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We met the management of Sintex Industries (SINT). Key takeaways from
the meeting (1) slowdown in Monolithic construction on account of delay in
clearances from the government,(2) Prefab segment is on track but might
see some collection slowdown from UP and Punjab due to elections and
(3) Domestic and Overseas custom moulding business to see slowdown
due to fall in auto sales growth and concerns over the European and US
economies. Post discussion with the management we downgrade our
revenue and EPS estimate for FY12e and FY13e. We downgrade our revenue/
EPS estimate by 8.5%/26% and 9.5%/25% for FY12e and FY13e respectively.
The stock has sharply corrected (44%) over the past 3 months on account of
forex losses and the slowdown impact in overseas markets. We revise our
TP from Rs240 to Rs115 (7x FY13e EPS) and believe that CMP of Rs65 factors
all negative aspects discussed below. At CMP of Rs65, the stock discounts
4.4x and 3.8x FY12e and FY13e EPS of Rs14.7 and Rs17.0 respectively.
Monolithic Construction: As per management there is a slowdown in Monolithic
construction especially on account of delay in getting clearances from the
government. The company has an order book of Rs29bn of which Slum rehabilitation
(Rs7.5bn), Railways (Rs2.5bn) and Defence (Rs2.5bn) cumulatively have ~45% of
the order book and where the slowdown/stoppage is being felt. We also noticed
stoppage of work in 4-5 sites out of the 18-20 sites in progress. We believe that
with the upcoming state elections (Feb’12) in UP (order book of Rs4.5bn) and
Uttarakhand the company will face delays in collection.
Prefab Segment: As per the management this particular segment is on track.
We believe going ahead this segment may also get some collection issues since
the plants in Baddi (HP) and Dadri (UP) supply to UP and Punjab which are going
for state elections in Feb’12.
Custom Moulding: As per the management there is likely to be a slowdown in
the domestic custom moulding business on account of slack in auto sales. Overseas
custom moulding will be hard hit due to European and US economic slowdown. As
per the management it is likely to be a flat to 5% negative growth in overseas
custom moulding.
VALUATIONS & RECOMMENDATION
We reduce our TP from Rs240 to Rs115 (7x on FY13e EPS) and maintain a ‘BUY’
rating on the stock. We believe the CMP factors the slump in overseas business,
forex loss impact and slowdown in the Indian economy.
Other Highlights:
Textile Division: As per management this segment is likely to show robust growth with
improvement in margin. We have not made any changes in our estimates except for margin
improvement in FY12e.
FCCB issue:
The company plans to prepay its FCCB of USD291mn ( Principal USD225mn+ Premium
USD60mn) in Sept'12, ahead of the repayment date of March'13. The company plans to
fund this repayment via overseas bank balance of USD110mn, USD30mn from its overseas
subsidiaries , USD30-40mn from the holding company and balance through ECB.
Impact on our estimates:
Post discussion with the management we downgrade our revenue and EPS estimate for
FY12e and FY13e
Monolithic: We reduce our FY12e and FY13e revenue target of monolithic by 18% and
19% respectively. Overhead costs will increase on stoppage of site and slowdown in
execution and hence will lower the margins. We have lowered our EBIDTA margin by
225bps and 200 bps for FY12e and FY13e respectively.
Prefab: We expect delay in collections in UP and Punjab although prefab orders may not
face the same magnitude of slowdown since these orders are of small ticket size and only
need collector approval. We have reduced our Prefab segment revenue by 12% and 9%for
FY12e and FY13 e respectively. On the margin front we have reduced FY12e and FY13e
margins by 50bps and 100 bps respectively.
Custom Moulding: We have not reduced domestic custom moulding revenue but have
reduced overseas custom moulding revenue. For Neif Plastic we have taken 0%YoY growth
in FY12 as against 15% YoY growth earlier. In FY13, we have assumed no reduction in
revenue for Neif plastic. For Wausaukee we have assumed 5%YoY de-growth as against
10% growth in our earlier assumption
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
We met the management of Sintex Industries (SINT). Key takeaways from
the meeting (1) slowdown in Monolithic construction on account of delay in
clearances from the government,(2) Prefab segment is on track but might
see some collection slowdown from UP and Punjab due to elections and
(3) Domestic and Overseas custom moulding business to see slowdown
due to fall in auto sales growth and concerns over the European and US
economies. Post discussion with the management we downgrade our
revenue and EPS estimate for FY12e and FY13e. We downgrade our revenue/
EPS estimate by 8.5%/26% and 9.5%/25% for FY12e and FY13e respectively.
The stock has sharply corrected (44%) over the past 3 months on account of
forex losses and the slowdown impact in overseas markets. We revise our
TP from Rs240 to Rs115 (7x FY13e EPS) and believe that CMP of Rs65 factors
all negative aspects discussed below. At CMP of Rs65, the stock discounts
4.4x and 3.8x FY12e and FY13e EPS of Rs14.7 and Rs17.0 respectively.
Monolithic Construction: As per management there is a slowdown in Monolithic
construction especially on account of delay in getting clearances from the
government. The company has an order book of Rs29bn of which Slum rehabilitation
(Rs7.5bn), Railways (Rs2.5bn) and Defence (Rs2.5bn) cumulatively have ~45% of
the order book and where the slowdown/stoppage is being felt. We also noticed
stoppage of work in 4-5 sites out of the 18-20 sites in progress. We believe that
with the upcoming state elections (Feb’12) in UP (order book of Rs4.5bn) and
Uttarakhand the company will face delays in collection.
Prefab Segment: As per the management this particular segment is on track.
We believe going ahead this segment may also get some collection issues since
the plants in Baddi (HP) and Dadri (UP) supply to UP and Punjab which are going
for state elections in Feb’12.
Custom Moulding: As per the management there is likely to be a slowdown in
the domestic custom moulding business on account of slack in auto sales. Overseas
custom moulding will be hard hit due to European and US economic slowdown. As
per the management it is likely to be a flat to 5% negative growth in overseas
custom moulding.
VALUATIONS & RECOMMENDATION
We reduce our TP from Rs240 to Rs115 (7x on FY13e EPS) and maintain a ‘BUY’
rating on the stock. We believe the CMP factors the slump in overseas business,
forex loss impact and slowdown in the Indian economy.
Other Highlights:
Textile Division: As per management this segment is likely to show robust growth with
improvement in margin. We have not made any changes in our estimates except for margin
improvement in FY12e.
FCCB issue:
The company plans to prepay its FCCB of USD291mn ( Principal USD225mn+ Premium
USD60mn) in Sept'12, ahead of the repayment date of March'13. The company plans to
fund this repayment via overseas bank balance of USD110mn, USD30mn from its overseas
subsidiaries , USD30-40mn from the holding company and balance through ECB.
Impact on our estimates:
Post discussion with the management we downgrade our revenue and EPS estimate for
FY12e and FY13e
Monolithic: We reduce our FY12e and FY13e revenue target of monolithic by 18% and
19% respectively. Overhead costs will increase on stoppage of site and slowdown in
execution and hence will lower the margins. We have lowered our EBIDTA margin by
225bps and 200 bps for FY12e and FY13e respectively.
Prefab: We expect delay in collections in UP and Punjab although prefab orders may not
face the same magnitude of slowdown since these orders are of small ticket size and only
need collector approval. We have reduced our Prefab segment revenue by 12% and 9%for
FY12e and FY13 e respectively. On the margin front we have reduced FY12e and FY13e
margins by 50bps and 100 bps respectively.
Custom Moulding: We have not reduced domestic custom moulding revenue but have
reduced overseas custom moulding revenue. For Neif Plastic we have taken 0%YoY growth
in FY12 as against 15% YoY growth earlier. In FY13, we have assumed no reduction in
revenue for Neif plastic. For Wausaukee we have assumed 5%YoY de-growth as against
10% growth in our earlier assumption
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