SINTEX INDUSTRIES LIMITED

Transcription

1 EQUI-GRADE Analytical Power for Investment Decisions Sintex Industries Limited Plastics and Textiles SINTEX INDUSTRIES LIMITED December 29, 2011 Very Good Fundamentals; Considerable Upside Potential CMP: Rs.62.2 / CIV: Rs.257 Sensex: Update Q2FY12 CARE Equity Research maintains fundamental grade of 4/5 on Sintex Industries Ltd (Sintex). This indicates Very Good Fundamentals. Revenue up 25.3 per cent The revenue for Sintex stood at Rs.1157 crores in Q2FY12 up 25.3 per cent year-over-year. All the three segments, building materials, custom mouldings and textiles, contributed to the high growth. EBITDA margins decline due to rise in raw materials cost Sintex s reported an EBITDA of Rs crores in Q2FY12, resulting in EBITDA margins of 17.7 per cent as against EBITDA margins of 18.6 per cent. The drop in the EBITDA was on account of higher raw materials cost in the current quarter. Order book stays healthy The monolithic construction order book was maintained at Rs crores at the end of Q2FY12, providing a revenue visibility of around 2 years. Rupee depreciation results in drop in net profit The company reported a forex loss in the current quarter of around Rs crores as against a forex gain of Rs crores in Q2FY11. Valuation We have valued Sintex at a CIV of Rs.257 per share; however our estimates are under review. We shall revise our estimates post management discussion. Financial Information Snapshot (Rs Crore) FY09 FY10 FY11 FY12 P Operating Income 3,135 3,319 4,484 5,271 EBITDA ,027 PAT (After minority interest) Fully Diluted EPS* (Rs.) Dividend Per Share (Rs.) P/E (times) EV/EBITDA (times) * Calculated on Current Face Value of Rs. 1/- per share 1

2 SINTEX INDUSTRIES LIMITED CARE Equity Research retains the fundamental grade at 4/5, indicating Very Good Fundamentals CARE Equity Research retains fundamental grade of 4/5 to Sintex. This indicates Very Good Fundamentals. The grade draws strength from leadership position in plastic water tanks, prefabricated building systems and monolithic construction segment with strong order book coupled with an experienced management. While, the current order book for monolithic construction at around Rs crores gives revenue visibility for next 2 years, an increased Government focus on social spending provides huge growth opportunities for Sintex. CARE Equity Research believes that risks associated with acquired subsidiaries are behind and Sintex has started realizing synergy benefits. Sintex: Interim Financial Snapshot (Rs Crore) Q2FY12 Q2FY11 Growth (y-o-y) H1FY12 H1FY11 Growth (y-o-y) Net Sales % % Total Operating Income % % EBITDA % % EBITDA Margin 17.66% 18.59% 17.39% 17.81% PAT (61.67%) (26.43%) PAT Margin 3.34% 10.85% 5.81% 9.77% Fully Diluted EPS* (Rs.) (61.25%) (25.45%) Source: Company and CARE Equity Research Healthy growth in revenue Sintex s revenue for Q2FY12 (July 1 to September 30, 2011) grew by 25.3 per cent y-o-y, to Rs crores as against revenue of Rs. 923 crores in Q2FY11. All three segments, i.e. buildings materials, custom mouldings and textiles witnessed healthy growth (between per cent y-o-y). When comparing the half yearly results, textiles segment has been a slight underperformer growing at around 16 per cent. 2

3 SINTEX INDUSTRIES LIMITED Sintex: Segmental Snapshot Q2 (July, 1 September, 30) H1 (April, 1 September, 30) Building materials Custom mouldings Building materials Custom mouldings Textiles Textiles Note: Inner donut refers to FY12 segmental revenue (Rs Crores), outer donut refers to FY11 segmental revenue (Rs Crores) Source: Company and CARE Equity Research Rise in raw materials cost leads to decline in EBITDA margins Sintex s reported an EBITDA of Rs crores in Q2FY12, resulting in EBITDA margins of 17.7 per cent as against EBITDA margins of 18.6 per cent. The drop in the EBITDA was on account of higher raw materials cost in the current quarter. Order book stays healthy The monolithic business addresses the low cost housing segment in urban and semi urban areas. The company has witnessed good traction in the monolithic business, both in order and execution. The monolithic construction order book stood maintained at Rs crores at the end of Q2FY12, providing a revenue visibility of around months. 3

4 SINTEX INDUSTRIES LIMITED Sintex: Monolithic Order Book Rs Billion Q3 FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Source: Company and CARE Equity Research Rupee depreciation results in drop in net profit, interest costs too play spoilsport The company reported a forex loss in the current quarter of around Rs crores as against a forex gain of Rs crores in Q2FY11. The loss was on account of the rupee depreciation from Rs. 44.5/ USD to Rs. 49.5/USD (drop of around 11 per cent) over July September 2011, resulting in a MTM loss on the outstanding unhedged exposure of USD 100 million on the company s FCCB borrowings. Sintex had raised USD 225 million via FCCBs in FY08. The interest cost too witnessed a rise on account of higher cost of borrowings. The company thereby reported a net profit of Rs crores in the Q2FY12 as against Rs. 100 crores in Q2FY11. Spreading reach in distribution, commencement of new facility in custom mouldings Post execution of monolithic construction work in UP last year, the company operationalised it distribution center in UP in the current quarter. The company also commenced its custom mouldings unit in Chennai in the current quarter. 4

5 24-Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec-11 SINTEX INDUSTRIES LIMITED Sintex s stock price are down by 65.3 per cent since last update from CARE Equity Research Sintex s shares traded at Rs. 179 at the time of last update by CARE Equity Research on 1st July The price of Sintex s stock exhibited a significant drop since the last update. As on the date of this report the stock price traded at Rs. 62 per share - down by around 65.3 per cent since the last update. The benchmark (Sensex) lost around 17.2 per cent - during the same period. Sintex: Stock performance since initiation Price Movement (rebased to 100) Sensex Sintex CIV Source: BSE and CARE Equity Research 5

6 SINTEX INDUSTRIES LIMITED ANALYSIS OF INTERIM RESULTS Consolidated Income Statement (Rs Crores) Q2FY12 Q2FY11 Q1FY12 Growth (y-o-y) Growth (q-o-q) Total Operating Income % 4.0% Net Sales % 4.0% EBITDA % 8.0% Depreciation and amortisation % -0.6% EBIT % 10.6% Interest % 18.6% PBT % -48.0% PAT % -58.6% EBITDA Margin 17.66% 18.59% 17.02% Net Margin 3.34% 10.85% 8.39% Source: Company and CARE Equity Research Consolidated Income Statement (Rs. Crores) H1FY12 H1FY11 Growth (y-o-y) Total Operating Income % Net Sales % EBITDA % Depreciation and amortisation % EBIT % Interest % PBT % PAT % EBITDA Margin 17.39% 17.81% Net Margin 5.81% 9.77% Source: Company and CARE Equity Research 6

7 SINTEX INDUSTRIES LIMITED FINANCIAL STATISTICS Income Statement (Rs Crore) FY09 FY10 FY11 FY12 P Operating Income 3, , , ,270.9 EBITDA ,026.6 Depreciation and amortisation EBIT Interest PBT PAT (After minority interest) Fully Diluted Earnings Per Share* (Rs.) Dividend * Calculated on Current Face Value of Rs. 1/- per share Balance Sheet (Rs Crore) FY09 FY10 FY11 FY12 P Net worth (incl. Minority Interest) 1,511 1,699 2,183 2,713 Debt 2,296 2,630 2,774 1,937 Deferred Tax Liability / (Asset) Capital Employed 3,950 4,499 5,162 4,856 Net Fixed Assets 1,980 1,955 2,548 2,610 Investments & Others Cash and Cash Equivalents 1, Current Assets, Loans and Advances 1,554 2,169 2,315 2,395 Less: Current Liabilities and Provisions ,064 1,207 Total Assets 3,950 4,499 5,162 4,856 Ratios FY09 FY10 FY11 FY12 P Growth in Operating Income 36.7% 5.9% 35.1% 17.6% Growth in EBITDA 29.4% 3.1% 51.6% 25.9% Growth in PAT 41.2% 1.2% 39.8% 21.3% Growth in EPS 22.8% 1.2% 38.8% 21.3% EBITDA Margin 16.6% 16.2% 18.2% 19.5% PAT Margin 10.4% 9.9% 10.3% 10.6% RoCE 11.1% 9.3% 13.8% 16.2% RoE 22.5% 20.5% 23.7% 22.8% Net Debt-Equity (times) Interest Coverage (times) Current Ratio (times) Price / Earnings (P/E) Ratio Price / Book Value(P/BV) Ratio Enterprise Value (EV)/EBITDA Source: Company, CARE Equity Research 7

8 SINTEX INDUSTRIES LIMITED EXPLANATION OF GRADES CARE Equigrade Grid (CEG) Through CEG, CARE Equity Research addresses two critical factors considered by an investor while investing in a particular company s equity shares: 1. Fundamentals: Whether the company is fundamentally sound with respect to its business, its financial position, its management and its prospects. 2. Valuation: What is the Current Intrinsic Value (CIV) of the stock and how it compares vis-a-vis its Current Market Price (CMP) These factors are answered assigning quantitative grades to both these parameters. CEG is the snapshot of Fundamental Grade and Valuation Grade assigned by CARE Equity Research. Fundamental Grade This grade represents how sound the company is fundamentally, vis-à-vis other listed companies in India. This grade captures: 1. Business Fundamentals and Prospects 2. Financial Soundness 3. Management Quality 4. Corporate Governance Practices The grade is assigned on a five-point scale as under: CARE Fundamental Grade Evaluation 5/5 Strong Fundamentals 4/5 Very Good Fundamentals 3/5 Good Fundamentals 2/5 Modest Fundamentals 1/5 Weak Fundamentals Valuation Grade This grade represents the potential value in the company s equity share for the investor over a 1 year period. The Current Intrinsic Value (CIV) or the price arrived by CARE Equity Research on fundamental basis is compared with the current market price (CMP) of the stock and the grade is assigned based on the gap between CIV and CMP of the stock. The grade is assigned on a five-point scale as under: CARE Valuation Grade Evaluation 5/5 Considerable Upside Potential (>25% upside from CMP) 4/5 Moderate Upside Potential (10-25% upside from CMP) 3/5 Fairly Priced (+/- 10% from CMP) 2/5 Moderate Downside Potential (10-25% downside from CMP) 1/5 Considerable Downside Potential (>25% downside from CMP) 8

9 SINTEX INDUSTRIES LIMITED Grading determination is a matter of experienced and holistic judgment, based on relevant quantitative and qualitative factors of the company in relation to other listed companies. DISCLOSURES Each member of the team involved in the preparation of this grading report, hereby affirms that there exists no conflict of interest that can bias the grading recommendation of the company. This report has been sponsored by the company. DISLCLAIMER This report is prepared by CARE Research, a division of Credit Analysis & REsearch Limited [CARE]. CARE Research has taken utmost care to ensure accuracy and objectivity while developing this report based on information available in public domain or from sources considered reliable. However, neither the accuracy nor completeness of information contained in this report is guaranteed. CARE Research operates independently of ratings division and this report does not contain any confidential information obtained by ratings division, which they may have obtained in the regular course of operations. Opinions expressed herein are our current opinions as on the date of this report. CARE s valuation of the security is mainly based on company specific fundamental factors. Equity prices are affected by both fundamental factors as well as market factors such as liquidity, sentiment, broad market direction etc. The impact of market factors can distort the price of the security thereby deviating from the intrinsic value for extended period of time. This report should not be construed as recommendation to buy, sell or hold a security or any advice or any solicitation, whatsoever. It is also not a comment on the suitability of the investment to the reader. The subscriber / user assumes the entire risk of any use made of this report or data herein. CARE specifically states that it or any of its divisions or employees have no financial liabilities whatsoever to the subscribers / users of this report. This report is for personal information only of the authorised recipient in India only. This report or part of it should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person, especially outside India or published or copied for any purpose. Credit Analysis and Research Limited proposes, subject to receipt of requisite approvals, market conditions and other considerations, to make an initial public offer of its equity shares and has filed a draft red herring prospectus ( DRHP ) with the Securities and Exchange Board of India (the SEBI ). The DRHP is available on the website of SEBI at as well as on the websites of the Book Running Lead Managers at and Investors should note that investment in equity shares involves a high degree of risk and for details relating to the same, see the section titled Risk Factors of the DRHP. [ This press release is not for publication or distribution to persons in the United States, and is not an offer for sale within the United States of any equity shares or any other security of Credit Analysis and Research Limited. Securities of Credit Analysis and Research Limited, including its equity shares, may not be offered or sold in the United States absent registration under U.S. securities laws or unless exempt from registration under such laws. ] Published by Credit Analysis & REsearch Ltd., 4th Floor Godrej Coliseum, Off Eastern Express Highway, Somaiya Hospital Road, Sion East, Mumbai CARE Research is not responsible for any errors or omissions in analysis/inferences/views or for results obtained from the use of information contained in this report and especially states that CARE (including all divisions) has no financial liability whatsoever to the user of this product. This report is for the information of the intended recipients only and no part of this report may be published or reproduced in any form or manner without prior written permission of CARE Research. 9

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