Sell Sintex Industries - Nirmal Bang Institutional

- With 13.1%/16.4% decline in monolithic/domestic custom moulding revenue, respectively, consolidated revenue of Sintex Industries (SIL) for 1QFY14 was 6.9%/8.0% below our/Bloomberg consensus estimates, respectively.

- Barring the pre-fab division, all other divisions witnessed a decline in operating margin and as a result the consolidated operating margin fell 221bps to 14.3% against our estimate of 14.8%, thereby leading to a steep 26.5%18.7% fall in net profit compared to our/Bloomberg consensus estimates, respectively.

- SIL increased FY14 capex guidance to Rs3.5bn from Rs2.5bn earlier.

- Following the elevated capex and lower revenue growth, we have reduced our net profit estimates by 17.4%/16.5% for FY14E/FY15E, respectively.

- In the wake of elevated capex guidance, concerns over corporate governance and subdued return ratios/free cash flow, we have downgraded our rating on SIL to Sell (from Buy earlier) with a revised target price of Rs30 (from Rs63 earlier) based on 3.0x FY15E EV/EBITDA.

Source : Equity Bulls

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