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Sintex Industries Ltd
Sintex Industries reported 10 per cent drop in revenues during the March 2009 quarter on subdued demand and lower realisations. Product prices were lower as commodity prices are below last year’s levels.

The key plastic division (86 per cent of revenues) helped the company improve its operating profit margin (OPM) 270 basis points to 20 per cent, even as the division reported 12 per cent year-on-year decline in revenues. This division, which makes prefabricated building systems, monolithic construction, and prefabs, benefited from the government’s rural infrastructure spending, though the private sector demand was sluggish. The shift in focus on high growth and profitable segments and a change in business mix from products to services have improved PBIT margins by 380 basis points to 17.7 per cent.

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Analysts, however, indicate that the visibility in the telecom shelter business is low due to slower tower roll-out by telecom players. Also, given the subdued economic environment, the prospects for the custom moulding business are moderate.

Sintex has been leveraging the technological capabilities of its overseas subsidiaries
(a fourth of total sales) to develop valueadded products. The company management says the focus on shifting manufacturing to low-cost destinations and high-margin segments has helped improve the profit margins of its overseas subsidiaries. The textile business (12 per cent of sales) reported 9 per cent sales growth, but its PBIT was flat at Rs 20.40 crore. Going ahead, analysts expect the company’s top line and net profit to grow 10-12 per cent in 2009-10. Sintex stock gained 27 per cent last week and at Rs 227, it trades at a price-earnings multiple of 9 times its estimated 2009-10 earnings.

Sintex Industries Ltd (updated - 15 Oct 2009)
Sintex Industries disappointed the Street by posting lower-thanexpected results for the quarter ended September 2009. Its stock is down 1.6 per cent post results (since October 9 closing) as compared to the 3.6 per cent rise in the Sensex. For the quarter, its consolidated revenues slipped, albeit marginally, by 2.5 per cent, while adjusted net profits fell 26.3 per cent on a y-o-y basis. The negative surprise is more concerning the net profit, mainly due to a 78 per cent fall in other income (to Rs 4.83 crore) and profits of the textile business (to Rs 2.9 crore).

Positively, volumes grew arobust 15-20 per cent, which helped sustain top line and offset the substantial fall in raw material prices (like polymer). Since the plastics business accounts for roughly 90 per cent of revenues and raw materials are derivatives of crude oil, the fall in their prices is in line with crude oil prices and the benefits were passed to the consumers. Notably, despite the weak performance of the textile business, the companys operating profit margin remained stable at 18.2 per cent.

Going ahead, things are seen improving. For instance, its building materials segment, which accounts for about 45 per cent of consolidated revenues and includes prefabricated and monolithic products, grew marginally by 1.2 per cent on a y-o-y basis, but registered 20 per cent q-o-q revenue growth, led by higher execution of monolithic structures.

Currently, the companys monolithic business (provides solutions for lowcost mass housing) has an order book of about Rs 1,500 crore, which provides good visibility. Its custom moulding, which includes products for electric accessories, automotive and mass transit, among others, and accounts for another 45 per cent of consolidated revenues, reported flat revenues. This business, too, could see some growth in revenues this year as demand from automotive and other segments is improving.

While revenues and profits were down 5-10 per cent in H1 2009-10, Sintex is expected to report flat to 5per cent growth in revenue and 8-10 per cent rise in net profit for the full year. At Rs 248, the stock is reasonably valued and is available at 9.5 times its estimated earnings for 2009-10 and 7.7 times 201011 earnings.
source - BS