Wednesday, July 16, 2008

Stock Idea: Sintex India

Religare Research has maintained its buy rating on Sintex India with a revised target price of Rs 503 in its July 15, 2008 research report. "Sintex Industries (Sintex) has reported disappointing Q1FY09 numbers due to lower volumes in the BT Shelter business and below-expected textiles revenues. While net sales increased 108% YoY to Rs 7.1 billion, this was spurred by the acquisitions of Bright AutoPlast, Nief Plastics and Wausaukee rather than growth in core operations. Higher employee costs and other expenditure shaved 590bps off the EBITDA margin to 11%. Sintex reports installation income on prefab construction under other income, which trebled to Rs 380 million during the quarter. Increased interest and depreciation offset the positive impact of other income, causing Sintex's net profit to grow much below our expectations at 68% YoY to Rs 567 million."
"The company's monolithic construction order book totaled Rs 15 billion at the end of the quarter with an execution period of two years. Further, the acquisition of Digvijay Communication during Q1FY09 will expand Sintex's geographical reach and product offerings in the telecom infrastructure sector. We are revising our estimates downwards in view of the below-expected quarterly results, tight market conditions and higher cotton and crude oil prices, which are weighing on margins. We maintain our Buy recommendation on the stock and roll over our target price to a one-year horizon. Our revised target for the stock is Rs 503 from Rs 587 previously," says Religare's research report.


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