Buy Sintex Industries; target of Rs 93: Emkay

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Buy Sintex Industries; target of Rs 93: Emkay

Emkay Global Financial Services is bullish on Sintex Industries and has recommended buy rating on the stock with a target of Rs 93 in its January 16, 2012 research report.

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Emkay Global Financial Services is bullish on Sintex Industries and has recommended buy rating on the stock with a target of Rs 93 in its January 16, 2012 research report.

"Sintex's Q3FY12 numbers (APAT of Rs687mn, adjusting for forex) were impacted by lower monolithic execution (25% yoy revenue decline and fall in EBITDA margins) and subsidiaries performance (9% yoy decline in revenues and 59% yoy decline in PAT). Consolidated revenues down 2% yoy, EBITDA margins stood at 14.1% (down 250bps yoy) and APAT declined by 39% yoy."

"Given FCCB repayment due next year, Mgmt in the concall sounded cautious on growth/execution which at present is higher working capital intensive (increase in working capital by Rs2.5bn vs. Sep11) and indicated preserving cash. It has reserved its comments on FY13E guidance for now. For FCCB repayment (about 280mn USD), it has indicated raising 30mn USD debt in its subsidiaries and 110mn USD ECB in Sintex. Apart from this, it has cash of about 140mn USD in its books (110mn USD outside India). Led by lower monolithic execution and lower margins and cut in subsidiaries revenue growth and EBITDA margins - we cut our FY12E and FY13E estimates by 23% and 28%. We have also reduced our Capex estimate for FY12E to Rs4bn vs. Rs5bn earlier - led by mgmt going slow on capex to preserve cash."

"At CMP of Rs70/share, stock is trading at 5.1xFY12E earnings and 0.7xFY12E Book. Stock is currently trading at huge discount (50%) to its average five year PE multiple of 10x. Though some discount is jus tified due to higher working capital cycle (140 days vs. 60 days), high capex and resulting negative free cash flows. We value Sintex at 30% discount to its long term average. Maintain buy with revised target price of Rs 93 per share," says Emkay Global Financial Services research report. 

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