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Sintex Industries: Strong end to the year - Views on News from Equitymaster
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Sintex Industries: Strong end to the year
May 13, 2015

Sintex Industries has announced the fourth quarter results of financial year 2014-2015 (4QFY15). The company has reported around 9.7% YoY growth in sales while net profits have grown by 22.7% YoY. Here is our analysis of the results.

Performance summary
  • Consolidated total income increases 9.7% YoY during 4QFY15.
  • Operating profits increased 14.3% YoY with margins improving by 80 bps YoY.
  • Net profits increased by 22.7% YoY due to strong performance at the operating level and substantial rise in other income. Adjusting for the extraordinary gains/losses net profits increased by 26.6% YoY.
  • 51.6% of the promoter's equity remains pledged at the end of March 2015.
  • Subsequent to the FCCB conversion worth US$ 61.95 m during the quarter, the number of equity shares increased by 51.7 m.
  • Consolidated D/E ratio stood at 0.84x the end of the quarter.
  • Board has recommended a dividend of Rs 0.7 per share for the fiscal under consideration.

Consolidated performance snapshot
(Rs m) 4QFY14 4QFY15 Change FY14 FY15 Change
Total income  19,831 21,763 9.7% 58,645 70,348 20.0%
Expenditure  16,257 17,679 8.7% 49,003 58,242 18.9%
Operating profit (EBDITA) 3,574 4,085 14.3% 9,642 12,106 25.6%
Operating profit margin (%) 18.0% 18.8% 16.4% 17.2%
Other income 95 477 401.1% 774 682 -11.9%
Interest 1058 861 -18.6% 2894 2,835 -2.0%
Depreciation 817 711 -13.0% 2548 2,605 2.3%
Exchange gain/(loss)  1 (61) NM (161) (218) NM
Profit before tax 1,796 2,929 63.1% 4,814 7,130 48.1%
Tax 175 948 442.1% 1,180 1,863 57.9%
Share of profit in associates (9) (3) NM 13 21 65.2%
Profit after tax/(loss) 1,612 1,978 22.7% 3,647 5,288 45.0%
Net profit margin (%) 8.1% 9.1%   6.2% 7.5%  
No. of shares (m)         426.4  
Basic earnings per share (Rs)#         12.4  
P/E ratio (x) *         8.9  
* On trailing 12 month basis; TTM EPS is calculated based on actual number of
shares reported in current quarter.
#Based on shares outstanding as of Mar 2015

What has driven performance in 4QFY15?
  • The building materials segment grew by 16% YoY in FY15. The custom molding business is also showing strong signs of growth (+21% YoY in FY15) with revival in the auto as well as industrial products business. The textile business, on the other hand, grew by 33% YoY during the year. The spinning project is on track and the commencement of 100,000 spindles is expected by September 2015. The balance 220,000 spindles will be operational by March 2016.

  • Operating profits increased 14.3% YoY during the quarter due to better cost control measures and healthy topline growth. Margins also improved by 80 bps YoY.

  • Net profits of the company grew by 22.7% YoY. Four folds rise in other income and 18.6% YoY fall in interest expenses coupled with 13.0% YoY fall in depreciation expenses boosted profits.
What to expect?
At the current price of Rs 110, the stock is trading at a multiple of 8.9x its trailing twelve month earnings. The performance in FY15 has been noteworthy largely driven by the prefabs and custom molding segments. Both the domestic and overseas custom molding business is gaining healthy traction as the company is diversifying itself into new sectors. Further, apart from sanitation and housing programs, new opportunities have started emerging in the building materials segment. Family size bio gas plants, agri sheds, healthcare centers are a few examples. With regards to custom molding, the company is already catering to more than 500 OEMs and is expanding its reach as there are immense opportunities both in India and abroad.

While the valuations at 8.9x TTM earnings may not appear expensive, high promoter pledge (51.6%) and ensuing dilution risk from FCCB conversion (51.7 m shares were added to the equity base this quarter post FCCB conversion) acts as an overhang. In addition, free cash generation is also proving to be a challenge as the company is in midst of its capex cycle. As a result, we maintain our SELL rating on the stock.

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