We retain a ‘buy’ rating on Sintex Industries and set a target price to Rs 127 per share. We raise our FY15/16e Ebitda by 6-9% after our interaction with the management. Given the high operative leverage, our EPS estimates increase 21% for FY15 and 26% for FY16. Earnings CAGR over FY14-17 would be 27%. The earnings revision is driven by expectation of higher growth and margins in domestic custom molding and higher PBT contribution from new spinning project from FY16. The stock trades at 5.9/4.7x FY16/17e EPS, 0.7/0.6x FY16/17e BV, and at an EV of 54x/4.2x FY16/17e Ebitda.
Rise in social spending, along with opportunities in the B2B (CSR, retail orders) and B2G segments (sanitation, education, healthcare, warehousing, cold storage, and defense), offers meaningful growth opportunity. Pan India presence, with strategic plant locations, tie-ups with various state governments, and strong distribution networks gives SINT the ability to effectively tap this opportunity. Prevailing growth would also necessitate gradual increase in capacities. Innovative offerings in biogas, sewage treatment, etc, should add revenue streams. We expect 20% revenue CAGR to sustain over FY14-17, with 24-25% margins.
Focus remains on managing working capital strength, with selective execution of projects having lower receivables and lesser approval uncertainties.