>Sintex Industries Ltd. (EMKAY)

SINTEX INDUSTRIES LIMITED
Attractive Valuations

Downward revision in earnings by 19% and 26% in FY10E and FY11E
We expect the current economic situation to create stumbling blocks in key business verticals of Sintex, leading to downward revision in revenues, EBITDA margins and earnings estimates for FY08-FY11E. We expect the (1) standalone custom moldings vertical to be impacted by slowdown in the auto sector, commodity price deflation and moderation of growth in electricals, (2) prefabs vertical to be impacted by lower tower capex rollout by telecom operators, (3) monolithic construction vertical to be impacted by delay in new order booking and commodity price deflation and (4) subsidiaries to be impacted by global slowdown. Consequently, we have revised our revenue estimates by - 4%, -22% & -29%, EBITDA margins estimates by -38bps, -150bps and -143bps and earnings estimates by 13%, -19% and -26% for FY09E, FY10E and FY11E respectively. The earnings upgrade in FY09E is due to inclusion of FCCB in debt instead of equity earlier. We expect revised earnings CAGR of 23% during FY08-FY11E with earnings of
Rs23.7, 24.8, 29.6 in FY09E, FY10E and FY11E respectively.

Standalone custom moldings to be the worst affected segment
We expect the standalone auto custom moldings business of Sintex to be hit by the (1) slowdown in the domestic auto sector and (2) commodity price deflation, leading to drop in realizations. Consequently, we have factored no growth in standalone auto custom moldings during FY08-FY11E versus CAGR of 12% earlier. Further, the expected moderation in growth in the domestic T&D sector and slump in Industrial capex is expected to impact the high growth standalone electrical custom moldings. Consequently we have factored in revised revenue CAGR at 14% in standalone electrical custom moldings versus earlier CAGR of 40%. Thus, we expect 8% revenue CAGR in standalone custom molding vertical during FY08-FY11E versus 30% CAGR earlier. The above vertical is lead contributor to earnings revision impacting FY10E and FY11E earnings by -6% and -8% respectively.

To see full report: Sintex