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Sintex’s Q4FY12 results were below our as well as street expectations. Q4 topline took severe hit due to slowdown in its monolithic business. As a result margin came down sharply, despite better margins in prefab and textile segments. Overseas custom moulding business continues to face headwinds. Management sounded cautious in its concall and do not expect situation to improve till H1FY13E. To honour its FCCBs due for redemption in March’13, the company will now focus purely on cash conservation and improving its balance sheet strength even at the cost of minimal capex for its monolithic business. In the current backdrop we cut our FY13E EPS estimate by 19.1%, however believe after recent steep correction, stock price is more than factoring in all the negatives. As a result we upgrade our rating to ‘Buy’ from ‘Hold’ earlier, with a revised SOTP based target price of `77.
Monolithic business continues to face slowdown resulting in revenue de-growth
Revenue suffered de-growth both on yoy (30.1% decline) and sequential basis (11.8% decline) to `10237.1 mn against `14639.8 mn in Q4FY11, substantially below our estimate of `13792 mn. Management in its concall indicated that 7 out of 19 of its monolithic sites are currently facing problems in the form of delayed/non-payment, land clearance, legal hassles etc. As a result its WC cycle (without cash) got stretched from 102 days in FY11 to 149 days in FY12.
EBITDA margin took severe hit due to slowdown in its monolithic and CM business
Sintex’s consolidated EBITDA saw de-growth of 44.7% yoy and 1.9% qoq to `1600.2 mn against our estimate of `1936 mn while consolidated EBITDA margin at 15.6% suffered 420 bps yoy decline. Against 19.5% margin in monolithic business reported in FY11, Sintex clocked only 15% margin in FY12, a massive 450 bps yoy decline.
Sintex to turn FCFF positive in FY13E
Sintex generated positive free cash flow (FCFF) in FY11, but due to stretched WC cycle, it again turned cash flow negative in FY12. With management now focusing on cash conservation and improving balance sheet strength by reducing its capex (guided for `1500 mn capex in FY13E against `4910 mn in FY12), we believe Sintex may turn FCFF positive in FY13E with lower capex and improvement in WC cycle.
Upgrade to ‘BUY’ due to valuation comfort – revise target price to `77/share
At CMP of `59 Sintex is trading at a P/E of 5.2x and 4.5x FY13E and FY14E EPS of `11.4 and `13.2 respectively. Slowdown in its monolithic construction business, high capex preventing free cash flow generation, high WC days and poor corporate governance are some of the key worries for the stock in the near term. However, we believe after recent steep correction the stock price is more than factoring in all the negatives. With management now shifting its focus to improving its balance sheet strength and cash conservation at the cost of lower/minimal capex, we believe this might augur well for the stock going forward. We upgrade our rating to ‘Buy’ from ‘Hold’ earlier due to valuation comfort, with a revised SOTP based target price of `77, giving an upside potential of 30.5%
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Sintex’s Q4FY12 results were below our as well as street expectations. Q4 topline took severe hit due to slowdown in its monolithic business. As a result margin came down sharply, despite better margins in prefab and textile segments. Overseas custom moulding business continues to face headwinds. Management sounded cautious in its concall and do not expect situation to improve till H1FY13E. To honour its FCCBs due for redemption in March’13, the company will now focus purely on cash conservation and improving its balance sheet strength even at the cost of minimal capex for its monolithic business. In the current backdrop we cut our FY13E EPS estimate by 19.1%, however believe after recent steep correction, stock price is more than factoring in all the negatives. As a result we upgrade our rating to ‘Buy’ from ‘Hold’ earlier, with a revised SOTP based target price of `77.
Monolithic business continues to face slowdown resulting in revenue de-growth
Revenue suffered de-growth both on yoy (30.1% decline) and sequential basis (11.8% decline) to `10237.1 mn against `14639.8 mn in Q4FY11, substantially below our estimate of `13792 mn. Management in its concall indicated that 7 out of 19 of its monolithic sites are currently facing problems in the form of delayed/non-payment, land clearance, legal hassles etc. As a result its WC cycle (without cash) got stretched from 102 days in FY11 to 149 days in FY12.
EBITDA margin took severe hit due to slowdown in its monolithic and CM business
Sintex’s consolidated EBITDA saw de-growth of 44.7% yoy and 1.9% qoq to `1600.2 mn against our estimate of `1936 mn while consolidated EBITDA margin at 15.6% suffered 420 bps yoy decline. Against 19.5% margin in monolithic business reported in FY11, Sintex clocked only 15% margin in FY12, a massive 450 bps yoy decline.
Sintex to turn FCFF positive in FY13E
Sintex generated positive free cash flow (FCFF) in FY11, but due to stretched WC cycle, it again turned cash flow negative in FY12. With management now focusing on cash conservation and improving balance sheet strength by reducing its capex (guided for `1500 mn capex in FY13E against `4910 mn in FY12), we believe Sintex may turn FCFF positive in FY13E with lower capex and improvement in WC cycle.
Upgrade to ‘BUY’ due to valuation comfort – revise target price to `77/share
At CMP of `59 Sintex is trading at a P/E of 5.2x and 4.5x FY13E and FY14E EPS of `11.4 and `13.2 respectively. Slowdown in its monolithic construction business, high capex preventing free cash flow generation, high WC days and poor corporate governance are some of the key worries for the stock in the near term. However, we believe after recent steep correction the stock price is more than factoring in all the negatives. With management now shifting its focus to improving its balance sheet strength and cash conservation at the cost of lower/minimal capex, we believe this might augur well for the stock going forward. We upgrade our rating to ‘Buy’ from ‘Hold’ earlier due to valuation comfort, with a revised SOTP based target price of `77, giving an upside potential of 30.5%
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