Accumulate Sintex Industries; tgt of Rs 63: Dolat Capital

“Sintex Industries, slowdown in the monolithic segment (on account of political logjam and execution issues) & custom moulding segment (particularly led by the overseas subsidiaries) resulted Sintex reporting 30% YoY fall in revenues much below estimates at Rs10.2bn in Q4FY12 as compared to Rs14.6bn in Q4FY11. For the full year revenues were down 1% to Rs44.3bn mainly led by monolithic segment which declined 19% YoY to Rs 10.9bn.”

“Slower execution of monolithic projects & slowdown in the custom mouldings segment resulted in severe contraction of operating margins to 15.8% in Q4FY12 from 20% in Q4FY11. However on back of better margins in Prefabs and Textile division, overall margins were better than our estimates (Dolat estimates @14.7%). For the full year, margins contracted by 200bps to 16.2%. Q4FY12 PAT declined 46% to Rs912mn as compared to Rs1.68bn recorded in Q4FY11 on account of poor operational performance. PAT for FY12 too declined 33% YoY to Rs3.07bn. Adjusted PAT (adjusted for MTM forex loss) however declined by 22% to Rs3.54bn.”

“We believe that Sintex would continue to face strong headwinds in its building product (read monolithic construction) as well as custom moulding segment (read overseas subsidiaries) over the next couple of quarters which could result in a moderate revenue growth for the company in FY13. We expect the revenues to grow at a two year CAGR of 11% from FY12-FY14 (Last 5 year CAGR of more than 30%) Sintex currently trades at 5.2x & 4.7x its FY12 & FY13E earnings of Rs11.2 & Rs12.6 respectively. With company facing strong headwinds with respect to its key segments, we continue to maintain our cautious stance on the company despite recent stock correction on the bourses. Apart from the operational headwinds, FCCB redemption (due in Q4FY13) would continue to remain an overhang on the stock. We maintain a “Accumulate” rating on the stock with a price target of Rs 63, reflecting an upside of 7% from the current levels,” says Dolat Capital research report.  

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