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Sintex Industries: Is turnaround on the cards? - Views on News from Equitymaster
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Sintex Industries: Is turnaround on the cards?
Oct 27, 2014

Sintex Industries has announced the second quarter results of financial year 2014-2015 (2QFY15). The company has reported around 23.2% YoY growth in sales while net profits have grown by 47.3% YoY. Here is our analysis of the results.

Performance summary
  • Consolidated total income increases 23.2% YoY during 2QFY15. The buildings material segment registered a growth of 26% YoY. Custom moldings and textile segment also registered strong growth of 18% YoY and 31% YoY respectively in 2QFY15.
  • Operating profits increased 35.7% YoY with margins showing an improvement of 160 bps YoY.
  • Net profits increased by 47.3% YoY due to a strong performance at the operating level. Adjusting for the extraordinary gains/losses net profits increased by 38.5% YoY.
  • 51.6% of the promoter's equity remains pledged at the end of Sep 2014.
  • Subsequent to the FCCB conversion worth US$ 31.65 m, the number of equity shares increased by 26.4 m odd.
  • The consolidated D/E ratio stood at 1.03x at the end of Sep 2014.

Consolidated financial snapshot
(Rs m) 2QFY14 2QFY15 Change 1HFY14 1HFY15 Change
Total income  13,649 16,809 23.2% 24,930 30,252 21.3%
Expenditure  11,528 13,931 20.8% 21,200 25,300 19.3%
Operating profit (EBDITA) 2,121 2,878 35.7% 3,730 4,952 32.8%
Operating profit margin (%) 15.5% 17.1%   15.0% 16.4%
Other income 5 61 1093.6% 92 86 -6.3%
Interest 476 676 42.0% 911 1,326 45.5%
Depreciation 572 602 5.2% 1136 1,148 1.1%
Exchange gain/(loss)  (84) (52) NM (121) (92) NM
Profit before tax 993 1,608 61.9% 1,654 2,472 49.4%
Tax 269 544 102.2% 470 798 69.6%
Share of profit in associates 5 10 90.5% 11 15 34.0%
Profit after tax/(loss) 729 1,074 47.3% 1,195 1,690 41.4%
Net profit margin (%) 5.3% 6.4%   4.8% 5.6%  
No. of shares (m)         357.0  
Basic  earnings per share (Rs)#         4.7  
P/E ratio (x) *         7.2  
* On trailing 12 month basis; TTM EPS is calculated based
on actual number of shares reported in each quarter
#Based on shares outstanding as of Sep 2014

What has driven performance in 2QFY15?
  • The building materials segment grew by 26% YoY. Renewed thrust on sanitation (Swachh Bharat Abhiyan) and housing for all will be the key growth driver for the segment going ahead. Currently, the prefab toilets that the company manufactures command a 90-95% market share. The monolithic business continues to remain in the consolidation mode.

  • Revenues from the custom molding business increased 18% YoY. The overseas business registered a growth of 14% YoY. The company has strong presence in the US and European markets and is as such well placed to capitalize on the global demand surge. Both the automotive and industrial products businesses witnessed strong volume growth during the quarter.

  • The textile business grew by 31% YoY during the quarter and management expects to scale the business towards Rs 8 bn mark over a period of 2-3 years.

  • Operating profits increased 35.7% YoY during the quarter due to better cost control measures and healthy topline growth.

  • Net profits of the company grew by 47.3% YoY. Huge surge in other income and better operating performance yielded strong bottomline performance.

  • The spinning project is running on schedule. Orders for plant & machinery are placed and execution is in full swing.
What to expect?
At the current price of Rs 94, the stock is trading at a multiple of 7.2x its trailing twelve month earnings. Since the last two quarters, Sintex's financial performance has been excellent. Governments focus on sanitation and housing programs indicate that the future growth prospects are buoyant as well.

The company is already witnessing an uptick in utilizations. Further, a huge opportunity for toilet blocks is also waiting on the cards. Custom molding and textile businesses are also showing signs of improvement. For instance, both auto and industrial businesses have witnessed a huge surge in volumes. With respect to textiles, the addition of new capacity last year is likely to lay a new platform for growth ahead. In light of these factors we are likely to revise our estimates and roll forward our target price to FY17 soon.

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