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Removed from Asia Pacific Conviction Buy List
Sintex Industries (SNTX.BO)
Equity Research
Removing from CL-Buy on underperformance; maintain Buy
What happened
We are removing Sintex Industries (SNTX.BO) from our Conviction Buy list
following the stock’s underperformance since being added to the list.
Since being added to the Conviction List on Sept 6 2011, the shares are
down 34% vs. our coverage down 15% and a flat BSE Sensex. Over the
past 12 months, SNTX has declined 56.4% vs. a 16.9% decrease in BSE
Sensex. We attribute this underperformance primarily to market concerns
on the company’s $225mn FCCB debt and its 20% revenue exposure to the
EU through its foreign custom molding subsidiaries.
Current view
We maintain our Buy rating on SNTX and continue to expect good
execution and revenue growth in its domestic monolithic and pre-fabs
segments. We believe the concerns relating to the FCCB debt are
overdone, as so far only US$110mn has been utilized by the company and
the payment for this is due only in Mar 2013. SNTX also has strong cash
balances and ST investments of Rs9bn (US$178mn), and we expect it to
generate FCF of around Rs2.8bn (US$56mn) over FY12E-13E, adequately
covering any repayment liabilities.
Exposure to EU demand is a concern, given current macro circumstances,
and we cut our contribution from the geography to flat growth (against 7%
growth vs. 12% growth guidance from the company). We also adjust
downward our margins for the same segment, building some loss of
operating leverage, resulting in a total EPS adjustment of -3% to -6% for
FY12E-14E and our P/E-based 12-month TP falling to Rs200 (from Rs214).
Sintex trades at 4.8X FY13E P/E vs. 5-year median 12-m fwd P/E of 10.9X,
attractive valuations in our view, with our forecast of a normalized 20%
EPS CAGR and high ROEs for the next two years. This implies a 98%
upside relative to 30% avg. upside potential for our coverage.
Key risks: 1) execution delays; 2) forex movement; 3) diversification.
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 �� ��
ACTION
Removed from Asia Pacific Conviction Buy List
Sintex Industries (SNTX.BO)
Equity Research
Removing from CL-Buy on underperformance; maintain Buy
What happened
We are removing Sintex Industries (SNTX.BO) from our Conviction Buy list
following the stock’s underperformance since being added to the list.
Since being added to the Conviction List on Sept 6 2011, the shares are
down 34% vs. our coverage down 15% and a flat BSE Sensex. Over the
past 12 months, SNTX has declined 56.4% vs. a 16.9% decrease in BSE
Sensex. We attribute this underperformance primarily to market concerns
on the company’s $225mn FCCB debt and its 20% revenue exposure to the
EU through its foreign custom molding subsidiaries.
Current view
We maintain our Buy rating on SNTX and continue to expect good
execution and revenue growth in its domestic monolithic and pre-fabs
segments. We believe the concerns relating to the FCCB debt are
overdone, as so far only US$110mn has been utilized by the company and
the payment for this is due only in Mar 2013. SNTX also has strong cash
balances and ST investments of Rs9bn (US$178mn), and we expect it to
generate FCF of around Rs2.8bn (US$56mn) over FY12E-13E, adequately
covering any repayment liabilities.
Exposure to EU demand is a concern, given current macro circumstances,
and we cut our contribution from the geography to flat growth (against 7%
growth vs. 12% growth guidance from the company). We also adjust
downward our margins for the same segment, building some loss of
operating leverage, resulting in a total EPS adjustment of -3% to -6% for
FY12E-14E and our P/E-based 12-month TP falling to Rs200 (from Rs214).
Sintex trades at 4.8X FY13E P/E vs. 5-year median 12-m fwd P/E of 10.9X,
attractive valuations in our view, with our forecast of a normalized 20%
EPS CAGR and high ROEs for the next two years. This implies a 98%
upside relative to 30% avg. upside potential for our coverage.
Key risks: 1) execution delays; 2) forex movement; 3) diversification.
INVESTMENT LIST MEMBERSHIP
Asia Pacific Buy List
Coverage View: Neutral
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