th

16 April, 2009
India
Sintex Industries
CMP: Rs. 137 Target: Rs. 240

Sovid Gupta +911243024840 Sintex Industries, with strong balance sheet and and huge cash balance is well Equipped to
Equity Analyst: Fairwealth Securities manage current challenging business Equipment. We estimates Sintex Industries to post
Private. Ltd. net sales of 3300 crores and 4200 crores for for FY09 and FY10 respectively, posting
compounded growth rate of 40% for 4 years.
Hunny Tarika +911243024810
At current market price market price of 137 stock is trading at 6.2x and 5x its FY09 and
Technical Analyst: Fairwealth Securities
Private. Ltd. FY10 estimated earnings.

We initiate an accumulate rating on Sintex with a target price of 200 and 240 with an
upward bias. We recommend investors to buy on dips.

Our valuation is based on expected EV/EBITDA of 5 for FY09. Proft margins for for FY09
Priced on April 16th , 2009 are expected to be lower at around 9.5% its FY09 sales on account of Higher Raw material
±% potential 40%+ prices.
th
Target set on 16 April

Market Data
Beta
Q4 Earnings Estimates:
.977
12M hi/lo 519/83
Market cap, INR Crores 1856 We expect company’s topline to remain flat with no growth.While profits are expected to
Shares in issue (mn.) 136 rise by 18%, to reach 105 crores from Q4 FY08 earnings of 89 crores.
Reuters BVML
Bloomberg SNTX.BO Rise in profiits can be attributes to lower raw material costs.

Flat growth in sales point to tough economic conditions lowering the overall growth.

Going forward sales are expected to face tough head winds from new areas however
strong orderbook in legacy businesses like prefab and monolithic structures will ensure
Share Holding Pattern (%) strong revenues growing forward.
Promoters 30%
FII 41%
Domestic Inst. & Corp Bod. 23%
Public & Others 6%

Fairwealth Securities Page 1

 Buy-Sintex Industries

Quarterly Result Round up:

Q3 FY09 Q3 FY08 Y-o-Y Q2 FY09 QoQ(%)
Quarterly Standalone Results Growth(
%)
Sales Net Sales
Textile 94.5 93.0 1.66 505.8 387.9 30% 438.9 15%
Other Income
Plastics 414.3 296.0 39.96
Operating 28.5 6.7 323% 24.7 15%
Others 0.0 0.0 0.00 Total Income
534.3 394.7 35% 463.6 15%
TOTAL 508.8 389.0 30.80 Operating Profit
123.3 95.1 30% 119.7 3%
PBIT OPM Margin(%)
0.2 0.2 (-100bps) 0.3 (-250bps)
Textile 19.6 20.3 -3.31
Interest
Plastics 63.6 59.1 7.58 21.5 17.3 25% 15.0 43%
PBDT
Others 0.0 0.0 0.00 101.7 77.8 31% 104.7 -3%
Depreciation
TOTAL 83.2 79.3 4.80 15.5 13.0 20% 15.4 1%
PBIT Margin(%) PBT
86.2 64.8 33% 89.3 -3%
Textile 20.7 21.8 110bps Tax
23.1 9.5 145% 21.1 10%
Plastics 15.3 20.0 470bps PAT
63.1 55.4 14% 68.2 -8%
Others 0.0 0.0 0.0 Extra-Ordinary
0.0 0.0 0.0
TOTAL 16.3 20.4 400bps PAT
63.1 55.4 14% 68.2 -8%
Source: Capital Line EPS
4.7 4.6 2% 5.0 -8%
Source: Company Data, Capital Line

Result Analysis:

Margins for Q3 fell sharply by 400 bps. Margins depreciated on account of inventory write
downs. We have treated this as a recurring expenses and company will take benefit of the
same in Q4 Earnings which we expect to post higher margins.

Sales om Stand alone basis increased by 31% while margins expanded by 7.6% on
standalone basis. Interests costs increased by 25% on Y-o-Y basis to 25 crores. Topline
growth was primarily driven by strong growth in Plastics segment.

Other Income of Rs. 25 crores in creased from Rs. 6 crores on account of Interests on
deposits.

Subsidiaries performance was satisfatctory during the quarter with the sale of Zepplin
Mobile increased by 117% on a sequential basis.

Interest’s costs increased by 25% to 21 crores on account of higher borrowing costs and
increased loans for working capital.

Fairwealth Securities Page 2

 Buy-Sintex Industries

Company Description

Sintex is the largest manufacturer of range of plastic applications. With a well diversified
portfolio and a very little competition in palce it stands a market leader in Indian plastic
proecessing industry.manufactures a wide range of products and manufactures a range of
products including custom moldings for various industries, pre-fabricated and monolithic
structures for temporary and permanent housing solutions, automotive components for
vehicles, trains, aircrafts and marine applications.Plastic division contributes to around 85%
of company’s revenues

Sintex has 9 manufacturing plants across India with 70% market share in storage tanks and
60% in prefabricated structures.

Outlook and Valuation

We expect Plastic segment of the company to continue to show robust growth with increased
contribution from Prefab and monolithic structures for housing and storage tank division to
contribute maximum in future growth which have an order book of more than 1500 crore to
be executed till FY10E..
We expect a healthy topline growth of 35% CAGR over FY08-FY10E. business segment is
likely to slowdown. Also high textile segment grwoth is expected to slowdown we expect a
growth of low single digits.
We expect company to trade between 8-10 P/E ratio and EV/EBITDA levels of around 8
during FY10E.

Valuation Ratios

FY07 FY08 FY09E FY10E

Total Income 1180 2335 3200 3900
EBITDA 209.9 421.3 590 780
EBIT 167.9 344.8 470 560
EBIT 14.2% 14.8% 15% 14%
PAT 93.8 210.7 272 347.1
Pat
7.9% 9.0% 8.50% 8.90%
Margin(%)
AEPS 11.8 16.8 21.7 27.7
EV/EBITDA 10 5.5 4.6 4.4
P/E 11.2 8 6.1 5.1
Source: Company Reports, Fairwealth Research

Fairwealth Securities Page 3

 Buy-Sintex Industries

Investment Rational

Strong Balance sheet

Sintex has strong balance sheet with cash in hand of about Rs1600 crore and net debt to
equity of 0.2. Sintex is expected to generate free cash of Rs 160 crore in FY10E. With
strong cashflow and surplus cash in balance sheet. 900 crores of FCCB raised last year are
convertible in 2013

Company planned to raise cash for expaning operations in US, these plans have been put
on hold citing tough global conditions giving company ample opportunities to use cash
elsewhere. At CMP of Rs137, the stock is trading at an attractive valuation of 5.3x FY10E
earnings and 0.8x FY10E book value.

Revenue Visibility

Strong revenue visisbility in terms of housing requirement in rural and slum dwellings along
with massive demand in Construction in slum dwellings would be a key growth are for the
company. Company order book size of over 1500 crores is 7x times its FY08 revenues of
210 crores.

With 9 manufacturing plants company will be able to cater to local demand at reduced
logistics cost in its pre fabricated structure business.

Foray into evolving busines:

With market leadership in value added products comp[any has huge plans to enter new
business where it can offer value added products in moulded plastics.With growing presence
in US and EU company will aslso be able to tap grwoth opportunities globally.

TECHNICAL OUTLOOK: Sintex Industries

Source:Meta Stock

SINTEX INDUSTRIES has given a breakout above 106 levels .A look at the stock,s RSI shows that it is trading in an overbought zone.
So we recommend to buy the stock on dips at around 125 & then 112, for a price Target of 160 and then 200.

Fairwealth Securities Page 4

 Buy-Sintex Industries

Key Risks:

Greiger Technik

Sintex announced the acquisition of Geiger Technik (Germany based auto custom
molding company) in Aug.08 at an EV of 35.6mn Euros. At the time of acquisition EUR 120
million turnover company had EBITDA margins of 7.5%. Auto Industry slump in European
markets has pushed the company into red, following which Geiger has filed for preliminary
bankruptcy recently. Sintex has already paid USD 10 million In case company winds off Sintex
will have to write down the same..

Raw Material:

Raw Material Costs around 55% of total sales and 65% of total Expenditures. High volatility in
Commodity prices will make it diffcult for Sintex to manage costs.

Global Scenario

Continuous expansion has led to substantial revenue from Global operations. Current economic
scenario is putting alot of pressure on bottomlines of these once profitable companies.
Also currency volatility will put pressure in terms of managing/ hedging these risks.

FCCB

st
Company has a total debt of 1900 crores as on 31 march FY08. Out of this 900 crores was
raised through convertible bonds at USD - INR of 40.5 convertible at Rs. 580 per Equity share.
With share price at 137 conversion seems unlikely and redemption at 30% above issue price
(Interests plus priciple at current exchange rate of 50).

Sintex Industries stock price fell by over 85%

th
upto 9 March’09, while during the same time
Nifty fell by less than 50%.

Fundamentally there is no reason for such deep

correction in the stcok price.

As a result of such sharp correction stock has

th
risen by 90% till 16 April. Stock still trades at
75% discount from its january high of Rs. 575.
th
Stock closed at CMP of Rs.137 on 16 April.

Source: Capital Line

Fairwealth Securities Page 5

 Buy-Sintex Industries

Annexure:

1. Income Statement: Fund Flow Statement:

200803 200703
2008(12) 2007(12)
INCOME SOURCES OF FUNDS :
Share Capital 27.1 22.2
Net Sales 2275.5 1163.1
Other Income Reserves Total 1464.3 630.8
60.1 26.9
Total Income 2335.5 1190.0 Total Shareholders Funds 1491.4 653.0
EXPENDITURE : Minority Interest 20.3 4.1
Raw Materials 1300.0 690.0 Secured Loans 938.2 516.9
Employee Cost 203.3 45.0 Unsecured Loans 988.1 172.3
Selling and Admin. Total Debt 1926.3 689.1
79.8 44.2
Expenses Total Liabilities 3438.0 1346.1
Other Manufacturing APPLICATION OF FUNDS
133.0 76.0
Expenses Net Block 1387.2 649.5
Power and Fuel Cost 72.4 46.8 Capital Work in Progress 255.0 40.3
Total Expenditure 1914.3 980.1 Investments 325.2 188.6
Operating Profit 421.3 209.9 Current Assets, Loans &
Interest 64.3 41.5 Advances
Inventories 302.2 150.6
Gross Profit 356.9 168.4
Sundry Debtors 793.8 233.4
Depreciation 76.5 42.0
Cash and Bank 1371.3 390.1
Profit Before Tax 280.4 126.4
Loans and Advances 161.5 67.1
Tax 69.8 32.7 Total Current Assets 2628.7 841.1
Net Profit 210.7 93.8 Less : Current Liabilities
EO Items & Min. Interest 12.2 2.0 and Provisions
Adj Net profit 198.5 91.8 Current Liabilities 656.3 265.8
EPS after Min. Int 16.8 11.8 Provisions 396.1 37.3
Book Value 110.1 58.9 Total Current Liabilities 1052.4 303.1
Net Current Assets 1576.3 538.1
Source: Company Report, Capital Line
Net Deferred Tax -106.9 -72.4
Total Assets 3438.0 1346.1
Contingent Liabilities 62.6 29.0
2. Cash Flow Statement:
Source: Company Report, Capital Line
200803 200703
Cash and Cash Equivalents at
Beginning of the year 578.71 514.06
Net Cash from Operating Activities 58.61 140.39
Net Cash Used in Investing Activities -971.14 -229.66
Net Cash Used in Financing Activities 2048.23 153.92
Net Inc/(Dec) in Cash and Cash
Equivalent 1135.7 64.65
Cash and Cash Equivalents at End of
the year 1714.41 578.71
Source: Company Report, Capital Line

Fairwealth Securities Page 6

 Buy-Sintex Industries

Coverage:

Our Stock coverage and Returns.

Stock Target Price as on Call date Price on % return absolute % return

2nd April Relative to
Sensex
Set Date Target Stock Sensex Stock Stock Sensex
Price
Educomp 22-Jan-09 2750 1715 8814 2219.3 29.4% 24.2% 5.2%
Havells 30-Jan-09 280 115 8325 163.9 42.5% 31.5% 11.0%
Jaiprakash 12-Feb-09
Associates 110 73 9466 112.85 54.6% 15.6% 38.9%
Lupin 3-Feb-09 780 630 8607 696.35 10.5% 27.2% -16.7%
Tata Steel 6-Mar-09 250 152 8325 269.1 77.0% 31.5% 45.5%
M&M 12-Mar-09 440 345 8344 454.5 31.7% 31.2% 0.5%
Unitech 25-Mar-09 51 34 9667 43.2 27.1% 13.2% 13.8%
Punj Lloyd 30-Mar-09 120/145 85 9549 120.95 42.3% 14.6% 27.7%
Note: Based on 16th April Sensex closing of 10947
Note: All calls are initial/ first time calls
Note: All reports can be accesed on our website under http://www.fairwealth.in/Research.aspx

Note:

Fundamental and Technical reports are independently given and investors are advised to take their decision based on their investment
profile and holding periods.

Disclaimer

This publication has been prepared solely for information purpose and does not constitute a solicitation to any person to buy or sell a security. While
the information contained therein has been obtained from sources believed to be reliable; investors are advised to satisfy themselves before making
any investments. Fairwealth Securities Pvt Ltd does not bear any responsibility for the authentication of the information contained in
the reports and consequently, is not liable for any decisions taken based on the same. Further, Fairwealth Research Reports only provide information
updates and analysis. All opinion for buying and selling are available to investors when they are registered clients of Fairwealth Investment Advisory
Services. As a matter of practice, Fairwealth refrains from publishing any individual names with its reports. As per SEBI requirements it is stated that,
Fairwealth Sec Pvt Ltd., and/or individuals thereof may have positions in securities referred herein and may make purchases or sale while this report is
in circulation.

Fairwealth Securities Page 7