Buy Sintex Industries; target of Rs 115: PINC Research

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Buy Sintex Industries; target of Rs 115: PINC Research

PINC Research is bullish on Sintex Industries and has recommended buy rating on the stock with a target of Rs 115 in its January 16, 2012 research report.

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PINC Research is bullish on Sintex Industries and has recommended buy rating on the stock with a target of Rs 115 in its January 16, 2012 research report.

"Sintex Industries (SINT) reported a marginal revenue de-growth of 2% YoY to Rs11.6bn and EBITDA margin of 14.1% (PINCe 14.3%) which is in line with our estimate. Reported PAT fell 27%YoY to Rs822mn which includes forex gain of Rs135mn due to new AS11 amendment. Adjusting for this forex gain, adjusted PAT is in line with our estimate at Rs687mn. SINT's stock price correction (39% over past 3 months) has already factored in the slowdown as discussed in our note released on 9thJan'12. Going forward we expect 1) monolithic business to revive post Q1FY13 (post election) and show better order intake, execution, and collection of payment, (2) prefab business to show new activity and faster collection starting H1FY13, (3) domestic custom moulding (CM) to start delivering better results as we see things to improve here onwards in electrical, auto and other divisions. However, overseas custom moulding will be hard hit due to European and US economic slowdown (4) focus on balance sheet lightening and improving FCF."

"SINT reported revenue de-growth of 2%YoY in Q3FY12 to Rs11.6bn which is in line with our estimate. The fall in revenue was primarily noticed due to monolithic business where revenue fell by 24% YoY to Rs2.65bn. Prefab segment did well with a 13% YoY rise to Rs2bn. Custom moulding grew 6%YoY to Rs5.2bn due to domestic CM but saw a fall in the overseas business. Going ahead, we believe that with the upcoming state elections (Feb'12) in UP (order book of Rs4.5bn) and Uttarakhand, the company will face delays in collection and hence slowdown in the execution process of both monolithic and prefab. We may witness some recovery in monolithic only by the end of Q1FY13. SINT reported EBIDTA margin of 14.1%; fall of 253 bps YoY. Fall in margin is primarily on account of decline in monolithic (~200bps fall) and custom moulding margins. Going ahead we expect overhead costs in monolithic to increase on slowdown/stoppage in execution at sites. Domestic custom moulding margins have also fallen on account of slowdown from electrical and auto businesses and expect things to revive very soon. However, we don't see any immediate relief for the overseas custom moulding business."

"At CMP of Rs72, the stock discounts FY12e & FY13e EPS of Rs14.0 & Rs16.2 by 5.1x and 4.5x respectively. We maintain our 'BUY' recommendation with TP of Rs 115, says PINC Research reports.

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