Hold Sintex Industries; target of Rs 71: Nirmal Bang

Nirmal Bang has recommended hold rating on Sintex Industries with a target of Rs 71, in its July 16, 2012 research report.

“Following strong performance of custom moulding and pre-fab divisions, Sintex Industries (SIL) outperformed our/Bloomberg sales estimates by 14.3%/9.0% and adjusted net profit estimates by 22.4%/25.4%, respectively. Monolithic division’s revenue is likely to be low until 3QFY13, which would be compensated by strong pre-fab revenue. Due to weak performance in 3QFY12/4QFY12 with a fall in net profit by 39.1%/45.2%, respectively, SIL corrected 23.5% in the past three months. We upgrade the stock to Hold from Sell with a revised TP of Rs71 (from Rs52) based on 5.0x (from 4.4x) FY13E EV/EBITDA. We expect the valuation to be capped due to high working capital needs, a mere 4.4% net profit CAGR likely over FY12-14E and forex risks linked to foreign liabilities.”

“SIL improved the performance of its foreign arms in 1QFY13, posting a 104% QoQ rise in revenue to Rs2.9bn, while revenue from pre-fab business grew 16.5% YoY. Even in a challenging situation, SIL posted a mere 2.8% YoY fall and a 5.6% QoQ rise in revenue to Rs10,806mn, 14.3%/9.0% higher than our/Bloomberg estimates, respectively. It reported EBITDA margin of 16.4% versus our/Bloomberg estimates of 14.1%/14.7%, respectively. Adjusted for forex loss, SIL posted a net profit of Rs757mn, down 20.8% YoY, but 22.4%/25.4% higher than our/Bloomberg estimates of Rs618mn/Rs603mn, respectively. SIL improved the performance of its foreign arms in 1QFY13, posting a 104% QoQ rise in revenue to Rs2.9bn, while revenue from pre-fab business grew 16.5% YoY.”

“Even in a challenging situation, SIL posted a mere 2.8% YoY fall and a 5.6% QoQ rise in revenue to Rs10,806mn, 14.3%/9.0% higher than our/Bloomberg estimates, respectively. It reported EBITDA margin of 16.4% versus our/Bloomberg estimates of 14.1%/14.7%, respectively. Adjusted for forex loss, SIL posted a net profit of Rs757mn, down 20.8% YoY, but 22.4%/25.4% higher than our/Bloomberg estimates of Rs618mn/Rs603mn, respectively,” says Nirmal Bang research report.

Institutional holding more than 40% in Indian cos

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