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Sintex Industries Ltd
Cut estimates led by interest
costs; retain Buy on valuation
„Cut estimates on higher interest costs; new PO Rs216
While Sintex reported an in line operating quarter, recurring PAT was 10% below
estimates led by higher interest costs. We cut FY12e and FY13e EPS by 12% to
13% to account for this and also lowered estimates for foreign subsidiaries. SOTP
based PO cut to Rs216 (earlier Rs250) to reflect reduced earnings and lower
multiples reflecting increased risk.
Operating results in line; MTM and interest costs drag
Q2 revenue was up 25% driven by prefabs (up 33% yoy), custom molding (up
29% yoy) and monolithic (up 16% yoy). However EBITDA margin declined 96bp
led by product mix and costs related to new plants. Recurring PAT grew 6% yoy,
missing our estimates mainly due to higher interest. Company booked MTM loss
of Rs596mn (vs gain of Rs203mn in Q2FY11) on FCCB resulting in 61%yoy
decline in reported PAT.
Downside risk to estimates led by foreign subsidiaries
Sintex derives ~24% revenue from Nief (Europe focused) and Wasaukee (US
focused). While we have already baked in a revenue decline in these subsidiaries
in FY13, we see downside risk to estimates from worse than expected slowdown.
However the impact will be limited as these subsidiaries form ~15% of earnings.
Valuations attractive post correction; retain Buy
Post an 11% YTD underperformance, Sintex trades at 5.6x1yr our fwd PE for
15% EPS CAGR. We believe these are attractive valuations given i) continuing
visibility in the domestic business as reflected in strong order book at INR30bn in
monolithic and ii) earnings growth. Our PO of Rs216 implies 1yr fwd PE of 9x.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Sintex Industries Ltd
Cut estimates led by interest
costs; retain Buy on valuation
„Cut estimates on higher interest costs; new PO Rs216
While Sintex reported an in line operating quarter, recurring PAT was 10% below
estimates led by higher interest costs. We cut FY12e and FY13e EPS by 12% to
13% to account for this and also lowered estimates for foreign subsidiaries. SOTP
based PO cut to Rs216 (earlier Rs250) to reflect reduced earnings and lower
multiples reflecting increased risk.
Operating results in line; MTM and interest costs drag
Q2 revenue was up 25% driven by prefabs (up 33% yoy), custom molding (up
29% yoy) and monolithic (up 16% yoy). However EBITDA margin declined 96bp
led by product mix and costs related to new plants. Recurring PAT grew 6% yoy,
missing our estimates mainly due to higher interest. Company booked MTM loss
of Rs596mn (vs gain of Rs203mn in Q2FY11) on FCCB resulting in 61%yoy
decline in reported PAT.
Downside risk to estimates led by foreign subsidiaries
Sintex derives ~24% revenue from Nief (Europe focused) and Wasaukee (US
focused). While we have already baked in a revenue decline in these subsidiaries
in FY13, we see downside risk to estimates from worse than expected slowdown.
However the impact will be limited as these subsidiaries form ~15% of earnings.
Valuations attractive post correction; retain Buy
Post an 11% YTD underperformance, Sintex trades at 5.6x1yr our fwd PE for
15% EPS CAGR. We believe these are attractive valuations given i) continuing
visibility in the domestic business as reflected in strong order book at INR30bn in
monolithic and ii) earnings growth. Our PO of Rs216 implies 1yr fwd PE of 9x.
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