Buy Sintex Industries - Q2FY13 Result Update - Dolat Capital

Revenues up 3% YoY at Rs.11.9bn, better than estimates: For the quarter under review, Sintex revenues increased by 3% YoY to Rs.11.9bn as against Rs.11.5bn in Q1FY12 (Dolat estimates Rs.11bn) led by strong performance from its prefabs segment which grew 37% YoY. The party spoiler continued to be monolithic & the overseas custom moulding segment which reported de-growth of 14% & 6% respectively for the quarter under review.

EBIDTA margins lower by 230 bps (lower than estimates): Lower margins in the custom moulding & monolithic segment resulted in contraction of overall margins by 230 bps to 15.4% (Dolat estimates @16.8%). As a result, operating profit for the quarter fell 10% YoY to Rs.1.83bn.

Reported PAT rises 86%: Subdued operating performance resulted to PBT declining by 18% YoY to Rs.1.03bn. However Forex MTM loss of Rs.49mn in Q2FY13 as against a huge loss of Rs.596mn resulted in the reported PAT growing by 86% to Rs.724mn as compared to Rs.388mn posted in the corresponding quarter of the previous year. However adjusting for forex losses, reported PAT would have been lower by 21% to Rs.772mn as compared to Rs.984 mn.

Valuation & Recommendation

Sintex currently trades at 5.8x & 4.6x its FY13E & FY14E earnings of Rs.12.7 & Rs.16 respectively. With the revenue visibility gradually improving across businesses, we are valuing the company on FY14E earnings. We thereby revise our rating to "Buy" with a price target of Rs.89, reflecting an upside of 21% from the current levels.

Source : Equity Bulls

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