Sintex Industries targets revenues of Rs 3,500cr in FY10

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Emkay Stock Broking has given a buy rating on Sintex Industries . The brokerage house sees a pick up in volumes and execution in its standalone business. Emkay expects Sintex to report strong volume growth of 10-12% in the second half of FY10. It has a target price of Rs 293 on the stock.

 

In an interview with CNBC-TV18, Sunil Kanojia, Group President, Sintex Industries spoke about the business and the road ahead for the company.

 

Here is a verbatim transcript of the exclusive interview with Sunil Kanojia on CNBC-TV18. Also watch the accompanying video.

 

Q: Can you tell us how the input costs are looking on the plastic side of your business, the tanks that you make and how the input costs are looking on the textile side which means have you seen a 10% increase, 15% increase? And in terms of pricing and volumes, what kind of percentage increases are you seeing both in textiles and in plastics?

 

A: If you look at the raw material prices, I think when we compare it with last year, in Q1 and Q2 prices were rising. But in Q3 and Q4 the prices came down drastically, and if you remember we even took the mark-to-market (MTM) losses in Q3.

 

Prices seem to have stabilised this year somewhere around the level of Q3 and Q4. Accordingly, I would say to a large extent, the prices which we charge to our customers have also been rationalised. They seem to be firming up but I don't see that they will go up at all or they will come down from these levels. Atleast I don't see any reason on any of the raw material prices or commodities to go down.

 

As far as cotton prices are concerned, they are also more or less stabilised. We happen to be in the segment where we have a niche market where it does not really matter to us too much as far as cost of cotton is concerned because eventually when you are selling designs to your customers, you are always able to pass on the prices to them. But it is a matter of a kind of demand push that needs to happen in the textile sector.

 

It has already started happening atleast at the lower level. But we need to still see some kind of upside to happen on the high end of the market where we are actually focused at.

 

Q: What about your other businesses, you also have an auto plant coming up in Chennai?

 

A: That plant is already set up. It started commencing production in the month of June last year which was basically to cater to the increased demand in automotive sector especially coming from Chennai. Chennai is fast emerging as the Detroit of India, and there is demand increase.

 

So therefore we decided that we should set up a new plant over there. Besides this catering to automotive growth, it will also cater to the electrical sector.

 

Q: Can you give us an idea of the contribution made by your major sectors to your revenues?

 

A: Largely we have building materials which contributes about 42% of the sales, then 46% comes from custom holding, which is India as well as overseas, and about 10-12% comes from textile.

 

And within building material you will see prefabricated structures contributing about 20% and then monolithic structures continues about 15% and monolithic structures this year will be a major growth sector. Automobile will be growing atleast 20-25%, monolithic structures will grow at 70-75%. Pre-fabricated structures will grow in a non-telecom sector but telecom sector is going to be a pressure point this year as it was last year.

 

Q: What will you do in second half revenues, about Rs 1,500 crore?

 

A: I would say that overall we have a guidance to do somewhere around 8-10% higher than what we have done last year. So we have done almost about Rs 700 crore in the first half. So we should be doing around Rs 3,400-3,500 crore this year.

 

Q: From this automotive plant that you are setting up down in Chennai, when does it go into full commercial production and at that stage what kind of revenues do you get from that plant or get added on, what are you getting out of it right now and what capacity is it operating on if it is operating?

 

A: The building phase one is totally taken care of though in terms of machinery installation we have not done in terms of the full capacity. When we look at total realisation that we will get from this plant it is somewhere to the tune of about Rs 30-35 crore next year. And then on full capacity level, it should grow to Rs 70 crore or so annually.