>SINTEX INDUSTRIES (MOTILAL OSWAL)

■ 1QFY10 sales down 9% YoY; adjusted PAT down 28% YoY: Sintex 1QFY10 results are significantly below expectation. Sales are down 9% YoY at Rs6.6b (expected Rs7.9b). EBITDA margin is up 50bp YoY at 13.2% (expected 15%). Reported consolidated PAT is up 6% YoY at Rs606m. However, this includes ~Rs200m of unrealized forex gain on account of FCCB translation. Adjusted for this, PAT is down 28% YoY at Rs406m (expected Rs681m). The main reason for the weak quarter is low government business pending elections.

■ Monolithic and pre-fabs to remain growth drivers: Sintex’s monolithic construction business has an order backlog of Rs18b to be executed in the next two years. This offers revenue visibility through FY11 at least. The various government schemes announced in Union Budget 2009-10 are expected to sustain demand for Sintex’s pre-fabricated structures business in the form of rural classrooms, health clinics, toilets, worker shelters, etc.

■ 10-15% downgrade in estimates: Based on 1QFY10 results and subsequent concall, we have downgraded our FY10 and FY11 sales estimate by 3-4%. EBITDA margins are also down 70-110bp. As a result, our FY10 EPS is downgraded by 15% to Rs23.2 and FY11 EPS by 10% to Rs31.1.

■ Stock trading at 8x FY10E, target price of Rs232 (10x FY10E), Buy: Even after our earnings downgrade, FY09-11E EPS CAGR is a reasonable 14%. RoE is 17-18% and the company is near zero-debt (Rs15b cash against Rs16.5b total debt including working capital). At CMP, the stock is trading at a P/E of 8x FY10E and 6x FY11E. We continue to value Sintex at 10x FY10E EPS to arrive at a revised target price of Rs232 (Rs273 earlier), 19% upside from current levels. We maintain Buy.

To see full report: SINTEX INDUSTRIES