COMPANY ALLOTED FOR ANALYSIS SINTEX INDUSTRIES LTD.

INDUSTRY SECTOR PLASTIC INDUSTRY

PLASTIC INDUSTRY ANALYSIS

GLOBAL PERSPECTIVELast few years have been tumultuous for plastics and petrochemical sector due to steep rise
in oil prices, which has adversely affected the global economies. However, considering the
feed stock advantage and abundance of oil reserves newer petrochemical complexes are
being established in Middle-east countries. i.e. Oman, Saudi Arabia, UAE, etc. It is
projected that by the end of 2010, Ethylene capacity in Middle-East would reach to about
35 million tons per annum and Polypropylene (PP) capacity to touch about 7 million tonnes
per annum.
The US Petrochemical sector may lose Export competitiveness as most of the Ethylene
capacities in USA are Ethane based, which are not cost competitive and are capable to
produce only Polyethylene (PE). Similarly, the revamping of European Petrochemical
Complexes would be imperative as they are based on old and expensive technology and are
not cost competitive with the Middle-East companies having the biggest advantage of raw
material at their door-step. China, Middle-East and India would be the major global players,
where expansion and augmentation of existing petrochemical capacity would take place in
the next 5 years.

Worldwide Plastics Industry witnessed a steady growth in the year 2007 which is reflected
in the increased consumption figures of all types of Plastics materials.
Asia has been worlds largest plastics consumer for several years, accounting for about 30%
of the global consumption excluding Japan, which has share of about 6.5%. Next to Asia is
North America with 26% share, then Western Europe with 23% share in the global market.

The key growth segment remains Packaging which accounted for over 35% of the global
consumption. Amongst the individual Plastics Materials, Polyolefin accounted for 53% of
the total consumption, (PE with 33.5%, PP with 19.5%) followed by PVC 16.5%, PS8.5%, PET & PU - 5.5%, Styrene copolymers (ABS, SAN, etc) 3.5% other engineering &
high performance & speciality plastics, blends, alloys, thermosetting plastics 13%.

In recent years, significant aspect of plastics material growth globally has been the
innovation of newer application areas for plastics such as increasing plastics applications in
automotive field, rail, transport, defence & aerospace, medical and healthcare, electrical &
electronics, telecommunication, building & infrastructure, furniture, etc.
Plastics have become the key drivers of innovations & application development. PolymerElectronics is one such area which has opened up new avenues for plastics; from organic
light emitting diodes to electro-optical and bio-electrical complements, from low-cost

plastic chips to flexible solar cells. New plastics can conduct electricity and emit light.
While polymers will not replace silicon as semiconductors, they do offer completely new
opportunities for low-priced mass-manufactured products. Radio-frequency identification
(RFID) tags in smartcards for identification and access control, payment and ticket systems,
price labels, product tracking systems in the logistics chain or packaging that monitors
product quality many things are in offing. Growth-trend of plastics has proved that there
has been a quiet Plastics revolution taking place in the material sector.

Global Per capita consumption of Plastics is ( in Kgs)

World Average

26

North America

90

West Europe

65

East Europe

10

China

12

India

5.0

South East Asia

10

L. America

18

INDIAN PERSPECTIVEOver the years, India has made significant progress in the industrial world with healthy
economic growth. On purchase power parity basis, it is one of the top five global economics
and is expected to be the third largest by the turn of this decade. Plastics, one of the fastest
growing industries in India, have a vital role to play.
Indian Plastics Industry is expanding at a phenomenal pace. Major international companies
from various sectors such as automobiles, electronics, telecommunications, food processing,
packing, healthcare etc. have set-up large manufacturing bases in India. So, demand for
plastics is rapidly increasing and soon India will emerge as one of the fastest growing
markets in the world.

The next two decades are expected to offer unprecedented opportunities for the plastic
industry in India. This would necessitate industry initiatives to foster investments, grow the
market, upgrade quality standards, enhance global participation, encourage Indian industry,
to adopt and adapt to world class technology and manufacturing practices

Despite instability in International prices of polymer materials in 2006 - 07, plastics

industry in the country has consolidated its performance by consuming about 5.0 million
tonnes of polymers, as compared to Chinese consumption of about 30 million tonnes in
2007. Indian plastics industries are enthusiastic about the acceleration of the growth engine
in the next 3 to 5 years due to capacity expansion of existing petrochemical complexes and
setting up of new crackers in the country currently.
Reliance Industries Ltd., (RIL) has about 75% share of Indian Petrochemical Cracker
capacity, followed by medium sized capacity of Gas Authority of India Ltd. (GAIL) and
Haldia Petrochemicals Ltd., (HPL). I
Indian Oil Corporation (IOC) has also planned an 800 K tonnes naphtha cracker at Panipat
at an investment of Rs.6300 crores to produce 800 KT of PE and PP each at Panipat. IOC
would also be setting up a production capacity 150 KT PP at Chennai by year 2009 as well
as styrene, which is not being produced in India.
TABLE Current Indian Petrochemicals Capacities (in KT)
Producer & Location

PP

HDPE

LDPE

HD/LL

PTA

PS

PVC

RIL, Hazira

350

400

300

RIL, Jamnagar

600

800

RIL Patalganga

60

300

IPCL, Nagothane

60

80

220

IPCL, Vadodara

75

80

55

IPCL, Gandhar

160

GAIL, Auriya

100

160

150

HPL, Haldia

210

200

260

BRPL, Bongaigaon

Finolex, Pisranpar

130

LG Poly, Vizag

80

Supreme, Mumbai

240

Chem Plast, Metturdam

60

DCW, Sahupuram

60

DCM, Shriram, Kota

400

35

RPRL, Abu

16

BASF Styrenics, Bharuch

60

Mitsubishi, Haldia

460

160

1040

1500

360

790

TOTAL
Grand Total

1355

5665

Typical Polymer consumption pattern of different polymers

Polymer

KT

LDPE/EVA

275

LLDPE

550

HDPE

920

1745

PP

1300

PVC

1000

PS

225

PET Film

135

Bottle

100

SAN/ABS

90

Polyamide

35

Polycarbonate

72

Polyacetal

PET/PBT

Others

Thermoset
Total

235

125

100
4820

The top 100 players account for just 20% of the industry turnover. The total number of
players in the sector is more than 25,000. However, the degree of fragmentation,
worldwide, is a large and despite the small size of operations of the players, they are able to
operate profitably. Further, the high growth in demand ensures that the market is able to
absorb the excess capacity in quick time. Overall, the degree of competition can be
considered high in the Indian plastic processing industry.

The sector has a significant presence of the unorganised sector, which accounts for more
than 70% of the industry turnover. More than 95% of the firms in the industry are
partnership, proprietorship or private limited companies. Further, these small companies get
significant advantages in taxes.
These firms thus provide significant level of competition to the organised sector companies,
which combined together are making losses. The organised sector companies thus need to
build up significant brand image to survive against the competition from the unorganised
sector. The key organised sector players include Nilkamal Plastics Limited and Supreme
Industries Limited.

Statistics of Plastics Industries in India :

Current Status
Major Raw Material Producers

15 Nos.

Processing Units

25,000 Nos.

Turnover (Processing Industry)

Rs.85,000 Crores

Capital Asset (Polymer Industry)

Rs.55,000 Crores

Raw Material Produced approx

5.3 MMT

Raw Material Consumed approx

5.1 MMT

Employed Direct/Indirect

3.3 Million

Export Value approx.

US $ 1.90 Billion

Revenue to Government approx.

Rs.7300 Crores

Demand Potential

12.5 MMT

Additional Employment

4.0 Million

Investment Potential

Rs.84,000 Crores

By 2011 12

VISION 2015 Indian Plastics Industry :

Consumption of Polymers @ 15% CARG

18.9 Million tonnes

Turnover of plastics Industries

Rs.1,33,245 crores

Additional Employment Generation

7 Million

Requirement of Additional
Plastics Processing Machines
Additional Capital Investment
In Machines (2004-2015)

68113 Nos
Rs.45,000 crores

RECENT HAPPENINGS IN PLASTIC INDUSTRY:1)Indian Plastic Industry in the next 5 yearsThe plastic industry in India has made significant achievements since its modest but promising beginning
by commencing production of polystyrene in 1957.
Plastic industry in India symbolizes a promising industry and at the same time helps in creating new
employment opportunities for the people of India.
The Indian plastic processing industry is highly fragmented and comprises 30,000 firms. Barring 10- 15%
of the firms, which can be classified as medium scale operations, all the units operate on a small-scale
basis.
Trends in the Industry:- Plasticulture- A win-win situation!
- Emergence of flexible packaging
- Plastics in Medicare
- Increasing usage of PVC
A large investment in telecom, ports, roads, power, and railways, has ensured that this sector continues to
grow at more than 10% p.a., for several years to come. The focus on plasticulture in the agricultural
sector envisaged coverage of 17 mn hectares under micro-irrigation schemes, will further boost the
prospects of the plastics industry.

The plastics processing industry is a source of great potential for global businesses. There is tremendous
scope for innovative technological up gradations and thus rapid growth of the sector. Overall turnover of
the plastic processing industry which currently stands at USD 17.5 Billion, is expected to touch USD
20.3 Billion in 2012 and further USD 27 Billion by 2015.
The Indian packaging industry is expected to become the fourth-largest packaging market in the world,
with revenues of US$43.7 billion in 2016. Flexible plastic packaging was the fastest-growing packaging
category in India, achieving a CAGR of 16.6% during the review period. During the review period, the
packaging industry benefitted from strong growth in the Indian retail market.
Other end-user markets from packaging, including pharmaceutical and processed food, have been
growing rapidly over the review period, both domestically and internationally. This demand from enduser markets is expected to remain high during the forecast period.

Key Highlights
- Indias retail growth and increased consumption of consumer products is driving the demand for
packaging in the country
- India is the sixth-largest packaging market in the world, with sales of US$24.6 billion in 2011
- The packaging industry is expected to grow at a CAGR of 12.3% during the forecast period, to become
the fourth-largest global market, with sales of US$43.7 billion in 2016
- The Indian food processing market is one of the largest in the world in terms of production,
consumption and growth prospects
- Indias per capita annual packaging expenditure was US$20 in 2011, which is significantly lower than
the top 20 market average of US$347.6. The low per capita expenditure offers a huge business

opportunity for packaging companies

- Despite the Indian packaging industry undergoing some consolidation, it is still fragmented, especially
following the introduction of new companies in the country
2)Indian plastics industry set to clock strong growth in 2012
The Indian plastics industry is expanding at a phenomenal speed and also among the fastest growing
sectors in the country. It is expected that this industry's turnover may rise to Rs 1,000 billion (Rs 100,000
crore) in 2012, according to Plastindia Foundation.
Plastindia Foundation, an apex forum of India's plastics industry, also estimated that the demand potential
will jump to 12.5-million metric tonnes. It is noteworthy that India's plastics processing sector is set to
grow from 69,000 machines to 150,000 machines by 2020.
India's demand for plastics in irrigation alone is projected to surpass 2.5 million tonnes by 2015. It is also
likely that this industry will employ nearly 4 million people in 2012 and 7 million people by the year
2015.
3)India wants to offer support to GCC nations for plastic industry
India is keen to offer support to Gulf Cooperation Council (GCC) nations in their focus on value addition,
from oil economy to polymers and plastic products.
Moreover, the booming Indian plastics industry has got the highest number of exhibitors almost half of
the overall participation - while the remaining are from China, France, Germany, Hong Kong, Iran, Japan,
South Korea, Saudi Arabia, Pakistan, Portugal, Qatar, Russia, South Africa, Spain, Switzerland, Taiwan,
Turkey, the UAE and the UK.
The packaging sector, which is a key driver of the plastics industry, in the UAE was worth $1.84 billion
during 2011, posting growth at a CAGR of 4.27%. It is likely to grow at a CAGR of 4.68% to reach $2.3
billion in 2016.

COMPETITOR ANALYSIS:Pricing- The commodity plastics market is characterised by a short term volatility in prices, but their
steady rise over the longer term. Bulk polymers have always been subject to the cyclical effects of supply
and demand that characterise all Commodities, and current price rises for these commodity materials are
predominantly in response to growing demand in countries such as China and India. Short term shocks
can also be caused by the oil price.
The biggest competitor of Sintex Industries in the plastic sector is Grasim.
The comparison between the two is as follows
Name
Sintex
Share Price
63.15
Market Cap (Rs. Cr)
1,723.94
Sales Turnover (Rs. Cr)
2,568.22
Net Profit (Rs. Cr)
229.69
Total Assets (Rs. Cr)
4,668.40

Grasim
2,634.80
24,166.82
4,969.72
1,177.00
9,729.73

SWOT ANALYSIS OF INDIAN PLASTIC INDUSTRY:STRENGTHS1. Indian polymer advantage

2. Availability of Low cost labour
3. Strong Supporting Industries
4. Widespread Usage
5. Produces huge quantity of recycled plastic.
WEAKNESSES1. Poor industry image
2. Health Hazards
3. High cost of finished plastic products
4. Suffers from low productivity of workers
5. Outdated machinery and equipments
6. Lack of focus on exports
OPPORTUNITIES1. Plasticulture still at a nascent stage in India
2. Booming Automotive sector
3. Rising water management
4. Food packaging Riding High!
5. Changing Consumer behaviour
6. Entering high priced processed plastic exports segment
7. Demand generated by industries like Retail etc.
THREATS1. Government bans
2. Fluctuating prices of raw material, especially crude oil
3. Competition & Replacement threat from substitutes.
4. Shortfall of skilled labour
5. Import threat from Middle east

COMPANY ANALYSIS
Company Profile Businesses Divisions:

Sintex Industries Ltd is one of the leading providers of plastics and niche textile-related products
in India.
The Sintex group is one of the leading providers of plastics and niche textile-related
products in India
Established in India in 1931, Sintex has a proven track record of pio neering innovative concepts
in plastics and textile sectors in India and an uninterrupted 77 years of dividend payment to its
shareholders.
The company is organized into two business segments namely, textile and plastics.
In the textile division, the company manufactures high-value, yarn-dyed structured fabrics,
corduroy and items relating to home textiles.
In the plastic division , the company manufactures the following: storage solutions for water, oil
and fuel; prefabricated structures, monolithic structures, industrial custom moulded products,
consumer custom moulded products and interiors products.

Location of headquarters & manufacturing facilities:

The company is headquartered in Kalol in Gujarat with 13 branch offices across India.
The company is having eight manufacturing facilities located at Kalol, Kolkata, Daman,
Bangalore, Nagpur, Baddi, Salem and Bhachau in India.
They are having a strong presence in the European, American, African, and Asian markets
including countries like France, Germany and USA.

Establishment & Journey so far:1931-74

Incorporated as The Bharat Vijay Mills Limited in June 1931
Established composite textile mill in Kalol, Gujrat
1975-90
Commenced manufacturing of plastic moulded polyethylene liquid storage tanks
water tanks.
Introduced new plastic products like doors, window frames and pallets
Plastic Sections for Conversion into Partitions, False Ceilings, Wall
panelling,
Cabins, Cabinets, Furniture etc.
1995
Renamed to Sintex industries limited
Commenced manufacturing of SMC moulded products, pultruded products, resin
transfer moulded products and injection moulded products
Modernization and expansion of the textile unit
Commenced structured yarn dyed business

including

2000-Till date
Alliance with European design houses and a UK based textile marketing
company
Commenced production of pre-fabricated structures for classrooms, booths
kiosks and office rooms
Acquisition of 74% stake in Indian subsidiary of Zeppelin Mobile systems
Ltd.,Germany
Entered the housing sector with monolithic construction
First international acquisition by acquiring 81% stake in Wasaukee Composites
Inc., USA.
Acquired 100% stake in Nief Plastic SA, a French company
Acquired automotive business division of Bright Brothers Limited
Wausaukee acquired 100% stake of its competitor, Nero Plastics Inc., USA
Zeppelin acquired Digvijay Communications and Network Pvt. Ltd., Indore and
became the total solution provider for telecom sector

Share Holding Pattern :

BSE: 502742
NSE: SINTEXEQ
ISIN code: INE429C01035
CURRENT STOCK PRIZE: 63.15 INR
Holder's Name
Promoters
Foreign Institutions
General Public
Other Companies
Banks &Mutual Funds
Financial Institutions
Others
Foreign NRI

No of Shares
99608765
80152616
33500556
29921222
13704582
8548373
5776257
1778495

Top Management - Board Of Directors:Chairman

Vice Chairman
Directors

Managing Director
Company Secretary
Deputy Company Secretary

Dinesh B Patel
Arun P Patel
Ramnikbhai Ambani
Ashwin Lalbhai Shah
RooshiKumar Pandya
Indira J Parikh
Rajesh B Parikh
Lavkumar Kantilal
Rahul A Patel
Amit D Patel
S B Dangayach
L M Rathod
Hitesh T Mehta

% Share Holding
36.49%
29.36%
12.27%
10.96%
5.02%
3.13%
2.12%
0.65%

Financial performance of Sintex Industries The consolidated revenue and EBITDA of the Company has grown at a CAGR of 43.9% and 45.3%
over the last four years. All business segments of Sintex Industries have registered consistent growth in
both top and bottom lines over the past four years.
The plastics division, which remains the mainstay of the companys business, accounted for 80.36% of
the total revenues with growth of 63.69% in FY11. Prefabricated structures, part of the plastics division
was the main driver of growth. This growth was driven by the demand for prefabricated structures such
as monolithic construction and BT shelters particularly to major telecom providers such as Bharti Airtel
and Reliance.
The textiles divisions revenues grew 9.51% during FY11 largely on account of a 49% rise in exports to
Euro-denominated nations like Italy and Spain - a natural hedge against a weakening US dollar. The
Company strengthened its business through alliance renewals with leading EU and UK design houses.
Sintex Industries Q1-2012 PAT drops to Rs.46.79 crore
Sintex Industries Ltd announced its Financial Results for the period ended June 30, 2012.
The company has posted net profit of Rs.467.936 million for the quarter ended June 30, 2012 as
compared to Rs.945.762 million for the quarter ended June 30, 2011, representing a decrease of 50.52%.
Total income was at Rs.10805.600 million for the quarter ended June 30, 2012 where as the same was at
Rs.11119.956 million for the quarter ended June 30, 2011, representing a decrease of 2.83%.
The company has reported an EPS of Rs.1.72 for the quarter ended June 30, 2012 as compared to
Rs.3.49 for the quarter ended June 30, 2011.
Shares of Sintex Industries Ltd was trading in BSE at Rs.66.60, up by Rs.2.10 or 3.26%. The stock hit
an intraday high of Rs.67.20 and low of Rs.61.90.
The total traded quantity was 35.58 lakhs compared to 2 week average of 9.06 lakhs.

SWOT ANALYSIS of SINTEX INDUSTRIES :STRENGTHS

Indias prefabricated leader, leveraging a rich government/private sector customer mix.

Limited competition in growth segment such prefabricated buildings due to high entry barriers
Marketing concept as a base.
The decision making and creation of the product is based on our customer's wants and needs

Quality of the material .

Very knowledgeable employees and a very good communication.

WEAKNESSES

Liquidity risk
The company is still struggling to make a decent profit.
The lack of monetary income hinders the ability to purchase the materials needed to make the
product.

OPPORTUNITIES

Surging demand in downstream industries like packaging, automobile and retail.

The Indian automotive sector is averaging an annual growth of more than 10%; the retail sector
reflects a strong growth potential across the foreseeable future; the FMCG segment accelerated
at 14.5% a year driving demand in the packaging sector
India is expected to be the third largest plastic consumer after the US and China with an expected
consumption of 12.5 MMT as against 38.9 MMT for the US and 31.3 MMT for China.
The investment surge in Indias power sector strengthening the demand for electrical accessories.
The Indian textile industry is projected to grow at 16% in value terms to reach USD 115 billion
by 2012, with exports growing at 22%.

THREATS

Execution delays in prefabricated building expansion plan

Delay in integration of acquired assets.
Declining economy.
Freight pricing is another concern, due to escalating gas prices
Mass amounts of competition.

BUSINESS STRATEGIES OF SINTEX :Objectives and Goals

Profit - Increase profit 20% over the next calendar year.

Exposure - Create a bigger brand image for the company creating a bigger awareness
throughout the US by 50% over the next calendar year.
Volume - Increase volume shipped out to distributors by 25% over the next year, and start
selling to dealers and increase the volume with dealers by 30%.

Acquisitions to drive growthSintex is well known for its water tanks has in India, has now made its entry into customized plastic
manufacturing business post its new acquisitions. Through these acquisitions it has entered into new

and very fast growing business. It would now with the aid of new techniques and setups, focus on
different ancillary products that can be used by the automobile, aerospace and power sectors.
1) The acquisition of 100% stake in France based Nief Plastic will enable the company to establish
itself in the international plastic component and composite markets. This will provide ready access
to reputed automobile manufacturers such as Renault, Peugot, Alstom, Schneider, Faurecia etc. and
also deeper penetration into the EU markets with precision plastic auto-component products
2) The acquisition of 81% stake in Wisconsin based Wausaukee Composites will help it in spreading
its composite component footprint across the US. The company will automatically cater to Neros
reputed client base comprising Phillips, Siemens, Hitachi, Toshiba, GE, Caterpillar, New Holland
Tractors, Agco, Bobcat, Alstom and Amtrac among others.
3) The acquisition of the automotive plastic division of Bright Brothers has enabled the company to
assume control of five strategically located manufacturing plants in Pune, Sohna, Chennai,
Pithampur and Nasik, specialising in the manufacture of injection-moulded plastic components for
the automotive industry. Bright Brothers has leading automotive companies like Maruti Suzuki,
Tata Motors, Honda, Mahindra & Mahindra and Hyundai as its clients.

Alliances to increase reachWith a view to strengthen our position, we at Sintex aim to offer ourselves as a global solutions provider
to our clients both in India and abroad. To achieve this we have adopted an aggressive strategy of
inorganic growth. Under this strategy we have acquired companies that are specialists in their respective
areas.
1) Wausaukee Composites Inc. - USA
Front end marketing in US for Sintex products, manufactured across diversified processes
Access to OEM Fortune 500 customer base
Access to superior technology
Sinetx LCC advantage to leverage volume business for Wausaukee

2) Nief Plastic SAS

Access to Niefs strong customer base
A route to enter the European plastic components market with competitive pricing and technical
qualifications
Potential synergies with Bright Autoplast to create a strong presence in automotive composite
and electrical market
3) Bright AutoPlast Pvt.Ltd. , India

4) Zep Infratech Limited, India

PRODUCT INNOVATIONSWith its state of art technology, it has witnessed an enormous growth in its two segments viz.
'Prefabricated Structure' and 'Monolithic Construction'. These divisions will be the major growth drivers
over the next few years. Sintex is present in the textile business, producing high quality fabrics under the
brand BVM for its prestige clients Armani, Versace, Tommy Hilfiger and more. It has formed an
alliance with the UK based textile entity to further improve in the areas of design, structure and finishes
and to adapt some new innovations.
1)Prefab Structures and BT Shelters: Sintex has manufacturing plants spread across all five regions
of India to cater to the respective regions. Prefabs are ideal for schools, kiosks, huts, tent substitutes,
hospitals, police station, site offices etc. Strong demand is expected from municipal corporation, defense
bodies, hospitals, telecom industries, government school bodies and various other sections within India.
It also exports its prefabricated structures products to Africa and some parts of Asia for housing,
schools, medical centers, kiosk and among others.
2)Monolithic Construction: After establishing its name in Indian plastic industry it will realize its
name in monolithic construction business too. Sintex has made an entry into low cost housing projects in
nine states of India. It uses new and innovative techniques that reduce construction time and cost. This
has helped to grab huge orders from different government and municipal bodies. The demand for low
cost housing in India is expected to maintain for many years given the immense shortage. Sintex
currently has an order backlog of Rs22bn, which we believe will grow over time.

EXPANSION STRATEGIES/ INVESTMENT RATIONALE :Sintex is known as a plastic water tank manufacturer in India, over the years the name has become
synonyms with water storage tanks. However since then it has come a long way and has diversified
itself into various other businesses, albeit in the same product, plastics. It now has the ability to use its
plastics in various forms in various industries. They have entered the construction and housing space,
automobile ancillaries, and power ancillaries to name a few. In addition the products of Sintex have
been accepted by the markets and these divisions have been growing rapidly and have been the growth
drivers.
1)Prefabricated Structures and BT shelters has smoothen the road ahead
One of the major changes in construction technology has been prefabricated structures. In a country like
India that has a massive dearth of infrastructure, prefabricated structures (better known as prefabs) have
a huge positive implication. Prefabs have a sprawling market in India in areas ranging from large
industrial and
commercial construction to mass housing. Over the past few years the construction techniques in India
have seen a major improvisation thanks to the adoption of global practices. In the context of prefabs, the
main application areas have so far been industrial buildings, workshops, etc. Mass housing, as a demand
driver, is yet to be tapped. In rural areas in particular, though housing projects are sponsored by the
government, there is very little supervision that results in poor quality of construction. The biggest
advantage of prefab structures is that there is no room for error in terms of the basic structures. These
structures have been tested and are known to be able to stand firm even in high winds and strong rains.
These prefab structures have a life expectancy of 30 years and it usually takes a significantly shorter
time to construct.

Prefab business has not only contributed to the revenue growth, but also further strengthens the
operating margins. Prefabs have managed to generate an EBIDTA margin of 18% for the FY10. We
believe margins could sustain at these levels going forward given the mass orders expected from
government. Sintex uses honeycomb concrete between plastic channels, which makes prefab structures
lighter and easier to transport. As the name suggests, these structures are pre-made at the factory and
minimum work is done on the actual site. This reduces the cost by 25-40% and the time for erection by
85-90% as compared to conventional structures.
2)Monolithic construction key growth driver
Sintex's entry into real estate business has accelerated its growth levels significantly. Monolithic
contributes 22-25% to its revenues and is expected to rise going forward. This segment caters to the low
cost housing segment, where a major chunk of its sales comes from the government and state municipal
bodies. Currently it operates in 7 states of India and has an order book of Rs 22bn. on hand. It has
chalked out plans to expand its construction business to all parts of India over the next few years. This
division has been growing at a CAGR of 80% since FY08. Given the acute shortage of housing and the
ever increasing demand of low cost housing in India we expect the order flow to remain robust. This
will ensure this division post a growth of 30% over the next few years. The monolithic division
generates an operating margin of 15% at the present moment. We believe going forward as project sizes
and number of projects increase the operating margins of the company could increase marginally.
3)Composite plastic division
The uses of plastic as a substitute for metals has grown significantly with its application in various
manufacturing industry like automobile, medical, packaging, aerospace etc. With its unique properties
like injection moulded, vacuum moulded and various other features plastic can be made in any form as
per the requirements and its end use application. The demand for plastic went through the roof, driven
largely by its use in automobile industries, which are replacing metal for plastic in the production of car
and other vehicles. Sintex is one of the dominant player in Indian plastic industry has realized the
opportunity and potential in the automobile industry and acquired one company in India, Bright Auto
Plast Pvt. Ltd and two companies
internationally, Nief Plastics SA of France and Wausaukee Composite Inc in the USA. Through its
alliance with these companies, Sintex has laid a strong foundation for its custom moulding division, with
a reach in all geographies along with India. Sintex manufactures various products like fuel tanks, cable
trays, bus seats, satellite dish, meter boxes, polymeric insulators and other accessories catering to auto
and rural and urban electrification industries. Besides this it manufactures plastic products used in
aerospace and wind mills.

ValuationsWith higher growth expectation from Monolithic, Prefab and its Custom Moulding divisions, we expect
revenue to grow 25 to 30% over next couple of years. At the current price the stock is trading at a P/E of
10.8x and 8.2x and an EV/EBIDTA of 10.9x and 8.9x for FY11E and FY12E respectively. Experts prefer
the P/E multiple of 13x for FY11E & arrive at a price target of Rs.432 and thus recommend a BUY on
Sintex Industries with an upside potential of 20%.

Risks in the BusinessDelays in orders execution

Sintex major growth would be coming from its monolithic construction business which comprises an
order book of Rs23bn. These orders need to be executed within next 21 to 22 months. Given these are
government projects there is a strong possibility in delay of projects. Delay from the government end due
to time lag
between allotment of land and actual construction, delay due to modification of plans, delay due to
inability of workforce. These risks would remain, we would consistently keep an eye on execution of
these projects and update our numbers when required.
Rise in level of working capital requirements
Sintex's working capital requirements have moved up drastically since its entry into monolithic
construction business. Debtor days have increased to 120 days from 95 days, while creditor days have
declined to 50 from 35days. This increase in working capital cycle has led to negative operating cash
flow. If they are unable to control their working capital this would add pressure on the balance sheet and
profitability of the company.
Prices of raw materials
Raw material costs around 52 to 55 percent of total sales and around 60 percent of total expenditures.
High volatility in commodity prices can affect the company's margins and bottom line growth. Raw
material used in plastic are made from the petroleum products, where there prices are largely depends on
the prices of crude.
However given the pragmatic shift and increase in the use of plastic we feel most of the price rises would
be passed on to the end user.
Low entry barrier
Sintex may have the market cornered with its respective products and business segments, but their
success may inspire others to enter the business and challenge their position. There are large numbers of
unorganised players in the prefabricated structure industry which we assume can lead to tough
competition in future. However with good economies of scale and its synergy with its overseas
subsidiaries Sintex outperforms in its all business divisions.