4th Feb 2015

SINTEX INDUSTRIES LIMITED

BSE: 502742 | Sector: BUILDING MATERIALS

View - BUY

CMP
: Rs. 115
Target Price: Rs. 150 (In the next 6 mths)

BUSINESS BACKGROUND
SIntex Industries Limited (SIL) commenced manufacturing of plastic molded polyethylene
liquid storage tanks including water tanks and introduced new plastic products like doors,
window frames and pallets. The Sintex group has 36 manufacturing plants in India and
abroad. Sintex Industries commenced manufacturing of SMC molded products, undertook
modernization and expansion of the textile unit and commenced structured yarn dyed
business. SIL entered prefab structures business in 2001 and started monolithic business in
2005. SIL has made 4 acquisitions in India and overseas to enhance its presence in the
composites segment. SILs acquisitions in the composites segment include Wausaukee
Components and Nero Plastics in the US, Bright Autoplast in India, and NIEF Plastics in
France. These acquisitions have strengthened Sintexs position by giving it access to
technology and customers.

FACEDATA
VALUE Rs
KEY

1.00

DIVD YIELD %

0.64

52 WK HI/LOW

119/31

NSE CODE

SINTEX

BSE CODE

SINTEX

MARKET CAP

RS 4097 CRS

INVESTMENT HIGHLIGHTS
Strong Q3 FY15 Performance
During the third quarter of FY15, total revenues grew by 32% to Rs.1832 crs
largely driven by a strong volume with Q3FY2015, EBIDTA growing by 25%
totalling Rs 306.85 crs as compared to Rs 244.65. crs earned in Q3 last year
with reported profit after tax (PAT) growing by 83% to Rs 161 crs as compared
to Rs 83. crs earned in Q3 last year.
In the first 9 months of FY15 SIL has recorded a Topline of Rs 4858.crs (from
Rs 3881.4 crs in the first 9 mths of FY14) led by better product mix. Also this is
reflected in a higher EBIDTA growth of 30% at Rs 802.05 crs from Rs 617.74
crs in the first 9 mths of last year and a strong 62% increase in PAT. The PAT
for the first 9 mths of FY15 stood at Rs 331 crs as compared to Rs 204 crs in
the first 9 mths of last year.
vScore: vScore (Value Score) is our proprietary company rating system f
For FY14 SIL has recorded a topline of Rs 5864 crs, a EBIDTA of Rs 974.crs
while PAT is placed at Rs 364 crs. SIL paid a dividend of 70% for FY14.

Stable cash flow from the textile business

The Textile segment of SIL caters to a niche market by supplying only high end
structured dyed yarn fabrics to luxury brands such as Armani, Burberry, DKNY,
Zara, among others. Due to the global recession, there has been a slowdown in
demand for luxury products, particularly in Europe, which has led to a
consolidation in the business. In FY14, textiles constituted 10.5% of total
revenues, down from 15.5% in FY08.
During FY12-14, revenues have grown at a CAGR of 8.1%. In FY13, revenues
were more or less flat. However, with recovery in overseas demand, revenues in
Assured
FY14 grew 15.7% YoY to Rs 546.4 crore. Further, with the role out of the new
spinning business from FY17E, we expect revenue from this segment to grow at
a CAGR of 18% during FY14-17E.

SHAREHOLDING PATTERN
PROMOTERS

- 41%

BANKS, MFs & DIIs - 13 %

FIIs

- 8%

PUBLIC

- 38%

KEY FUNDAMENTALS

YE

FY15 FY16 FY17

Sales Gr%

19

15 15

PBT Gr%

29

19 25

PAT Gr%

30

23

20

EPS Gr%

-9

23

20

Roe %

11 11

12

Roce %
EPS (Rs)
P/E(x)

Precise
10.6

10

Advice

13.0 15.0
8 7

Greenfield spinning project minor delays expected

Commercial production of phase-1 spinning project has been deferred by a month (on account of
weather conditions and local delays), whereas trial runs will start in Mid-may. SIL has also marginally
lowered its revenue guidance from the project in FY16, as it expects a utilization rate of 20%/70% in
FY16/17, from 50%/90% earlier.
Building materials to see some slowdown in near term
While execution in monolithic business will continue to be at a slower pace, revenue growth in prefab
business continues to surprise us positively. Sintex expects revenue CAGR of 20-25% growth in
prefab over the next 2 years, led by increased social spending on education and healthcare, coupled
with new governments focus on low cost housing. However, a systematic execution in Monolithic will
lead to a 15-20% yoy de-growth in revenues (guidance of Rs6.5-7.5bn in FY15).
Clean India programme a big opportunity, no near term benefits
Sintex is extremely bullish on recent initiatives on Swacch Bharat Mission, clean India campaign,
which would cover 1.04crore households, provide 0.25m seats of community toilets, and solid waste
management for 4041 towns. The total cost of the program me is estimated at Rs 620 bn over the
next 5 years, where Sintex will be the biggest beneficiary, given its 90- 95% market share of
prefabricated toilets. However in the near term, Sintex envisages no benefits and expects atleast 9-12
months for meaningful orders to come by.
Custom molding overseas acquisition yielding results
While revenue growth in domestic business came at 13% (in line), overseas custom molding grew at
55% (Rs5.8bn) which is attributable to contribution from SIMONINN acquisition. The company
expects SIMONINN revenues at EUR50m with likely Ebitda margins at 8-9%.

Solid financial performance - topline growth and margin expansion

We estimate SILs earnings to witness a CAGR of 20-25% over FY13-16E. This will be driven by
strong revenue growth (15-20% CAGR over FY13-16E) and a steady EBITDA margin expansion over
the same period.
Over the years, the company has improved its operational performance significantly with its operating
margins having remained in a range between 15. to 16% since last 3 years. Also, considering that the
company is a domestic Textiles & Building materials player, the net leverage at 1.08x as on FY14
seems high but this is expected to come down to 0.62:1 by Mar 2017. .

Business Outlook & Stock Valuation

On a rough cut basis, in FY15, Topline will see a steady rise wherein Topline is expected to touch Rs 6960.
crs. On the bottomline level we expect the company to record a PAT of Rs 475 crs in FY15E. Thus on a
conservative basis, SIL should record a EPS of Rs 10.5.. for FY15E. For FY16E and FY17E our expectation
is that earnings traction for SIL would continue to be robust wherein we expect a EPS of Rs 13 and Rs 16.
A macroeconomic turnaround, improving trajectory of businesses linked to government spending and easing
working capital cycle would drive a 34% PAT CAGR over FY14-17E. Further the SIL management is
targeting a 25% topline growth from new products and a strong 300 to 400 bp increase in its ROCE by 201718
Sintex enjoys early-mover advantage in businesses that are levered to social sector spending in India
(schools/low cost housing/ healthcare centers), funded almost entirely by government. It is believed this
spending will continue, given the socio economic context. Sintexs India construction (monolithic and prefab)
business (40% of revenue) is geared to social sector spending in India by the central and state governments
on low-cost housing, slum rehabilitation, schools and rural healthcare center construction in remote areas.
Though the monolithic business, which has been suffering due to sluggishness from government activity and
consequent delays in execution and receivables pulled down overall performance, things are expected to get
better as Sintex has reduced the number of slow moving sites from seven to five and this will soon come
down to three in the near future
The recent spate of reforms from the government will help gradually revive the domestic economy and
augurs well for SIL as a buoyant social spending and an improved Capex from the private sector will ensure
a strong revival in SILs fortunes.
Hence we believe that the SIL stock should be purchased at the current price for a price target of around Rs
150 keeping a financial stop loss of Rs 95.
FINANCIALS
For the Year Ended March RsCrs
Net Sales
EBIDTA
EBIDTA %
Interest
Depreciation
Non Operational Other Income
Profit Before Tax
Profit After Tax
Diluted EPS (Rs)
Equity Capital
Reserves
Borrowings
GrossBlock
Investments

FY14A
5864.8
975.4
16.63
274.4
254.8
52.4
482.5
364.6
11.72

FY15E
6960.1
1150.1
16.52
273.1
286.0
30.0
621.0
475.0
10.63

FY16E
7998.1
1330.0
16.63
310.0
310.0
30.0
740.0
582.0
13.02

FY17E
9200.1
1530
16.63
300.0
340.0
35.0
925.0
700.0
15.66

31.11
3484.4
3819.0
5003.8
305.8

44.7
4834.9
3987.0
5780
305.8

44.7
5416.9
3887.0
5980.0
305.8

44.7
6116.9
3837.0
6230.0
305.8

KEY CONCERNS

Sharp increase in intesrest rates

Downturn in Goverment spending and any negative impact on the Textles sectors would also
impact SILs operations negatively.

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