Hold Sintex Industries; target of Rs 35: ICICIdirect.com
Brokerage house ICICIdirect.com has recommended hold rating on Sintex Industries with a price target of Rs 35, in its July 15, 2013 research report.
ICICIdirect.com's research report on Sintex Industries
"Sintex Industries' (SIL) Q1FY14 numbers remained below our estimates at the topline and PAT level. Total revenues grew 4.4 percent YoY to Rs 1,123.9 crore (I-direct estimate: Rs 1,188.6 crore) mainly led by growth from prefab and overseas custom moulding business, which reported revenue growth of ~19.1 percent and ~22.8 percent YoY, respectively. Currency weakness also had a positive impact on topline growth as 20 percent of revenue is contributed by exports. On the other hand, monolithic segment remained a dragger with revenue declining 13.1 percent YoY as SIL curtailed its business due to low margin and blocking of high working capital in this segment. The domestic moulding textile business also remained sluggish with mere 1.1 percent YoY growth in revenues due to poor demand from Europe. On the margins front, prefab segment reported healthy margins of over ~23 percent while margins in custom moulding (overseas) remained subdued at 8.1 percent. Margins in monolithic segment improved QoQ due to closing down of slow moving sites and low base effect. As a result, total operating margin remained marginally higher at 14.3 percent (vs. our estimate: 13.8 percent). However, net profit remained below our estimates led by subdued topline and forex loss of Rs 3.7 crore for the quarter on FCCB for this quarter."
"With downsizing of the monolithic business and slowdown in domestic custom moulding business, we expect revenue growth to moderate further to 7.7 percent (vs. our previous estimate of 14.3 percent) in FY14E. Given the slowdown in the domestic business (except prefab), the proposed spinning business (plan outlay of Rs 1,800 crore), if implemented, would also likely put further pressure on return ratios over the next 12-18 months. Hence, we remain cautious and downgrade our rating to HOLD from BUY with a revised target price of Rs 35 (valuing on SOTP basis)," says ICICIdirect.com research report.
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