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Sintex: Strong start to FY11
Jul 12, 2010

Plastics major, Sintex has announced its 1QFY11 results. The company has reported a 38% YoY growth in its sales while net profits have grown by 30% YoY. Here is our analysis of the results.

Performance summary
  • Sales grow by 38% YoY during 1QFY11, led by an equivalent growth in the company’s plastics business (89% of consolidated sales). The textile segment also grew by a strong 30% YoY during the quarter.
  • Operating margins improve to 15.1% during the quarter, from 13.2% in 1QFY10. This is on the back of lower staff and other costs.
  • Net profit growth for the quarter stands at 30% YoY. This is lower than growth in sales owing to a decline in other income (down 44%) and sharp rise in taxes (up 52%). Higher interest costs (up 76%) also impacts the profit performance.

Consolidated performance
(Rs m) 1QFY10 1QFY11 Change
Sales 6,624 9,106 37.5%
Expenditure 5,750 7,733 34.5%
Operating profit (EBIDTA) 874 1,374 57.2%
Operating profit margin (%) 13.2% 15.1%
Other income 359 202 -43.6%
Interest 142 249 75.5%
Depreciation 366 363 -0.8%
Profit before tax 725 964 33.0%
Tax 114 174 52.4%
Minority interest 5 2 -58.8%
Profit after tax/(loss) 606 788 30.1%
Net profit margin (%) 9.1% 8.7%
No. of shares 136.5 136.5  
Diluted earnings per share (Rs)*   25.4  
P/E ratio (x)*   12.8  
* On a trailing 12-months basis

What has driven performance in 1QFY11?
  • The 38% YoY growth in Sintex’s consolidated sales during 1QFY11 was largely aided by robust performances from both its businesses of plastics and textiles. While sales from the former grew by 38% YoY during the quarter, the latter grew by 30% YoY. One reason for the sharp growth in both these segments is the low base of 1QFY10, when their sales were down 9% and 8% respectively.

    During 1QFY11, the company saw strong demand across both its plastic sub-segments – building material (includes monolithic construction and prefabs), and custom molding (electronic meter-boxes, water tanks). While sales from the former grew by 43% YoY, those of the latter were up 39% YoY during the quarter. The company’s current order backlog for the monolithic business stands at Rs 23 bn. This is to be executed over the next 20-22 months.

  • All of Sintex’s subsidiaries (excluding Zeppelin Mobile – shelters for telecom towers) recorded strong performance during the quarter. The best performances came from Sintex’s domestic business and that of Bright Autoplast. Sales here grew by 47% YoY each. As for its international subsidiaries like Wausaukee and Nief, sales were up 15% and 34% respectively. The company continues to see weakness in Zeppelin, where sales declined 15% YoY during the quarter. The management has indicated that the performance of these subsidiaries is almost in line with its sales and profitability estimates for FY11.

  • Sintex saw an almost 2% improvement in its operating margins during 1QFY11. Margins stood at 15.1% during the quarter. These gains were owing to a decline in staff costs and other expenditure. Staff costs, as percentage of sales, declined from 16.6% in 1QFY10 to 12.9% in 1QFY11.

  • Sintex’s net profit growth for the quarter stood at 30% YoY. This was lower than growth in sales owing to a decline in other income (down 44%) and sharp rise in taxes (up 52%). Higher interest costs (up 76%) also impacted the profit performance. As the management has clarified, a large part of this rise in interest cost is owing to a one time interest payment the company has made in lieu of a settlement of a court case. Excluding the impact of this one-time charge, Sintex’s profits for the quarter are up 36% YoY.

What to expect?
At the current price of Rs 330, the stock is trading at a multiple of 8.6 times our estimated FY13 consolidated earnings. We maintain our positive view on the stock from a 2 to 3 years perspective.

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