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Sintex: Robust all-round performance - Views on News from Equitymaster

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Sintex: Robust all-round performance
Oct 13, 2010

Plastics major, Sintex has announced its 2QFY11 results. The company has reported a 29% YoY growth in sales while net profits are up by 75% YoY. Here is our analysis of the results.

Performance summary
  • Consolidated net sales grow by 29% YoY during 2QFY11. Growth driven by both the plastics and the textiles divisions.
  • Operating margins expand to 18.6% during 2QFY11, from 18.2% in 2QFY10. This is led by staff costs and other expenditure (both as percentage of sales).
  • Led by a strong sales growth and expansion in operating margins, and also aided by lower depreciation and higher other income, net profits surge by 75% YoY during the quarter. The rise in other income was largely aided by Rs 160 m forex gain. Excluding this, net profits are up 47% YoY during the quarter.
  • During the first half 1QFY11, net sales and profits grow by 33% and 52% YoY respectively.


Consolidated performance
(Rs m) 2QFY10 2QFY11 Change 1HFY10 1HFY11 Change
Sales 7,154 9,231 29.0% 13,778 18,337 33.1%
Expenditure 5,849 7,515 28.5% 11,599 15,248 31.5%
Operating profit (EBIDTA) 1,305 1,716 31.4% 2,179 3,090 41.8%
Operating profit margin (%) 18.2% 18.6%   15.8% 16.8%  
Other income 48 272 462.1% 407 474 16.4%
Interest 157 266 69.2% 299 514 72.2%
Depreciation 372 357 -4.0% 738 720 -2.4%
Profit before tax 825 1,365 65.5% 1,550 2,329 50.3%
Tax 242 363 49.9% 356 537 50.7%
Minority interest 10 1 -95.0% 16 3 -83.0%
Profit after tax/(loss) 572 1,001 74.9% 1,178 1,790 51.9%
Net profit margin (%) 8.0% 10.8%   8.6% 9.8%  
No. of shares       136.5 136.5  
Diluted earnings per share (Rs)*         28.6  
P/E ratio (x)*         14.8  
* On a trailing 12-months basis

What has driven performance in 2QFY11?
  • The 29% YoY growth in Sintex's consolidated sales during 2QFY11 was driven by strong performance from both its business segments. The plastics business (90% of total sales) grew by 30% YoY during the quarter. This was primarily led by the sub-segment of building material, where sales grew by 37% YoY. Sintex's order backlog in this business currently stands at around Rs 26 bn to be executed over the next 20-21 months. The other sub-segment of the plastics business – custom molding – grew by 24% YoY during the quarter. As for the second key business of textiles, sales grew by 25% YoY during the quarter.

    Segment-wise performance
    (Rs m) 2QFY10 2QFY11 Change 1HFY10 1HFY11 Change
    Textile revenue 762 948 24.5% 1,521 1,935 27.2%
    % share 10.6% 10.3%   11.0% 10.6%  
    PBIT margin 3.8% 13.6% 6.4% 12.6%
    Plastic revenue 6,392 8,282 29.6% 12,257 16,402 33.8%
    % share 89.4% 89.7%   89.0% 89.4%  
    PBIT margin 14.5% 16.7% 13.0% 15.1%

  • Led by lower staff costs and other expenditure, Sintex saw a 0.4% improvement in its operating margins during 2QFY11. The margins stood at 18.6% during the quarter. Sintex's staff costs declined from 13.2% of sales in 2QFY10 to 11.7% in 2QFY11. 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 49.1% of sales during the quarter, from 45.9% in 2QFY10.

  • Sintex's net profits grew by a robust 75% YoY during 2QFY11. This was helped by a good growth in sales and expansion in operating margins. The profits were also aided by lower depreciation and higher other income. The rise in other income was largely aided by Rs 160 m forex gain. Excluding this, net profits are up 47% YoY during the quarter.

What to expect?
At the current price of Rs 424, the stock is trading at a multiple of 11 times our estimated FY13 consolidated earnings. Given Sintex's strong 1HFY11 performance, we will have to revise upwards our forward estimates for the company.

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