Sintex Industries Ltd : BUY

FY11: An all round performance with robust outlook 

The company posted revenue of Rs 1,464 cr (34% YoY) driven by all round segmental performance. EBITDA stood at Rs. 310 cr (60% YoY), EBITDA margin increased by 350 bps YoY to 21.2% due to execution of higher margin orders + stiff cost control measures by mgmt. Company has posted an adj. PAT of Rs 168 cr (21% YoY).

• FY11 show:  company posted record revenue of  Rs 4,475 cr (36%); EBITDA stood at Rs. 816 cr  (53%), EBITDA margin increased by 193 bps to 18.2%; Adj. PAT of Rs 460 cr (40%) on YoY basis.
• Building Product : increased profitability driven by prefab + monolithic
• Revenues from the building product division stood Rs. 2,180 cr (55% YoY) with an EBITDA margin of 18.6%. 
• Monolithic construction grew by impressive 86% YoY at Rs. 1,337 cr on account of fast execution of orders with EBITDA margins of 18.7%. Order book stood at Rs 2,900 cr exec. over 22-24 mths. 
• Prefab records sharp growth of 21% YoY at Rs. 645 cr on account of new geographies and strong traction across products; EBITDA stood at Rs 131 cr with over 20% EBITDA margins.
• Water tank business also grew by 30% at Rs. 198 cr with EBITDA of Rs 24 cr Custom molding : changing orbit to high margin led profitability
• Revenues from this division increased by 21% YoY at Rs. 1,860 cr EBITDA for the year stood at Rs 279 cr with over 15% EBITDA margin. Overall margins to improve going forward as more production shifts to India from overseas.  Textile: keeping up the momentum 
• Revenues from textile division increased by 27% YoY at Rs. 436 cr while EBITDA stood at Rs. 128 cr with over 28% margin. 

Valuations & Outlook

Sintex is the only company globally having such diversified usage of plastics (from water tanks-custom molding-prefabs-monolithic const.). Although mgmt. has indicated a similar performance over the next 2 years but we consider that Sintex is poised to grow over 20% CAGR (FY11-13) conservatively, backed by huge government spending on social infrastructure. Improving return ratio profile +strong operating margins + better working capital management places the company in a sweet spot. 

We believe that the concerns of FCCB is overshadowed by strong balance sheet as company is having cash & equivalents over Rs 1300 cr and expected to generate FCF in excess of Rs 400 cr till FY 13.  We have raised our FY 12 earning estimates by 6% and continue to believe that Sintex offers a unique mix of visible growth, stable margins and strong balance sheet at a very attractive price. We maintain high conviction BUY recommendation with a target price of Rs 230 (PE–12x FY12E EPS).