Sintex Industries Research Report: Angel Broking

Angel Broking is bullish on Sintex India and has recommended buy rating on the stock with a target of Rs 229 with the following investment rationale:

For 3QFY2011, Sintex reported above expectation results. Strong revenue and profit growth of 39.9% yoy and 55.7% yoy, respectively, was mainly led by the monolithic segment and international subsidiaries. The recent acquisition of DCPL has strengthened Sintex’s geographical footprint and the monolithic segment’s product portfolio. Sintex‘s Management has reiterated its strong outlook for the domestic plastic segment and has clarified that future investment of Rs 100cr–140cr by FY2013 in the power segment is purely for captive consumption, which will improve margins over the long term.

Sintex’s consolidated net sales grew by 39.9% yoy to Rs 1,186cr during 3QFY2011, in line with our expectation. Sintex‘s strong revenue growth was mainly led by the monolithic segment (up 171% yoy), Bright Autoplast (up 49% yoy), textile segment (up 29% yoy) and international subsidiaries (up 20% yoy). Sintex‘s domestic custom moulding segment reported subdued performance. Standalone BT Shelter and Zeppelin continued to drag Sintex‘s performance. Sintex‘s 3QFY2011 consolidated operating profit stood at Rs 197cr, up 55% yoy. OPM for the quarter stood at 16.6%, up 162bp yoy (down 200bp qoq) on the back of higher contribution from the high-margin monolithic segment. During the quarter, Sintex‘s booked other income of Rs 14cr (down 45.0% yoy). Consequently, PAT came in at Rs 112.8cr, up 55.7% yoy, significantly above our expectation.

We have revised upwards our earnings estimates of Sintex for FY2011 and FY2012 by 8.0% and 8.6%, respectively. At Rs 167, the stock of Sintex is trading at 8.1x FY2012E EPS and 1.7x FY2012E BV. Historically, Sintex has traded at 14x its 1-year fwd. avg. P/E, which makes current valuations attractive. Besides, Sintex’s fundamentals have strengthened with strong revenue visibility and demand in the domestic plastic segment. We maintain Buy Sintex with a target price of Rs 229.