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Sintex Industries: 'Plastics' continues to dominate - Views on News from Equitymaster
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  • May 3, 2011 - Sintex Industries: 'Plastics' continues to dominate

Sintex Industries: 'Plastics' continues to dominate
May 3, 2011

Sintex Industries has announced the full year results of financial year 2010-2011 (FY11). The company has reported around 35.1% YoY and 39.8% YoY growth in sales and net profits respectively.

Performance summary
  • Consolidated income from operations grows 35.1% YoY during FY11. Growth was driven by both the plastics and textiles business divisions, especially the former which registered a growth of 36.1% YoY during the year.
  • Operating margins expand to 18.2% during FY11, from 16.2% during FY10. This is led by lower employee cost and other expenditure (as a percentage of sales)
  • Despite a surge in tax rates and fall in other income net profits increase 39.8% YoY during the year.
  • The company has recommended a dividend of Rs 0.65 per share.


Consolidated performance snapshot
(Rs m) FY10 FY11 Change
Income from operations 33,192 44,837 35.1%
Expenditure  27,811 36,682 31.9%
Operating profit (EBDITA) 5,380 8,155 51.6%
Operating profit margin (%) 16.2% 18.2%  
Other income 878 518 -41.1%
Interest 731 1,089 49.0%
Depreciation 1445 1,491 3.2%
Profit before tax 4,083 6,092 49.2%
Tax 772 1,508 95.3%
Minority Interest  21 3 -87.6%
Share of profit in associates   19  
Profit after tax/(loss) 3,290 4,600 39.8%
Net profit margin (%) 9.9% 10.3%  
No. of shares (m)   273.0  
Basic & Diluted earnings per share (Rs)   16.9  
P/E ratio (x) *   10.5  
* On a trailing 12 month basis

What has driven performance in FY11?
  • The 35.1% YoY growth in Sintex's consolidated sales during FY11 was largely driven by strong performance from its plastics business. The business, which forms around 90% of the company's consolidated sales, grew by 36.1% YoY during the year. This was primarily led by the sub-segment of building material (prefabs and monolithic construction), where sales grew by a whopping 50.9% YoY during the year. Sales from the second sub-segment custom molding also registered a healthy growth of 25.5% YoY during the year.

    Segment-wise performance (Consolidated)
      FY10 FY11 Change
    Textiles 
    Revenue (Rs m) 3,463 4,375 26.3%
    % share  10.2% 9.6%  
    PBIT margin 7.4% 13.7%  
    Plastics 
    Revenue (Rs m) 29,729 40,462 36.1%
    % share  87.3% 89.2%  
    PBIT margin 13.0% 15.3%  
    Unallocated 
    Revenue (Rs m) 878 518 -41.1%
    % share 2.6% 1.1%  
    PBIT margin 79.1% 72.5%  
    Total
    Revenue (Rs m) 34,070 45,355 33.1%
    PBIT margin 14.1% 15.8%  

  • Led by lower staff costs and other expenditure, Sintex saw a 2.0% YoY improvement in its operating margins during FY11. The margins stood at 18.2% during the year. Sintex’s staff costs declined from 13.2% of sales in FY10 to 10.3% in FY11. The margin performance would have been better but for a rise in raw material costs and cost on purchase of traded goods. The raw material costs, for instance, increased to 54.2% of sales during the year, from 51.1% in FY10.

    Based on segment, both the plastics and textiles segments reported a good improvement in PBIT margins during the year.

  • Despite increase in tax rates and fall in other income, net profits increase 39.8% YoY during the year. This is mainly due to expansion in sales and strong performance at the operating level.

  • The company incurred a capex of Rs 7.6 bn during the year. It also managed to lower its working capital cycle from 150 days in FY10 to about 103 days in FY11.

What to expect?
At the current price of Rs 177, the stock is trading at a multiple of 7.7 times our estimated FY13 earnings. We maintain our positive view on the stock from the medium term perspective. (RPro Subscribers kindly click here)

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