Sintex Industries: Q2F10 Result Review

Sintex Industries came out with a result, which was below market expectation. Let us go through the figures once again.


Revenue

Total revenue fell by 2.5% on quarterly basis and on half yearly basis H1 revenue fell by 5.8%, YoY. According to the company, the revenue fall was mainly due to reduction in prices for their products, line with reduced commodity prices.

Segment wise, textile division dragged down overall revenue, declined 14.1% for the quarter and 11.4% for the half year. This was largely attributable to the falling polymer prices and most of which had been passed on the customer.

Other hit was on operating income, which was down 70.6% during last quarter. A slag in the BT shelters segment and the US subsidiary facing execution hiccups in the wind energy segment saw the other income dropping significantly 78%.

From the companies recently acquired subsidiaries, Zeppelin Mobile performed the best (sales increased 136.2%) and Wausaukee Composites (sales decreased 33.6%) performed the worst.

Operating Profit Margin

Operating profit margin down 1.8% during Q1F10, stands at 18.2%, backed by better profit margins from Prefabs (24%) and monolithic (26%) segments. Again, textiles was on blip side owing to under utilization of recent capacity additions, OPM felled to just 4%.

Net Profit

Q2 net profit dropped to Rs. 58.26Cr. from 83.78Cr, i.e. 31.7%, on YoY basis. H1 net profit down by 16%.

Earning Per Share

Q2 EPS stands at Rs. 4.2 down 31.7% from Rs. 6.2 during Q2 previous year. On half yearly wise, EPS down to Rs. 8.7 from Rs.10.4, a fall of 16%.

Outlook

The management expects a topline growth of 10% and PAT growth of 15% for FY10. However, It is alarming the management’s cautious tone on the BT shelter segment and its overseas subsidiaries performance.

Going ahead, we expect the companies prime focus would be on the building materials segment, anticipating better order inflows from national development programs line JNNURM, Bharat Nirman etc. With govt. push for mass housing and better infrastructure would be the key for the companies domestic business.

We expect, with the smooth order inflow expected from the government in the mass housing segment and a strong order book position (now at Rs. 1400 Cr) would enable the company to sustain its growth momentum. Moreover, revival in the overseas subsidiaries’ performances would add sheen to its business going forward.

We maintain our buy recommendation, for a holding of 12 – 16 months.