Well-moulded Sintex

A revival in its textile business, along with a creditable performance in its plastics business, helped Gujarat-based Sintex Industries post a 30% year-on-year jump in its consolidated bottomline for the first quarter to about Rs 79 crore, in line with its guidance.

On a standalone basis, the textile division posted a 68% jump in operating profit to Rs 11.41 crore, riding on a nearly 30% surge in revenues to Rs 98.68 crore. The segment has been showing signs of growth since Q3 last fiscal. Group president Sunil Kanojia said the company has done well in the high-end textile segment, with both capacity utilisation and realisation improving over the last year.

Standalone plastics business profits zoomed 71% to nearly Rs 77 crore, riding on 51% growth in revenue to Rs 421.1 crore.
Consolidated total income rose 38% to over Rs 910 crore, due as much to the performance of its subsidiaries as to its Indian operations. Bright AutoPlast & Zeppelin Mobile Systems in India, US-based Wausaukee Composites and French firm Nief Plastic grew between 30% and 55%, though Kanojia said some of it could be attributed to the low numbers in Q1 of 2009-10. “But the pipeline is quite strong,” he added.

While the growth in custom mouldings was muted, building products grew 80%. Building products include monolithic construction, pre-fabricated buildings and storage tanks. The company has an order backlog of Rs 2,300 crore in the monolithic segment, whose contribution in Q1 surged to Rs 176 crore from Rs 93 crore.

Angel Securities in a report dated May 3 said Sintex’s high exposure to government orders provides it better visibility and lower risks of cancellation in the domestic plastic segment. “Going ahead, we expect the company’s business to be primarily driven by the domestic plastic segment on account of the government’s higher thrust on infrastructure and pick up in private capex,”
Tanks, which are what the company is best known for, contribute just about 5% to its overall business.

Sintex has projected a growth of 30% in both its topline and bottomline this fiscal. There could be a slight dip in the second quarter owing to the rains but the normally robust second half of the year is expected to more than make up for it.

While there has been some pressure on raw material costs since Q3, since the company is able to pass it on to its clients, observers don’t see a dent in the margins.

The stock, which has gained close to 13.70% over the past month (since June 11), closed the day almost flat —- down 0.22%. At the current market price of Rs 324.10 per share, the stock trades at 11.02 times its expected FY11 earnings per share (EPS) and 9.23 times its expected FY12 EPS. Most brokerages remain positive on the stock prospects from a long-term perspective.