Buy Sintex Industries, target of Rs 587: Religare

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Buy Sintex Industries, target of Rs 587: Religare

Religare Research has maintained its buy rating on Sintex Industries with a target price of Rs 587. Sintex Industries has acquired Digvijay Communications and Networks (DCN) through its 75% subsidiary Zeppelin Mobile Systems India via a slump sale transaction worth Rs 540 million.

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Religare Research has maintained its buy rating on Sintex Industries with a target price of Rs 587 in its June 23, 2008 research report. "Sintex Industries has acquired Digvijay Communications and Networks (DCN) through its 75% subsidiary Zeppelin Mobile Systems India via a slump sale transaction worth Rs 540 million. Based out of Indore in Madhya Pradesh, DCN is a telecom infrastructure service provider whose product offerings and markets complement those of Sintex. The management expects DCN to post revenues of Rs 750 million in FY09 with an EBITDA margin of 27%."

"In view of the tight economic conditions and rising inflation, we have estimated revenues of Rs 650 million for DCN in FY09 with a 25% EBITDA margin, and a 25% growth in topline in FY10. We have revised our estimates slightly upwards for FY09 and FY10 to factor in the acquisition. We feel that the deal size of Rs 540 million, which is 3.3x DCN's FY09E EBITDA, is justifiable. However, since it does not have a major impact on Sintex's valuations, we are keeping our target price unchanged at Rs 587. We maintain a Buy recommendation on the stock," says Religare's research report.

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