Sintex Industries - Moulding, prefab segments drive growth... - ICICIdirect

Sintex Industries' (SIL) Q4FY13 numbers remained ahead of our estimates at the topline and PAT level. Total revenues grew 37.6% YoY to Rs. 1396.7 crore mainly led by the strong performance in prefabricated building systems (prefab) and custom moulding business, which reported robust revenue growth of over ~43% and ~89% YoY, respectively. However, the monolithic segment remained a dragger with revenue declining 9.8% YoY as SIL curtailed its business due to low margin and blocking of high working capital in this segment. It cleared five slow moving sites in this fiscal and proportionately unlocked working capital from this segment. The textile business also remained sluggish due to poor demand from Europe. On the margins front, the domestic custom moulding and prefab segments reported healthy margins of over ~20% due to healthy revenue growth while margins in monolithic and custom moulding (overseas) remained subdued at 6-7%. As a result, the total operating margin declined 223 bps YoY to 13.5%. Forex loss on long term FCCB for this quarter stood at Rs. 11.6 crore vs. loss of Rs. 45 crore in the last quarter. However, tax credit of Rs. 25 crore and other income of Rs. 45.6 crore led to robust PAT growth of over 65% YoY to Rs. 151.0 crore. Going ahead, with improving growth visibility in the custom moulding business due to geographic expansion led by new acquisitions in Germany & Poland and strong traction in the prefab segment due to robust demand, we expect revenue to grow at a CAGR of 14.8% during FY13-15E. We also expect a gradual improvement in margins led by streamlining of the monolithic segment, which is high working capital intensive in nature.

Valuations compelling but re-rating not to happen soon

We believe the company are taking care of concerns on the monolithic segment, with high working capital requirement and elevated debt, through raising funds (FCCB of US$140 million, QIP of ~Rs. 175 crore and Rs. 122 crore through issue of share warrants) and streamlining of the monolithic business. However, due to its varying nature of business led by volatile growth trend and pressure on margins, a re-rating is unlikely soon. Hence, we remain cautiously optimistic and maintain BUY rating with a revised target price of Rs. 67/share (valuing on an SOTP basis).

Source : Equity Bulls

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