Sintex Industries - Strong Performance, Maintain BUY - IFCI Financial Services

Top line increased 14% YoY and 21% QoQ : Sintex Industries Ltd (SIL) reported increase in top line by 14% YoY and 21% QoQ to Rs13.7bn due to healthy demand for all business segments. Prefabricated building system grew 31% YoY and 48% QoQ to Rs3031mn, Monolithic business segment increased 9%YoY and 41% QoQ to Rs2633mn and Custom Moulding (CM) business grew 10% YoY and 8% QoQ to Rs5880mn (CM Overseas - Rs3529mn up 22% YoY and CM India - Rs2351mn down 4% YoY due to slowdown in automobile segment).

EBIDTA margins increased 20bps YoY and 120bps QoQ: EBIDTA margins declined to 13.5% down 210bps YoY and 210bps QoQ in 2QFY14 with increase in sales.

Bottom line increased 1%YoY and 56% QoQ: Tax expense declined to Rs269mn. Resultant bottom line increased to Rs729mn (up 1% YoY and 56% QoQ).

Other Key Highlights:

- SIL has acquired two assets in Poland (low cost manufacturing) and Germany (manufacturing and designing hub) and have incurred capex of Rs1.7bn. The company expects to generate sale of Euro 14mn in FY14E and Euro 40m in FY15E (100% capacity utilisation).

- Management has increased its capex target to ~Rs4.5bn (earlier guidance of Rs3.5bn). Also management intends to set up 300,000 spindles unit in Gujarat and incur a capex of ~Rs18bn and generate IRR of +16% as it expects sops incentives under Gujarat TUFS scheme. Expansion in textile will lead to slower than expected in balance sheet deleveraging.

- Company is likely to focus more on electrical and off road vehicles segment due to slowdown in automotive segment and thus diversify its presence in CM segment.

Valuations: We maintain our BUY rating on the stock and maintain our target price of Rs50 per share based on 4.7 x EV/ EBIDTA multiple of FY15E (average one year forward 5.6x EV/EBIDTA after 2008) of FY15E.

Source : Equity Bulls

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