Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Sintex Industries
A ttractive valuation, expect good H2 FY12
�� Event: Q2 FY12 results miss on higher MTM loss, interest and tax rate
Sintex Industries (Sintex) posted Q2 FY12 net profit of Rs386m, lower than UBS-e
due to: 1) higher foreign currency convertible bond (FCCB) MTM notional loss of
~Rs596m on Rupee depreciation versus the US$ on net amount of cUS$110-115m;
2) an increase in interest expense owing to higher costs; and 3) a higher tax rate of
42%. Operational performance in Q2 FY12 was strong, with revenues up 25%
YoY and EBITDA margins at 17%. Management is confident of meeting FY12
guidance.
�� Impact: incorporate MTM loss for FY12; lower PT from Rs240 to Rs205
Adjusting for FCCB MTM loss, we lower our net profit for FY12 by c11% and
now assume FCCBs to be redeemed. Our pre-exceptional EPS estimate (as given
in the table below) is maintained. We reiterate our Buy rating, supported by the
positive outlook on non-cyclical government social spending-driven business,
albeit with a lower price target of Rs205 on lower assumed target valuation for
non-building products businesses.
�� Action: risk reward attractive at current valuations, in our view
In our view, the risk-reward profile of the stock looks attractive given expected
stronger H2 FY12 performance and lower valuations of 5.7x FY12E preexceptional
PE (6.3x FY12E including exceptional loss) and 5.4x FY13E PE.
Sintex is trading at 1.1x FY12E and 0.9x FY13E P/BV. We reiterate our Buy
rating.
�� Valuation: maintain Buy with a lower PT of Rs205
We base our price target for Sintex on our sum-of-the-parts methodology. Our
price target implies 9.6x FY13E PE.
See full list -click link below:
SINTEXMaintain EPS estimates; lower PT to Rs205
For FY12, we marginally increased our EBIT estimate incorporating margins
reported in H1 FY12, included the reported MTM loss, and slightly increased
interest expenses, thus lowering our post-exceptional PAT estimate 10.8% to
Rs49.25bn. However, we have broadly maintained our pre-exceptional net profit
forecast. We now assume FCCB debt repayment in FY13, instead of dilution.
Incorporating the impact, our pre-exceptional EPS estimates are broadly
maintained for FY12/13.
We maintain a Buy rating on the stock on a lower price target of Rs205 (Rs240
earlier), incorporating lower multiples for most of its businesses, except prefabs
and monolithic (structural non-cyclical government social spending-driven). The
slightly lower multiples (albeit our positive outlook) reflect the current uncertain
business environment in non-building products and lower return ratios currently.
However, we do believe that the recent sharp correction in the stock price was
overdone, given the expectations of strong Q3/Q4 FY12 results, going forward.
We expect better results due to higher seasonality in billing in H2, margin and
tax improvement targeted by management and reiteration of their FY12 outlook.
Monolithic order book visibility of Rs30bn adds comfort. Also, any potential
appreciation of the Rupee versus the US$ will facilitate reversal of MTM FCCB
loss booked in Q2 FY12. At 5.7x FY12E pre-exceptional PE (6.3x FY12E
including exceptional loss) and 5.4x FY13E PE, we believe shares are attractive.
On P/BV, Sintex is trading at 1.1x FY12E and 0.9x FY13E. We reiterate our
Buy rating and believe the current risk-reward profile is very attractive at these
valuations.
Key takeaways from the conference call
�� Management highlighted that while the operational performance was strong,
the results were impacted by notional MTM FCCB loss of Rs596m due to
Rupee/US$ depreciation from c44.5 to c49.0. Funds raised through FCCBs
were US$225m and net of cash was cUS$110m. It expects strong Q3/Q4
FY12 on billing, margins, results and tax rate. Management maintained its
guidance for FY12 for all segments and will likely review its FY13 outlook
in February 2012, when it has more clarity.
�� Monolithic order book at Rs30bn reflects order accretion, when revenue
booking is increasing. The company expects to maintain 18-22 months’ order
book visibility.
�� In Q2 FY12, EBITDA margins were: 1) monolithic—21.4%; 2) Prefabs—
21%; 3) Tanks—10%; 4) Custom Moulding—15%; and 5) Textiles—22.4%.
�� Interest costs were higher due to higher cost of borrowing (expect average
cost at 10-11%) and higher debt YoY on working capital requirement.
Management indicated that it targets to maintain working capital discipline.
Other income was lower due to charging to capital gains account. Capex in
the quarter was Rs1.9-2.0bn, higher than what it seems in the balance sheet
due to capitalisation.
�� Working capital was: 1) Monolithic—104 days; 2) Prefabs—120 days; 3)
Custom Moulding—90-120 days; and 4) Textiles—86 days. Goodwill has
declined due to impairment of US investments.
�� The tax rate in Q2 FY12 on post-exceptional PBT was higher at 42%, but
lower at 22% on pre-exceptional PAT.
�� FCCB money utilisation has been—US$20-25m for overseas imports for
capital goods, US$16-17m in Q4 FY11 for buying contractual assets,
US$25-26m for Morocco, Tunisia, Hungary facilities of Neif and some
amount on reducing staff costs in Western Europe.
�� Sintex Industries
Sintex started its textile business in 1955 with a composite textile mill in Kalol,
Gujarat. The company established its plastics division in 1975 for the
manufacture of one-piece moulded polyethylene water storage tanks. It
expanded its product offering in the plastics division in the late 1980s to include
plastic extruded sections for partitions, false ceilings and plastic doors, and
injection moulding products. Sintex's subsidiaries have 22 manufacturing
locations. The manufacturing facilities for its plastics divisions are all in India -
in Kalol, Kolkata, Daman, Bangalore, Nagpur, Baddi, Salem and Bhachau.
�� Statement of Risk
We believe intensifying competition because of low/moderate entry barriers is a
risk in the building products segment, and monolithic construction margins
could be affected by new competitors in the low-cost housing segment. Other
risks are fall in working capital discipline, slowdown in the industrial recovery
globally and India and unrelated investments or ventures
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Sintex Industries
A ttractive valuation, expect good H2 FY12
�� Event: Q2 FY12 results miss on higher MTM loss, interest and tax rate
Sintex Industries (Sintex) posted Q2 FY12 net profit of Rs386m, lower than UBS-e
due to: 1) higher foreign currency convertible bond (FCCB) MTM notional loss of
~Rs596m on Rupee depreciation versus the US$ on net amount of cUS$110-115m;
2) an increase in interest expense owing to higher costs; and 3) a higher tax rate of
42%. Operational performance in Q2 FY12 was strong, with revenues up 25%
YoY and EBITDA margins at 17%. Management is confident of meeting FY12
guidance.
�� Impact: incorporate MTM loss for FY12; lower PT from Rs240 to Rs205
Adjusting for FCCB MTM loss, we lower our net profit for FY12 by c11% and
now assume FCCBs to be redeemed. Our pre-exceptional EPS estimate (as given
in the table below) is maintained. We reiterate our Buy rating, supported by the
positive outlook on non-cyclical government social spending-driven business,
albeit with a lower price target of Rs205 on lower assumed target valuation for
non-building products businesses.
�� Action: risk reward attractive at current valuations, in our view
In our view, the risk-reward profile of the stock looks attractive given expected
stronger H2 FY12 performance and lower valuations of 5.7x FY12E preexceptional
PE (6.3x FY12E including exceptional loss) and 5.4x FY13E PE.
Sintex is trading at 1.1x FY12E and 0.9x FY13E P/BV. We reiterate our Buy
rating.
�� Valuation: maintain Buy with a lower PT of Rs205
We base our price target for Sintex on our sum-of-the-parts methodology. Our
price target implies 9.6x FY13E PE.
See full list -click link below:
UBS Mid-Caps Strategy - What to Buy? �� Oct 2011 Update
SINTEXMaintain EPS estimates; lower PT to Rs205
For FY12, we marginally increased our EBIT estimate incorporating margins
reported in H1 FY12, included the reported MTM loss, and slightly increased
interest expenses, thus lowering our post-exceptional PAT estimate 10.8% to
Rs49.25bn. However, we have broadly maintained our pre-exceptional net profit
forecast. We now assume FCCB debt repayment in FY13, instead of dilution.
Incorporating the impact, our pre-exceptional EPS estimates are broadly
maintained for FY12/13.
We maintain a Buy rating on the stock on a lower price target of Rs205 (Rs240
earlier), incorporating lower multiples for most of its businesses, except prefabs
and monolithic (structural non-cyclical government social spending-driven). The
slightly lower multiples (albeit our positive outlook) reflect the current uncertain
business environment in non-building products and lower return ratios currently.
However, we do believe that the recent sharp correction in the stock price was
overdone, given the expectations of strong Q3/Q4 FY12 results, going forward.
We expect better results due to higher seasonality in billing in H2, margin and
tax improvement targeted by management and reiteration of their FY12 outlook.
Monolithic order book visibility of Rs30bn adds comfort. Also, any potential
appreciation of the Rupee versus the US$ will facilitate reversal of MTM FCCB
loss booked in Q2 FY12. At 5.7x FY12E pre-exceptional PE (6.3x FY12E
including exceptional loss) and 5.4x FY13E PE, we believe shares are attractive.
On P/BV, Sintex is trading at 1.1x FY12E and 0.9x FY13E. We reiterate our
Buy rating and believe the current risk-reward profile is very attractive at these
valuations.
Key takeaways from the conference call
�� Management highlighted that while the operational performance was strong,
the results were impacted by notional MTM FCCB loss of Rs596m due to
Rupee/US$ depreciation from c44.5 to c49.0. Funds raised through FCCBs
were US$225m and net of cash was cUS$110m. It expects strong Q3/Q4
FY12 on billing, margins, results and tax rate. Management maintained its
guidance for FY12 for all segments and will likely review its FY13 outlook
in February 2012, when it has more clarity.
�� Monolithic order book at Rs30bn reflects order accretion, when revenue
booking is increasing. The company expects to maintain 18-22 months’ order
book visibility.
�� In Q2 FY12, EBITDA margins were: 1) monolithic—21.4%; 2) Prefabs—
21%; 3) Tanks—10%; 4) Custom Moulding—15%; and 5) Textiles—22.4%.
�� Interest costs were higher due to higher cost of borrowing (expect average
cost at 10-11%) and higher debt YoY on working capital requirement.
Management indicated that it targets to maintain working capital discipline.
Other income was lower due to charging to capital gains account. Capex in
the quarter was Rs1.9-2.0bn, higher than what it seems in the balance sheet
due to capitalisation.
�� Working capital was: 1) Monolithic—104 days; 2) Prefabs—120 days; 3)
Custom Moulding—90-120 days; and 4) Textiles—86 days. Goodwill has
declined due to impairment of US investments.
�� The tax rate in Q2 FY12 on post-exceptional PBT was higher at 42%, but
lower at 22% on pre-exceptional PAT.
�� FCCB money utilisation has been—US$20-25m for overseas imports for
capital goods, US$16-17m in Q4 FY11 for buying contractual assets,
US$25-26m for Morocco, Tunisia, Hungary facilities of Neif and some
amount on reducing staff costs in Western Europe.
�� Sintex Industries
Sintex started its textile business in 1955 with a composite textile mill in Kalol,
Gujarat. The company established its plastics division in 1975 for the
manufacture of one-piece moulded polyethylene water storage tanks. It
expanded its product offering in the plastics division in the late 1980s to include
plastic extruded sections for partitions, false ceilings and plastic doors, and
injection moulding products. Sintex's subsidiaries have 22 manufacturing
locations. The manufacturing facilities for its plastics divisions are all in India -
in Kalol, Kolkata, Daman, Bangalore, Nagpur, Baddi, Salem and Bhachau.
�� Statement of Risk
We believe intensifying competition because of low/moderate entry barriers is a
risk in the building products segment, and monolithic construction margins
could be affected by new competitors in the low-cost housing segment. Other
risks are fall in working capital discipline, slowdown in the industrial recovery
globally and India and unrelated investments or ventures
No comments:
Post a Comment