Sintex?s strong momentum in domestic businesses along with steady improvements in its international businesses continued in Q2FY11. Strong topline growth of 29% YoY (year-on-year) translated into 56% growth in reported PAT (profit after tax). The monolithic business weighed in with revenue growth of 108% YoY, while most other domestic plastic businesses clocked 20-50%. In view of improved prospects of the domestic plastics business, we raise our FY11-12 earnings estimates by 11.1%. That said, balance-sheet concerns such as high working-capital seem to be scarcely reflected in the current P/E (price -to-earnings ratio) of 14.4x (times) FY11, so we retain Add, in spite of a new TP (target price) of Rs 520 (14x FY12), indicating 20% upside on 12-month basis.
Buoyed by 29% YoY topline growth and 34 bps (basis points) Ebitda (earnings before interest, taxes, depreciation and amortisation) margin expansion, Ebitda grew 31.4% YoY. PAT grew 56.4% YoY, thanks to a 462% growth in other income (34% QoQ), in spite of a 69.2% YoY rise in interest costs and a higher tax rate. The monolithic-construction business consolidated its momentum, with revenue up 108% YoY at Rs 2.43 bn, while maintaining an order book size of Rs 26 billion (up from Rs 22 bn in the previous quarter). Revenue from non-BT (base transfusion) pre-fabs rose 22% YoY. In domestic mouldings, Bright Brothers registered 50% YoY revenue growth. The current order book in monolithic construction is Rs 26 bn over a 20-21-month period as per the company release. Revenues from Zeppelin (which currently remains the only BT exposure for Sintex) continued to decline.
In constant-currency terms, in our estimate, Nief grew 54% YoY, while Wasaukee grew 37% YoY. This should expand profitability through operating leverage. In textiles, revenue growth of 24% aided a 978 basis points YoY, Ebit (earnings before interest, taxes) margin improvement to a healthier 13.6%.
The company?s non-cash NWC (net working capital) is 150 days now (double of last year?s), driven by 122% growth in loans and advances, coupled with a 15% drop in current liabilities. While this is partly explained by high monolithic billing at year end, the increase is still very high.
Sintex acquired 100% equity stake in Esvegee Steel (Gujarat) Pvt Ltd and renamed it Sintex Oil & Gas Pvt Ltd. Under the New Exploration and Licensing Policy (NELP) for exploration of oil and gas, this entity submitted bids for six inland blocks under the NELP-VIII offer. The company emerged successful for three blocks: CB-ONN-2009/1, CBONN-2009/2 and CB-ONN-2009/7.
Sintex?s outstanding FCCB (foreign currency convertible bonds) had its conversion price reset to Rs 493 from Rs 580, pursuant of the clauses in the FCCB contract. Now, the conversion would lead to issuance of 18,497,464 shares of Rs 2 each, instead of the 15,722,844 shares of Rs 2 each that were to be issued if the conversion price had stayed at Rs 580. This means that in the event of conversion, the dilution would be 13.6%.