Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Management is maintaining 20%-25% revenue growth guidance for FY12 but
expects risks to growth in Europe in FY13. We take a more conservative view
and reduce our EPS estimates by 8%/16% for FY12/FY13. SINT is trading at
7.3x FY13E P/E, close to its bottom historical valuations, which seem to be
reflecting the worst. Maintain OW with a revised target price of Rs250.
#1: Are government orders slowing? Spending on social infrastructure
continues to be robust, the govt. has increased budget allocation on schemes
like ‘Sarvshiksha Abhiyan’, which are being implemented on a priority
basis. In addition, recent changes in construction norms have allowed
prefabricated construction in tribal regions (was not permitted so far), which
according to SINT management provides additional opportunity of Rs30B.
#2: Sustainability of margins for monolithic business? SINT is
increasingly bidding for large ticket orders, thus enhancing operating
leverage (current average order size is Rs650MM vs. Rs100-Rs150MM in
2008). In-house manufacturing of plastic formwork also aids margins. SINT
management acknowledges entry of new players, but believes that margin
impact is 3-4 years away, only after new entrants ramp up.
#3: Risks to growth in EU, auto comps businesses? OEMs are, so far,
sticking to committed budgets; however, risk of cuts next year is high;
during the last downturn, SINT’s European orders had slowed with a lag.
SINT is adding new customers which will help cushion a slowdown to some
extent – following Schnieder, SINT has recently started a line for Areva
T&D. Domestic auto comps business is slowing, in line with the industry.
#4. Health of the balance sheet? Operating cycle has improved from 191
days of revenues in FY10 to 131 days in FY11, which is likely to remain
steady. Net debt of Rs14.7B, which is likely to decline to Rs11.0B.
Management maintains ROCE guidance of 20%+ over the next 3-4 years.
Our view: We believe that domestic business exposed to govt. spending is
likely to remain steady. We see risks to the overseas subsidiaries and assume
a 5%-10% decline in revenues for the US/EU subsidiaries vs. 5%-10%
growth earlier. Reduce FY12/FY13 EPS estimates by 8%/16%, maintain
OW with revised Mar-12 PT of Rs250, still based on 12x FY13E P/E.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Management is maintaining 20%-25% revenue growth guidance for FY12 but
expects risks to growth in Europe in FY13. We take a more conservative view
and reduce our EPS estimates by 8%/16% for FY12/FY13. SINT is trading at
7.3x FY13E P/E, close to its bottom historical valuations, which seem to be
reflecting the worst. Maintain OW with a revised target price of Rs250.
#1: Are government orders slowing? Spending on social infrastructure
continues to be robust, the govt. has increased budget allocation on schemes
like ‘Sarvshiksha Abhiyan’, which are being implemented on a priority
basis. In addition, recent changes in construction norms have allowed
prefabricated construction in tribal regions (was not permitted so far), which
according to SINT management provides additional opportunity of Rs30B.
#2: Sustainability of margins for monolithic business? SINT is
increasingly bidding for large ticket orders, thus enhancing operating
leverage (current average order size is Rs650MM vs. Rs100-Rs150MM in
2008). In-house manufacturing of plastic formwork also aids margins. SINT
management acknowledges entry of new players, but believes that margin
impact is 3-4 years away, only after new entrants ramp up.
#3: Risks to growth in EU, auto comps businesses? OEMs are, so far,
sticking to committed budgets; however, risk of cuts next year is high;
during the last downturn, SINT’s European orders had slowed with a lag.
SINT is adding new customers which will help cushion a slowdown to some
extent – following Schnieder, SINT has recently started a line for Areva
T&D. Domestic auto comps business is slowing, in line with the industry.
#4. Health of the balance sheet? Operating cycle has improved from 191
days of revenues in FY10 to 131 days in FY11, which is likely to remain
steady. Net debt of Rs14.7B, which is likely to decline to Rs11.0B.
Management maintains ROCE guidance of 20%+ over the next 3-4 years.
Our view: We believe that domestic business exposed to govt. spending is
likely to remain steady. We see risks to the overseas subsidiaries and assume
a 5%-10% decline in revenues for the US/EU subsidiaries vs. 5%-10%
growth earlier. Reduce FY12/FY13 EPS estimates by 8%/16%, maintain
OW with revised Mar-12 PT of Rs250, still based on 12x FY13E P/E.
No comments:
Post a Comment