Sintex Industries - Monolithic & CM overseas dent earnings... - ICICIDirect

Sintex Industries' (SIL) Q1FY13 numbers were above our estimates on account of a better-than-expected performance in the custom moulding (CM) segment. Net sales declined ~3% YoY to Rs.1076 crore (our estimate Rs.1010 crore) while the EBITDA margin dropped 55 bps YoY to 16.5% (our estimate: 14.6%). The monolithic construction business remained a dragger due to a slowdown in approvals/clearances with delays in government orders while a slowdown in eurozone industrial activities led to a decline in overseas CM revenue. We expect order execution in the monolithic business to remain weak in FY13E coupled with a challenging demand environment in overseas subsidiaries. We forecast flattish growth in bottomline in FY13E with margins under pressure.

Dismal performance in monolithic construction & overseas CM biz

The topline de-grew ~3% YoY to Rs.1076.4 crore while adjusted PAT declined ~31% YoY to Rs.65.6 crore on account of a slowdown in monolithic construction and the overseas CM business. Monolithic revenues declined ~22% YoY to Rs.215 crore while prefabs and storage tanks revenue grew ~16% YoY and ~33% YoY to Rs.172 crore and Rs.64 crore, respectively. Domestic CM sales grew ~25% to Rs.224 crore while overseas CM sales declined ~16% YoY to Rs.292 crore.

FY13E bottomline to remain flat; expected to improve by FY14E

We expect muted topline growth of ~3% YoY in FY13E and ~9% in FY14E, mainly driven by growth in prefabs, tanks and domestic CM segments. The bottomline is expected to remain flat in FY13E on account of a slowdown in the monolithic and overseas CM business. However, we forecast ~21% YoY PAT growth in FY14E on account of an improvement in monolithic businesses.

Valuations cheap but re-rating unlikely

Though valuations appear cheap, we believe concerns on monolithic and European CM business coupled with high working capital requirement would keep valuations under check. We have revised our target price to Rs.71 per share (valuing on SOTP basis) with a HOLD rating.

Source : Equity Bulls

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