FUNDAMENTALS VALUATION

Transcription

1 FUNDAMENTALS VALUATION SINTEX INDUSTRIES LIMITED 24 th September 2010

2 ANALYTICAL CONTACT Ms. Revati Kasture BUSINESS DEVELOPMENT CONTACTS MUMBAI Mr. P. N. Satheeskumar KOLKATA Mr. Sukanta Nag CHENNAI Mr. V Pradeep Kumar pradeep.kumar@careratings.com AHMEDABAD Mr. Mehul Pandya mehul.pandya@careratings.com NEW DELHI Ms. Swati Agrawal swati.agrawal@careratings.com BANGALORE Mr. G. Sundara Vathanan sundara.vathanan@careratings.com HYDERABAD Mr. Ashwini Kumar Jani ashwini.jani@careratings.com CARE EQUITY RESEARCH OFFERS Independent Research of equities on fundamentals or valuations or both IPO Grading White Label Research Valuation of companies for Institutional Investors, Asset Managers and Corporates Sector Write-ups for Offer Documents of securities

3 EQUI-GRADE Analytical Power for Investment Decisions SINTEX INDUSTRIES LIMITED Plastics and Textiles SINTEX INDUSTRIES LTD. Very Good Fundamentals; Moderate Upside Potential CMP : Rs / CIV : Rs September 2010 CARE Equity Research assigns 4/5 on fundamental grade to Sintex Industries Limited CARE Equity Research assigns fundamental grade of 4/5 to Sintex Industries Limited (Sintex). This indicates Very Good Fundamentals. The grade draws strength from Sintex s leadership position in plastic water tanks, prefabricated building systems and monolithic construction coupled with experienced management. While strong order book of monolithic construction gives revenue visibility for next months, increased Government focus on social spending provide huge growth opportunities for Sintex. Furthermore, CARE Equity Research believes that risks associated with acquired subsidiaries are behind us and Sintex is likely to start realizing synergy benefits going forward. Sintex s textile business had witnessed dip in FY10. Though CARE Equity Research is skeptical, the management is positive about the future of this business. Additionally Sintex s increased focus on monolithic business may elongate the working capital cycle of the company and any gap in securing funding may affect the company s prospects adversely. Valuation CARE Research assigns valuation grade of 4/5 to Sintex based on the Current Intrinsic Value (CIV) of Rs. 415 as against Current market Price (CMP) of This indicates that the stock has Moderate Upside Potential. CARE Equity Research has used Discounted Cash Flow (DCF) to value the company. Financial Information Snapshot (Rs Crore) FY09 FY10 FY11 P FY12 P Operating Income 3,136 3,319 3,868 4,271 EBITDA 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. 2/- per share 1

4 SINTEX INDUSTRIES LTD. FUNDAMENTAL GRADE Very Good Fundamentals 4/5 Established track record and market leader in water tanks with strong brand recognition Sintex is one of the leading plastics and composite manufacturer with a presence in high-end textile business in India. Incorporated as a textile company in 1931, Sintex forayed into liquid storage tanks segment in Currently, Sintex has almost become a generic name; synonymous with water tanks in India. Although this segment has low entry barrier resulting in stiff competition from organized and unorganized players, Sintex derives competitive strength from strong brand recognition and diverse range of various related product offerings. Furthermore, advanced technology and high asset utilization has led to high efficiency and lower production costs. The company has its manufacturing facilities spread across India which allows it in using local resources more effectively, thereby achieving additional cost efficiencies. Government focus on social spending provide huge growth opportunities Government of India has envisaged spending of around Rs 1,000 billion under the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) through Till date, a total of 982 projects have been sanctioned with total project cost of about Rs 841 billion. The Urban Development Ministry has requested to lower the population limit for cities to be eligible for JNNURM from current floor of 10 lakhs to 5 lakhs. This proposal, if approved, would introduce 28 new cities across 12 states to the scheme. Furthermore, allocation to the Indira Awas Yojna (IAY) has been increased from Rs 88 billion in FY10 to Rs. 100 billion for FY11. Assuming that GoI meets its spending targets under the JNNURM and continue to focus on IAY scheme at the same level, CARE Equity Research estimates that projects worth at least $ billion is likely to be announced in next 2-3 years. CARE Equity Research believes that the Government s initiatives on social spending provide huge growth opportunities for Sintex to capitalize on its proven track record and established relationship with the state government agencies. Sintex is currently present in 17 states and various products of the company are already being used in various schemes approved by the state and the central government agencies. Factors like higher upfront investment, strict pre-qualification norms by the government agencies and large size of orders are likely to favour larger players like Sintex over other unorganized players. 2

5 Order Book (Rs crore) SINTEX INDUSTRIES LTD. Year wise Distribution of Actual Costs and Projects Budgetary Allocation For IAY (Rs Crore) under JNNURM Year Actual Project Costs (Rs Crore) Number of Approved Projects UIG BSUP Total UIG BSUP Total , ,342 8,796 25, ,007 7,926 20, ,225 7,830 27, , , Total 58,030 26,150 84, UIG: Urban Infrastructure and Governance BSUP: Basic Services to the Urban Poor 12,000 10,000 8,000 6,000 4,000 2,000-10,000 8,800 5,400 4,040 FY08 FY09 FY10 FY11 Source: JNNURM and Ministry of Rural Development Strong order book of monolithic construction to give revenue visibility The monolithic construction business is one of the fastest growing sub-segments of Sintex primarily due to increased government spending on slum rehabilitation and housing for economically weaker section (EWS) housing. Monolithic construction business is likely to play major role in these government initiatives not only due to its cost effectiveness but also due to its speed of execution. A typical monolithic construction takes six months to complete as against a typical brick/mortar housing project which takes two years. Sintex holds the leadership position in this segment due to the competitive advantage derived from the integration with other products of its plastics division that are used as raw material in monolithic housing. Historically, Sintex has maintained a sizeable order book for its monolithic segment with execution time frame of about months. The current order book for the segment stands at about Rs 2,300 crore, which provides sales visibility for next months. Sintex: Monolithic Construction Business Order Book 3,500 3,000 2,500 2,000 1,500 1, months 1, months months 2,200 2,300 Q3FY10 Q4FY10 Q1FY11 Source: CARE Equity Research 3

6 SINTEX INDUSTRIES LTD. Acquisition related risks are have been overcome with subsidiaries showing signs of recovery In last four years, Sintex has made six acquisitions in India and abroad. Four of these acquisitions Wasaukee Composites, Bright Autoplast, Nief Plastics and Nero Plastics were aimed to enhance its presence in the composites segment. The other two acquisitions, namely Zeppelin Mobiles and Digvijay Communications (through Zeppelin), were targeted at capturing the prefabricated structure business in telecom industry. These acquisitions immediately ran into integration issues as the four subsidiaries operating under the composite segment faced headwinds from global economic slowdown and the two subsidiaries active under the telecom space were negatively impacted by reduced spending by major telecom players. Going forward, with integration issues behind us, CARE Equity Research expects Sintex to start reaping the benefits of its acquisitions. Restructuring of business coupled with recovering global economy is likely to provide stability to composite business revenue. These composite subsidiaries have heavy exposure to domestic and export automotive market. For instance, Bright Autoplast (India) and Nief Plastics (France) derives 100% and 40% of its revenue respectively from automobile segment. A robust growth in Indian automotive segment along with a possible recovery in European market augurs well for these subsidiaries. On the other hand, Zeppelin Mobiles (Sintex s telecom subsidiary) is expected to arrest the decline in its revenue stream on the back of increased capital expenditure related to 3G. Sintex: Valuation Summary of Acquired Companies Source: CARE Equity Research 4

7 SINTEX INDUSTRIES LTD. Sintex: Summary of Acquired Companies Acquired Company Zeppelin Mobile Systems India Wasaukee Composites Country Date of Acq. Cost (Rs crore) India May US May Bright Autoplast India Sep Nief Plastics France Oct Segment Telecom Shelters Composites (Existing: Construction, Agri, Wind Energy, Imaging Systems New: Defense & Aeronautics) Composites (Automotives) Composites (Automotive (40%), Electrical (30%), Aerospace & Defense (20%), Others (10%)) Key Customers Leading telecom companies in India Alstom, Toshiba, Siemens, GE Medical, New York City Transit Leading automobile companies in India Peugeot, Renault, Schneider, ABB, Alstom, Valeo, Faurecia Synergy Benefits To tap prefab market for telecom industry Access to the US composites market Entry into the Indian Automotive Segment Technology, Entry into European composite market, access existing customer base, Synergies with Bright Autoplast Nero Plastics US Dec Composites (Auto, Electrical) Caterpillar, New Holland, Kenworth Entry into highly engineered structured plastic products segment; Existing customer base Digvijay Telecom Leading telecom To tap prefab market India Jun Communications infrastructure companies in India for telecom industry Total Note: Acquisition cost converted to Indian rupee using average year to date (YTD) exchange rates. Rs/$ ; Rs/ Source: CARE Equity Research Sintex s textile business has witnessed dip in FY10 Textile business contributes about 10.2% to Sintex s overall turnover in FY10. However, in last four years, the textile segment has grown at slower pace compared to the plastics segment. Revenue from the textile business grew at a CAGR of 2.9% compared to that of plastics business CAGR 51.6%. Consecutively, share of textile business in the company s overall revenue mix declined from 26.6% FY07 to 10.2% in FY10. Going forward, CARE Equity Research remains skeptical about future prospects of Sintex s textile business due to three reasons. Firstly, Sintex has positioned itself in niche market supplying high end structured dyed yarn fabrics to luxury brands like Armani, Hugo Boss, Diesel, Burberry et cetera. Demand of these luxury products are likely to remain muted in the medium term given that the global economy is still in early recovery stage. Secondly, the global retail industry is currently going through the phase of retail consolidation. Major global retailers are attempting to reduce the number of sourcing vendors in order to reduce logistics and procurement costs. Under such vendor consolidation scenario, relatively small players like Sintex may find it difficult to compete with other 5

8 SINTEX INDUSTRIES LTD. domestic textile players with large integrated capacities and proven track record. In the domestic market, demand of luxury textile products may not increase to such an extent to have meaningful positive impact on Sintex s overall revenue stream and profitability. Lastly, the company management is not foreseeing any major capital expenditure in this division suggesting that the company has shifted its focus on exploring various sub-segments of plastics and entering infrastructure business through its subsidiaries. Sintex: Segmental Revenue Break-up Textile Segment Plastic Segment Textile Share in Total Revenue (%) 3,500 CAGR 2, CAGR 371 3, % 2, % , , , , , FY07 FY08 FY09 FY10 FY07 FY08 FY09 FY10 FY07 FY08 FY09 FY10 Source: CARE Equity Research Comfortable liquidity position foreseen even in case Sintex needs to repay the FCCBs On March 12, 2008, Sintex issued Zero Coupon FCCBs aggregating $225 million (Rs. 899 crore) convertible into equity shares at a price of Rs. 580 per share. Subsequently, on March 12, 2010, the conversion price was reset from Rs 580 per share to Rs 493 per share. In case of non-conversion of FCCBs, the bonds will be redeemed in US dollar on March 13, 2013 at % of their principal amount. The funds was raised to meet foreign currency expenditure in connection with the expansion plans of existing business and/or to fund overseas acquisitions. However, this amount has largely been underutilized by the company. Sintex has parked large amount of the unutilized capital in fixed deposits (FY10 Rs 745 crore; FY09-Rs 832 crore; FY08-Rs 895 crore). CARE Equity Research have assumed that the bonds will be redeemed at maturity resulting in the total repayment of about Rs.1,280 crore in FY13. The FCCB amount parked in fixed deposit is likely to remain unutilized and eventually be used for repayment of FCCB. Furthermore, healthy cash accruals over FY11-13 period would support the repayment of FCCB in addition to the amount parked in fixed deposits. Thus, CARE Equity Research foresee 6

9 SINTEX INDUSTRIES LTD. Sintex s liquidity position to be comfortable even in the event of FCCBs not being converted and subsequently being redeemed in FY13. Increased focus on monolithic business to increase working capital intensity As explained earlier, the future revenue growth of the company is expected to come from monolithic segment, where the Government s focus on social spending provides huge growth opportunities for Sintex. Since the segment is working capital intensive, any delay in execution/funding of such projects may elongate the working capital cycle of the company. Reasonable corporate Governance practices Sintex s board comprises of 11 directors, of which 6 are non-executive independent directors, 1 is executive director and 4 are promoters. This suggests well diversified composition of board with adequate separation of ownership and management. Sintex is in compliance with the provisions of the Listing Agreement in respect of corporate governance, especially with respect to broad basing of the Board of Directors and constituting committees. There are three Board level committees in Sintex - (i) Audit Committee, (ii) Shareholders /Investors Grievances Committee and (iii) Remuneration Committee. All three committees are chaired by non-executive independent directors. The board is supported by well experienced senior level managerial personnel. 7

10 SINTEX INDUSTRIES LTD. VALUATION GRADE Moderate Upside Potential 4/5 CARE Equity Research values Sintex Industries Limited at Rs. 415 per share According to CARE Equity Research, the Current Intrinsic Value (CIV) of Sintex stands at Rs. 415 per share. This translates into Enterprise Value (EV) of Rs. 8,130 crore. Thus, the equity shares of Sintex have Moderate Upside Potential from the current market price (CMP) of Rs per share. The CIV is calculated based on Discounted Cash Flow methodology CARE Equity Research have arrived at CIV of the stock using Discounted Cash Flow (DCF) methodology. Sintex: Target Price Summary Sl No Item 1 CIV as per DCF methodology Implied P/E ratio based on CIV of Rs 415/share Implied EV/EBITDA ratio based on CIV of Rs 415/share 9.8 Source: CARE Equity Research Discounted Cash Flow The overall firm Weighted Average Cost of Capital (WACC) is calculated based on our long term assumptions of cost of financing summarized in below table. CARE Equity Research have used Free Cash Flow (FCF) methodology to arrive at the firm value. The forecasted FCF is as per CARE Equity Research estimates. Terminal value is arrived at by using Gordon Growth Model. CARE Equity Research have assumed that in the long-run, Sintex s capital expenditure shall be equal to its depreciation charge. The estimated terminal value forms about 72% of the firm s total equity value, which appears to be reasonable. 8

11 Terminal Year Growth Rate (%) SINTEX INDUSTRIES LTD. Sintex: Valuation Based on Discounted Cash Flows Item Value Basis Risk Free Rate 8.00% 10 year G-sec yield Equity Risk Premium 6.00% Beta 1.20 Cost of Equity 15.20% Cost of Debt 11.00% Long term average cost of debt Tax Rate 30.00% Long term tax rate D/E Ratio 1.50 Long term target D/E ratio; Capital Intensive WACC 10.70% Terminal growth rate 3.00% (Rs crore except per share data) PAT Non-Cash Items Interest (1-T) Capex Increase in WC Free Cash Flow Discount Rate PV of FCF PV of Terminal Value 5, 952 Total Discounted Value of Firm 8,129 Less: Net Debt 2,502 Present Value of Equity 5,627 No of Equity Shares Fair Value of Equity Share Sintex: Sensitivity Analysis Share price Weighted Average Cost of Capital (%) 9.5% 10.0% 10.7% 11.0% 11.5% 2.0% % % % % Source: CARE Equity Research 9

12 1-Mar Aug Feb-07 8-Aug Jan Jul Jan Jul Jan Jul-10 2-Apr-07 2-Aug-07 2-Dec-07 2-Apr-08 2-Aug-08 2-Dec-08 2-Apr-09 2-Aug-09 2-Dec-09 2-Apr-10 2-Aug-10 Share Price (Rs.) 1-Year Forward EV/EBITDA SINTEX INDUSTRIES LTD. Price to Earning based valuation The stock is currently trading at P/E of 13.0x and 11.1x our FY11 and FY12 EPS estimates respectively. Similarly, the current market price is reflecting EV/EBITDA of 8.8x and 7.2x our FY11 and FY12 EBITDA estimates respectively. The stock has traded at an average historical forward P/E of about 12x through FY06-10 period. The valuations crashed momentarily below 6.0x in late Jan-Apr/09 owing to earnings disappointments and concerns over overseas acquisition; and since then have been stabilized in x range. Our current fair value estimate of Rs 415 indicates P/E and EV/EBITDA of 12.7x FY11E and 9.8x FY11E respectively, which is upper band of Sintex s historical trading averages. CARE Equity Research believe that the stock deserves upper band of valuation given earnings momentum already picking up and the overseas subsidiaries have start showing synergy benefits. Sintex: Implied P/E Calculation Sintex: Implied EV/EBITDA Calculation based on Fair Value based on Fair Value Implied P/E PAT (2012) 443 No. of Shares (crore) 14 EPS(2012) 32.7 Fair Value 415 Implied P/E Implied EV/EBITDA EBITDA (2012) 827 Fair Value 415 No. of Shares (crore) 14 Market Cap (Rs crore) 5,627 Net Debt (2010) 2,502 EV 8,129 Implied EV/EBITDA 9. 8 Sintex: 1-yr forward P/E contour Sintex: Historic 1-yr forward EV/EBITDA Share Price 6x 10x 12x 14x 18x Source for all above graphs and tables: CARE Equity Research and Prowess 10

13 SINTEX INDUSTRIES LTD. COMPANY BACKGROUND Company Overview Sintex is one of the leading plastics and composite manufacturer with presence in high-end textile business in India. Incorporated as a textile company in 1931, Sintex forayed into liquid storage tanks segment in Currently, the plastic division forms around 87% of standalone turnover and the textile division forming about 10%. Sintex is the market leader in organised water tanks market having nationwide presence with multi-location manufacturing facilities. The company, being pioneer in this market, is almost a generic name for water tank products in the country. Manufacturing facilities of the textile division is located at Kalol (Gujarat), whereas, that of the plastic division is geographically spread across the country. Sintex has grown inorganically by making six acquisitions in last four years in India and abroad. Organization Chart* *Please refer to page 4 and 5 for detailed discussion on subsidiary companies. Source: CARE Equity Research 11

14 SINTEX INDUSTRIES LTD. Business Mix Sintex has diversified revenue stream through two main divisions namely, plastics and textile. The plastic division is largest in terms of its share in company s overall revenue stream contributing close to 87% of the total FY10 turnover. The company's textile division primarily manufactures and supplies high-end dyed yarn fabric to luxury brands like Armani, Hugo Boss, Diesel, Burberry et cetera. Textile business contributes about 10.2% to Sintex s overall turnover in FY10. Sintex also ventured into infrastructure business through its wholly owned subsidiary Sintex Infra Projects Ltd in Nov The subsidiary has secured contracts worth Rs crore in Northern States for pipeline related construction work. Divisional Chart Sintex Group Plastics Textile (Sintex) Infrastructure (Sintex Infra) Building Material Water Tanks (Sintex) Custome Mouldings Monolithic (Sintex) Electrical (Nief, Sintex) Prefab (Sintex) Autocomponents (Bright Auto, Nief) Housing BT Shelters (Zeppelin) Source: CARE Equity Research 12

15 SINTEX INDUSTRIES LTD. Prefabricated Structures Prefabricated structures are essentially building structures fabricated in the factory and used globally for a variety of applications in residential and commercial space. These prefabs offered by Sintex use honeycomb concrete stuffed between plastic channels, making it lighter to use and transport while maintaining its strength. Sintex has end-to-end involvement in such prefabs manufacturing projects right from manufacturing to logistics and installation of the same. Another key sub-segment of prefabs is BT shelters (Basic Telecom Shelter) that provide base support for wireless telecommunication towers. The acquisition of Zeppelin and subsequent acquisition of Digvijay s telecom infrastructure has helped Sintex in emerging as one of the largest players in BT shelter segment, positioned as endto-end telecom solution provider. Apart from BT shelter, prefabs are extensively utilized in rural healthcare, education infrastructure and sanitation centers. Monolithic Construction The monolithic construction involves fabrication and casting of four walls and slabs together by pouring fluid cement concrete while using nominal quantities of metallic reinforcement bars for strength and stability to form a single or multi-storied building. The monolithic construction is cost effective and quick to construct compared to conventional brick-mortar structure. A typical monolithic construction takes six months to complete as against a typical conventional structure which takes two years. Industrial Custom Molding The products in this segment are designed specifically to meet client requirements. This segment also has two subsegments, namely electrical accessories molding business and the auto component molding business. Sintex typically works on long-term contracts to produce these custom-made industrial products for chemicals, telecom, power and pharmaceutical industries. Textile Segment Sintex has positioned itself in niche market supplying high end structured dyed yarn fabrics to luxury brands like Armani, Hugo Boss, Diesel, Burberry et cetera. Textile business contributes about 10.2% to Sintex s overall turnover in FY10. However, in last four years, the textile segment has grown at slower pace compared to the plastics segment. Revenue from the textile business grew at a CAGR of 2.9% compared to that of plastics business CAGR 51.6%. Consecutively, share of textile business in the company s overall revenue mix declined from 26.6% FY07 to 10.2% in FY10. The company is not foreseeing any major capital expenditure in this division going forward. 13

16 SINTEX INDUSTRIES LTD. Sintex: Break-up of Revenue Stream (Consolidated, FY10 in %) Bright Autoplast, 6.0 Wausaukee, 4.4 Nief Plastic, 22.4 Zeppelin, 4.2 Sintex- Standalne, FY07 FY08 FY09 FY10 Textile Plastics Unallocated Source: CARE Equity Research Promoters & Management Name Designation Education Experience Dinesh Patel Chairman B.Sc (Bombay University) More than 5 Decades of experience Arun P.Patel Vice- Chairman B.Sc (Bombay University) More than 5 Decades of experience Rahul A Patel Bachelors degree in Managing More than 24 years experience in Communications. Director textile and plastic MBA from USA Amit D Patel Managing Director Bachelors degree in commerce MT from USA 18 years of experience in textile, chemical and plastic S B Dangayach Managing Director B.Sc (Hons). P.G.D.B.A from IIM Ahmedabad 3 decades of experience in plastics L.M. Rathod Group CFO & CS Graduate in commerce and law, MBA and FCS 2 decades of experience in corporate finance, company law and taxation Sunil Kanojia Group President Graduate in Engineering and MBA from IIM-A 23 years of domestic and international experience, across industries 14

17 SINTEX INDUSTRIES LTD. SNAPSHOT OF THE INDUSTRY Prefabricated Structures Prefabricated structures are essentially building structures fabricated in the factory and used globally for a variety of applications in residential and commercial space. Outlook for this industry remains healthy on account of economic buoyancy and diverse and multiple applications of the prefabricated structures. List of products which can be offered in prefabricated structures Site office/accommodation Portable class rooms Mobile toilets Camp Site Modular cabin Beach houses Security rooms Guard rooms Cellular phone shelter Farm houses Bunk house Huts and roof top Exhibition hall kiosks Workshops Warehouses Transit camps Portable toilet Guard rooms/ post Clinics Storage shed Barracks Portable kitchen Resorts and cottages Cold storages Extended accommodation Disaster relief shelters Low Cost Housing Et cetera Source: CARE Equity Research Monolithic Construction Monolithic structures are housing structures made of concrete. They are strong, with life equivalent to any other building. Besides, these structures can be built in short duration and at a low cost. Hence, Government finds this to be very effective for projects like rehabilitation and slum redevelopment. Outlook for this industry remains buoyant with Government increasingly spending on slum rehabilitation and housing for economically weaker section. Sintex holds leadership position in this segment due to its competitive advantage derived from integration with other products of its plastics division that are used as raw material in monolithic housing. There are many other smaller players in the unorganised sector that compete in this market along with Sintex. Industrial Custom Molding Custom moldings or composite plastics find applications in manufacturing automotive and various other industrial components. Composite plastics score higher over metals on account of better strength to weight ratio, lighter weight, convenient to handle, higher heat tolerance and similar life as metals. Composites cannot be recycled and thus do not have scrap value. So composites can be put to use in applications where the components are likely to be stolen like switch boxes on street lights, manhole covers, all kinds of metal parts installed on roads and rail networks, etc. Composite plastic, being a bad conductor of electricity, can be used for electrical applications. Accordingly, there is huge demand potential for composites, especially in the growing and developing economies like India. 15

18 SINTEX INDUSTRIES LTD. FINANCIAL STATISTICS Income Statement (Rs Crore) FY08 FY09 FY10 FY11 P FY12 P Operating Income 2, , , , ,270.9 EBITDA Depreciation and amortisation EBIT Interest PBT PAT ( After m inority interest) Fully Diluted Earnings Per Share* (Rs.) Dividend On Preffered Stock On Common Stock * Calculated on Current Face Value of Rs. 2/- per share Balance Sheet (Rs Crore) FY08 FY09 FY10 FY11 P FY12 P Tangible Net worth (incl. Minority Interest) 1,374 1,511 1,699 1,984 2,401 Debt 1,926 2,296 2,630 2,224 1,813 Deferred Tax Liability / (Asset) Capital Em ployed 3, 407 3, 950 4, 499 4, 377 4, 383 Net Fixed Assets 1,458 1,980 1,955 2,165 2,136 Investments & Others Current Assets, Loans and Advances 2,951 2,893 3,321 3,135 3,225 Cash and Cash Equivalents 1,371 1, Less: Current Liabilities and Provisions 1, Total Assets 3, 407 3, 950 4, 499 4, 377 4, Ratios FY08 FY09 FY10 FY11 P FY12 P Growth in Operating Income % 5.9% 16.5% 10.4% Growth in EBITDA % 3.1% 34.6% 14.1% Growth in PAT % 1.2% 14.7% 17.4% Growth in EPS % 1.2% 14.7% 17.4% EBITDA Margin 17.6% 16.6% 16.2% 18.7% 19.4% PAT Margin 10.0% 10.4% 9.9% 9.8% 10.4% RoCE 8.3% 11.1% 9.3% 12.7% 14.7% RoE 19.2% 22.5% 20.5% 20.5% 20.2% 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 16

19 SINTEX INDUSTRIES LTD. 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 17

20 SINTEX INDUSTRIES LTD. 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 5/5 4/5 3/5 2/5 1/5 Evaluation Considerable Upside Potential (>25% from CMP) Moderate Upside Potential (10-25% from CMP) Fairly Priced (+/- 10% from CMP) Moderate Downside Potential (Negative from CMP) Considerable Downside Potential (<25% from CMP) 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. Nothing in this report can be construed as either investment or any other advice or any solicitation, whatsoever. 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. Published by Credit Analysis & REsearch Ltd., 4th Floor Godrej Coliseum, Off Eastern Express Highway, Somaiya Hospital Road, Sion East, Mumbai

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22 SINTEX INDUSTRIES LTD. ABOUT CARE Credit Analysis & REsearch Ltd. (CARE) is a full service rating company that offers a wide range of rating and grading services across sectors. CARE has an unparallel depth of expertise. CARE Ratings methodologies are in line with the best international practices. CARE Research CARE Research is an independent research division of CARE Ratings, a full service rating company. CARE Research is involved in preparing detailed industry research reports with 5 year demand and 2 year profitability outlook on the industry besides providing comprehensive trend analysis and the current state of the industry. CARE Research also offers research that is customised to client requirements. CARE Research currently offers reports on more than 21 industries that include Cement, Steel, Aluminium, Construction, Shipping, Ship-building, Commercial Vehicles, Two-Wheelers, Tyres, Auto Components, Pipes, Natural Gas, Retail, Sugar, etc. CARE Research now offers independent research of equities through its product. CREDIT ANALYSIS & RESEARCH LTD HEAD OFFICE Mr. P. N. Satheeskumar Cell: Tel: sathees.kumar@careratings.com 4th Floor, Godrej Coliseum, Somaiya Hospital Road, Off Eastern Express Highway, Sion (East), Mumbai Tel: care@careratings.com Fax: KOLKATA Mr. Sukanta Nag Cell: Tel: / 1803, E- mail: sukanta.nag@careratings.com 3rd Flr., Prasad Chambers (Shagun Mall Bldg), 10A, Shakespeare Sarani, Kolkata CHENNAI Mr. V Pradeep Kumar Cell: Tel: / Fax: pradeep.kumar@careratings.com Unit No. O-509/C, Spencer Plaza, 5th Floor, No. 769, Anna Salai, Chennai AHMEDABAD Mr. Mehul Pandya Cell: Tel: Fax: mehul.pandya@careratings.com 32, Titanium, Prahaladnagar Corporate Road, Satellite, Ahmedabad NEW DELHI Ms. Swati Agrawal Cell: Tel: / swati.agrawal@careratings.com 710 Surya Kiran,19 K.G. Road, New Delhi BANGALORE Mr. G. Sundara Vathanan Cell: Tel: sundara.vathanan@careratings.com Unit No. 8, I floor, Commander's Place, No. 6, Raja Ram Mohan Roy Road, (Opp. P F Office), Richmond Circle, Bangalore HYDERABAD Mr. Ashwini Kumar Jani Cell: Tel: ashwini.jani@careratings.com 401, Ashoka Scintilla , Himayat Nagar Hyderabad