Dismal performance; prefab this time…
New venture to put cap on return ratios; dropping coverage
The growth trajectory of the company has remained unstable due to its presence across wider segments. Further, with over 42% equity dilution led by FCCB conversion, EPS growth remained flattish to negative over the past five years. The company is venturing into a new segment (spinning business) from H2FY16 onwards. We expect the company to maintain its revenue growth guidance despite muted Q1FY16 performance through heavy capex on the new segments. However, we believe that managing these segments in a profitable manner with their long-term sustainability would remain a key challenge for the company given the issues faced by the company in the past. We are dropping coverage on the stock to optimise available resources and till a meaningful sustained improvement at the bottomline level happens.
Note: (i) Vikas Sethi of Sethi Finmart has recommended Sintex Industries on the ground that it has “attractive valuations and great business prospects” (ii) JP Morgan has recommended Sintex Industries on the ground that it is the “beneficary of ‘clean India’ and CSR spending by corporates“.