Buy Sintex Industries; target Rs 50: Sunidhi Securities

Sunidhi Securities' report on Sintex Industries

"Sintex Industries, during Q2FY14, net profit has remained flat at Rs 73 crore on 21 percent higher sales of Rs 1,360 crore. Q2FY14 EPS stands at Rs 2.3. OPM and NPM stood at 15.0 percent and 5.4 percent against 15.6 percent and 6.1 percent respectively in Q2FY13.  During H1FY14, again net profit remained almost flat at Rs 119.5 crore on 10 percent higher sales of Rs 2,483 crore. H1FY14 EPS stands at Rs 3.8. During FY13, consolidated net profit rose 10 percent to Rs 324 crore on 14 percent higher sales of Rs 5,079 crore. EPS stood at Rs 10.4 on enhanced equity. A dividend of 70 percent was paid. SIL offers a one of the widest wide plastic-based solution in global plastic processing space – from creating housing units to small components that find application in the medical equipment and electrical businesses. It is the only Indian plastic processing company with a pan-India manufacturing presence and manufacturing operations in 12 nations to cater to the global demand."

"Sintex’s customised moldings business caters to Fortune 500 customers across continents and various sectors. It intends to leverage these customers and potentially enhance domestic manufacturing and outsourcing. This will significantly improve margin in the business over the next couple of years. According SIL, the recent spate of reforms from the government will help gradually revive the domestic economy and augurs well for Sintex as a buoyant social spending and an improved Capex from the private sector will ensure a strong revival in the company’s fortunes. But, even before the benefits of the reforms start trickling in, the company is witnessing improvement in the business. In the recent conference call, SIL said, it has started seeing slow, but steady improvement in most of its businesses, which is very encouraging. Visibility has improved across businesses. SIL strongly believes, it will bounce back in the near future."

"SIL has highlighted generating free cash flows for the next couple of years, improving return on capital, shrinking the overall balance sheet size and improving working capital through stringent controls on the monolithic business, as key focus areas to strengthen its balance sheet, going forward. Despite economic adversities across the globe, SIL grew its topline by about 15 percent and strengthened its balance sheet. This was achieved through a disciplined approach in streamlining business systems and processes to maximise efficiencies and a continued focus on improving the business mix. Now, SIL is perfectly poised to accelerate profitable business growth going forward with a hawk eye on maintaining a lean balance sheet. At the current market price of Rs 36, the share is trading at a P/E of 3.6x on FY14E and 2.9x on FY15E. We recommend BUY with a target price of Rs 50 at which the share will trade at a P/E of 4x on FY15E," says Sunidhi Securities research report.

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