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Operating performance in-line, MTM losses pare net profits. 2Q
EBITDA growth of 19% yoy was in line with our estimates. However, net
profits declined 61% yoy, 30% below our estimates on account of MTM
losses of Rs596MM (v/s our estimates of Rs500MM MTM loss) on USD
FCCB exposure (v/s Rs200MM MTM gain in 2Q last year). Revenue
drivers remain robust – 25% yoy revenue growth was driven by 33%
growth in prefabs, 29% growth in custom moldings and 16% growth in
monolithic business.
EBITDA margin decline of 100bps on comissioning of new plants,
product mix. SINT comissioned a prefab plant in UP and a composites
plant in Chennai in 2Q, which along with an adverse product mix pared
EBITDA margins by 90bps on a yoy basis. However margins are likely to
pick up as new plants ramp up. Management expects full year margins to be
in-line or better than FY11 margins.
Three disappointments. 1) Tax rate in 2Q was significantly higher than
expected due to lower production from the HP plant which enjoys
substantial tax benefits. Production from this plant will ramp up in 2H,
which will normalize the tax rate; management expects full year FY12E tax
rate of 24%. 2) Working capital deteriorated, with receivable days
increasing from 116 days for Mar-11 to 126 days for Sep-11, though it is inline
with 122 days for Sep-10. 3) Interest cost increased by 56% yoy,
(Rs420MM v/s our estimates for Rs360MM), which we believe is on
account of higher working capital debt, though we were already factoring in
higher interest cost than before.
Management maintains FY12 guidance of Rs5.75B net profit, excluding
the MTM forex impact v/s our FY12E estimate of Rs5.08B. SINT stock has
corrected 27% over past 1m and is now trading near its trough valuations at
5.5xFY12E P/E. While we acknowledge the non-operational
disappointments in 2Q, operating profits remain on track. We believe that
potential slowdown risks in Europe and risks to monolithic business
margins are already reflected in the valuations (and also built into our
estimates). Maintain OW, with Mar-12 PT of Rs250
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Operating performance in-line, MTM losses pare net profits. 2Q
EBITDA growth of 19% yoy was in line with our estimates. However, net
profits declined 61% yoy, 30% below our estimates on account of MTM
losses of Rs596MM (v/s our estimates of Rs500MM MTM loss) on USD
FCCB exposure (v/s Rs200MM MTM gain in 2Q last year). Revenue
drivers remain robust – 25% yoy revenue growth was driven by 33%
growth in prefabs, 29% growth in custom moldings and 16% growth in
monolithic business.
EBITDA margin decline of 100bps on comissioning of new plants,
product mix. SINT comissioned a prefab plant in UP and a composites
plant in Chennai in 2Q, which along with an adverse product mix pared
EBITDA margins by 90bps on a yoy basis. However margins are likely to
pick up as new plants ramp up. Management expects full year margins to be
in-line or better than FY11 margins.
Three disappointments. 1) Tax rate in 2Q was significantly higher than
expected due to lower production from the HP plant which enjoys
substantial tax benefits. Production from this plant will ramp up in 2H,
which will normalize the tax rate; management expects full year FY12E tax
rate of 24%. 2) Working capital deteriorated, with receivable days
increasing from 116 days for Mar-11 to 126 days for Sep-11, though it is inline
with 122 days for Sep-10. 3) Interest cost increased by 56% yoy,
(Rs420MM v/s our estimates for Rs360MM), which we believe is on
account of higher working capital debt, though we were already factoring in
higher interest cost than before.
Management maintains FY12 guidance of Rs5.75B net profit, excluding
the MTM forex impact v/s our FY12E estimate of Rs5.08B. SINT stock has
corrected 27% over past 1m and is now trading near its trough valuations at
5.5xFY12E P/E. While we acknowledge the non-operational
disappointments in 2Q, operating profits remain on track. We believe that
potential slowdown risks in Europe and risks to monolithic business
margins are already reflected in the valuations (and also built into our
estimates). Maintain OW, with Mar-12 PT of Rs250
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