2QFY12.
SINT is trading at trough valuations seen during credit crisis. SINT
stock is trading at 5.5x FY13E P/E, at trough valuation levels earlier seen
during the 2008-09 credit crisis. We note that our EPS estimates for FY13E
are 9% below consensus, assuming a decline in European business revenues.
We maintain our OW rating with a Mar-12 price target of Rs250 based on
12x FY13E P/E. Key risks include dependence on govt. orders, significant
slowdown in Europe, high working capital and investments in non-core
businesses.
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