>SINTEX INDUSTRIES

For 4QFY2012, Sintex reported a 30.1% yoy decline in its net sales to `1,024cr. The company’s EBITDA declined by 45% yoy to `160cr and its EBITDA margin contracted by 415bp yoy to 15.6%. PAT came in at `91cr, down 46% yoy. We maintain our Buy recommendation on the stock.


Lower monolithic segment’s revenue impacts earnings: Sintex’s consolidated net sales declined by 30.1% yoy to `1,024cr during 4QFY2012, lower than our expectation. The decline in revenue was mainly led by the monolithic segment, which reported a dip of 54% yoy to `264cr; and flat performance by the storage tanks segment at `59cr. The domestic custom moulding segment reported 22% yoy growth to `266cr, while the overseas custom moulding reported a 71% yoy decline in revenue to `91cr. Sintex’s 4QFY2012 consolidated EBITDA stood at `160cr, down 45% yoy. OPM for the quarter stood at 15.6%, down 415bp yoy (up 158bp qoq) on the back of margin expansion in all segments. During the quarter, Sintex booked other income of `12cr (up 35% yoy). Consequently, PAT came in at `91cr, down 46% yoy, significantly below expectation.


Outlook and valuation: We have downgraded our earnings estimates for FY2013E and FY2014E on account of slowdown in the monolithic segment. Sintex will have low net debt/equity of 0.7x, by FY2014E. The stock is currently trading at 3.3x FY2014E EPS and 0.4x FY2014E P/BV only, which we feel is very attractive. Over the last five years, Sintex has traded at an average one-year P/E of 11.4x, which makes current valuations attractive. Moreover, further integration of foreign subsidiaries and acquisition in the monolithic segment will act as key catalysts for the stock. We maintain our Buy recommendation on the stock with a target price of `79.



Plastic segment pull downs EBITDA margin on a yoy basis
During the quarter, the plastic segment’s EBIT margin declined by 434bp yoy but\ improved by 102bp qoq on account of a better product mix. EBIT margin in the textile segment contracted by 525bp yoy but expanded by 203bp qoq owing to pick-up in demand for high-end fabrics and better pricing. In our view, quarterly margins are not a fair indicator of the company’s performance due to lumpiness of its business.


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