DBFS RESEARCH

EQUITIES INDIA-Entertainment

Analyst : Saji JohnE-mail : research@dbfsindia.com

: 0484-3060129

Associate of Doha Bank

Stock Rating BUY

Sintex Industries

March 2015

Weak quarter for monolithic; Due to challenging times

and policy paralysis, several important decisions pertaining

to low-cost housing and funds sanction for these projects

were put on the back burner. It has resulted in a sectoral

slowdown. outlook elusive yet optimistic: Monolithic

segment posted ~40% YoY de-growth in 3Q, along with

margin contraction of 300-350bps QoQ due to certain

cancellations. Outlook remains elusive with a revival

dependent on clarity on governments plan to implement

mass housing projects. FY15 revenue guidance moderated to

INR6-7b (v/s INR7.5b+ earlier).

Revise estimates: We cut FY15E-17E revenue for

monolithic segment by 15-20% and raise overseas

composites revenue by 5-13%. This translates into 1-3% cut

in EBITDA estimates. Lower tax estimate on the back of

MAT credit to be assumed in the coming quarters; we raise

FY15E/16E/17E EPS by 6%/5%/3%.

Financial

Summary FY14 FY15E FY16E FY17E

Revenue 5842.62 6960.00 8029.52 9703.41

EBITDA 942.35 1225.22 1523.44 1767.42

EBITDA

Margin (%) 16.13 17.60 18.97 18.21

PAT 363.40 510.36 692.51 839.95

EPS 11.72 12.07 16.37 19.86

PE 10.24 9.95 7.33 6.04

ROE (%) 0.10 0.11 0.14 0.15

Stock Data

CMP (24.03.2015) 120

Stock Beta 2.61

NSE Code SINTEX

BSE Code 502742

Bloomberg Code SNTX:NS

Reuters Code SNTX.NS

52 Week High 136.8

52 Week Low 40.5

Market Cap (In crore) 4835.5

Face Value 1

DPS 0.70

PE Multiple 10.7

CMP : Rs . 115Target Price: Rs. 175

Strong momentum across prefabricatedbuilding systems, Custom Molding and Textiles

Robust orders flow in Prefabs for toiletblocks, Aangan wadis schools, agri sheds

besides other rural programs

Custom molding grows 37%, both globaland domestic business see size able traction.

Textile business see 22% growth withimproved margins of over 400 bps

DBFS RESEARCH

March 2015Sintex Industries

EBITDA in line; business recovery on track; FCCB overhangs

remain in EBITDA in line; lower tax boosts PAT: Sintex

Industries (SINT) 3QFY15 revenue grew 32% YoY to

INR18.3b (v/s est. of INR17.1b), while marginal correction in

operating margin translates into EBITDA at INR3.1b, +25%

YoY (v/s est. of INR3b). MAT credit brought down the

effective tax rate to ~7% in 3Q (v/s 32% in 1HFY15), which

boosts PAT to INR1.7b, +90% YoY (v/s est. of INR1.2b).

Momentum intact in Prefab, Textile; asset stabilization

drives composites: Prefab and Textile verticals continue to post

strong sales growth (28% YoY and 23% YoY respectively)

along with margin expansion led by better utilization and strong

product mix. Contribution from the recently-acquired Simonin

boosts revenue from overseas composites by 55% YoY.

Domestic composites recorded 13% YoY growth in revenue

along with 100bps QoQ uptick in margins.

Valuation and investment thesis

Valuation and view - business recovery cycle on track: SINTs

business cycle is favorably poised with an improvement in

macro outlook and likely uptick in government and private

spending in related verticals. FCCB dilution concerns remain an

impediment albeit a significant conversion (~50%) is behind.

The stock trades at 6.04x FY17E EPS, 6.67x FY17E

EV/EBITDA. We value SINT at 7.86x FY17E EV/EBITDA

(v/s 8.45 x FY16E earlier) on the back of improved business

outlook. This translates into fair value of INR152/share.

However we also adjust for potential FCCB-linked dilution to

reach target price of INR148/share (26% upside). Maintain

Buy.

Shareholding Pattern

Promoter 37.72

FII 21.66

DII 19.53

Others 21.09

DBFS RESEARCH

March 2015Sintex Industries

Consistent verticals (35% mix): Momentum

intact in Prefab and Textile

Prefab continues strong sales growth of 28% YoY (v/s31% in 2Q), while EBITDA margin expanded 0.5pp QoQ to

26%. Execution in education (class rooms), healthcare and

sanitations remain key drivers. Opening up of opportunities in

CSR, clean India etc offers renewed growth drivers in coming

years.

Textile (Fabric) segment recorded 23%YoY growth (v/s31% in 2Q) coupled with 3pp QoQ margin expansion to 27.9%.

Deeper penetration to new and existing customers drove the

growth while enriching product portfolio, de-bottle necking of

facilities and high utilization boost operating margins.

In tank segment, the company recorded revenue growth of31% (11% in 2Q), with flattish QoQ trend in margins at 11.8%

Improving verticals (45% mix): Composites - benefits newassets percolating

Domestic composites recorded 13% YoY growth in revenuealong with 1pp QoQ uptick in margins to 19.4% on the back of foraying

into value added offerings. Synergistic benefits with global subsidiaries

are gradually improving.

In overseas business, 3QFY15 witnessed a strong scale up inrevenue (55% YoY) driven by contribution from Simonin (acquired in

July 2014), and steady rampup in Poschmann (Germany and Poland).

Simonin is contributing mid-teen EBITDA-based RoCE with outlook of

margin improvement from 8% to 9-10%.

Management expects easing of investment in defense sector(means higher outsourcing by OEMs), revival in economic outlook and

stimulus announced by ECB to have favorable impact on domestic and

overseas composite segment.

Struggling verticals (10%): Weak quarter for monolithic; Outlookelusive, yet optimistic

Monolithic segment posted ~25% YoY growth in (3rd quater),along with margin contraction of 3-3.5pp QoQ due to certain

cancellations.

Current facility utilization is at 33%. Outlook remains elusivewith revival dependent on clarity on government plan of implementing

mass housing projects. FY15 revenue guidance moderated to INR6-7b

(v/s INR7.5b+ earlier).

Textiles 1108 1306 1516 1530 1535 1710 1860 1720 5460 6825

Plastics 10131 12324 12234 18340 11880 15030 16400 19081 53029 62391

Buliding Materials

4672 6444 5815 10440 5670 8100 7590 9144 27371 30504

Prefab2048 3031 3215 3440 2600 3960 4130 4212 11734 14902

Monolithic and EPC

1869 2663 1950 6060 2370 1310 2610 3969 12542 12259

Tanks755 750 650 940 700 830 850 963 3095 3343

Composites

5459 5880 6419 7900 6210 6930 8810 9937 25658 31887

Domestic 1872 2351 2690 3680 2530 2910 3040 3988 10593 12468

Foreign 3587 3529 3729 4220 3680 4020 5770 5948 15065 19418

Total 11281 13649 13750 19870 13415 16740 18260 20801 58465 19418

Segment wise Performance

DBFS RESEARCH

March 2015Sintex Industries

Ratios 2014E 2015E 2016E 2017E

EPS 11.72 12.07 16.37 19.86

Growth % 3.26 2.95 35.69 21.29

Book Value 112.28 108.09 118.80 136.46

Divd. Per

Share21.78 29.61 27.50 27.50

Dividend % 0.70 0.70 0.65 0.65

P/E 10.24 9.95 7.33 6.04

P/BV 1.07 1.11 1.01 0.88

EV/

EBITDA11.22 9.73 8.45 7.86

Divident

Yield18.15 24.68 22.91 22.91

EBITDA 942.351225.2

21523.44

1767.4

2

Equity

Shareholder31.12 42.30 42.30 42.30

Average RoE 0.10 0.11 0.14 0.15

Average

RoCE0.07 0.10 0.11 0.12

Avergae RoA 0.04 0.13 0.15 0.16

Turnover

Ratios13.25 15.02 16.48 17.29

Debtors (Days

Sales)

138.0

0130.00 125.00 123.00

Inventory

(Days Sales)28.00 27.00 25.00 21.00

Leverage

Ratios2.57 2.15 2.18 2.13

Debt/ Equity 1.08 0.88 0.74 0.62

DBFS RESEARCH

March 2015Sintex Industries

Rs.in crore

Income Statement Mar '14 Mar '15E Mar '16E Mar '17E

Income

Sales Turnover 5,979.05 7112.80 8,197.60 9,888.30

Excise Duty 136.43 152.80 168.08 184.89

Net Sales 5,842.62 6960.00 8,029.52 9,703.41

Expenditure

Raw Materials 3,396.04 3983.17 4590.66 5834.10

Stock Adjustments 9.84 17.00 50 50

Purchase of stock in trade 154.21 161.92 145.73 167.59

Employee Cost 633.05 683.69 786.25 904.19

Other Expenses 707.13 889.00 933.45 980.12

Total Expenses 4,900.27 5734.78 6506.08 7935.99

EBITDA 942.35 1225.22 1523.44 1767.42

Depreciation 254.76 279.29 307.216 334.75

EBIT 687.59 945.93 1216.22 1432.67

Interest 289.38 297.85 327.64 344.02

Other Income 99.28 31.60 34.76 31.284

Extra-ordinary items 16.06 0.00 0 0

EBT (Post Extra-ord Items) 481.43 679.68 923.35 1119.93

Tax 118.03 169.49 230.84 279.98

Reported Net Profit 363.4 510.36 692.51 839.95

Financial Summary Mar '14 Mar '15 Mar '16 Mar '17

Revenue 5842.62 6960.00 8029.52 9703.41

EBITDA 942.35 1225.22 1523.44 1767.42

EBITDA Margin (%) 16.13 17.60 18.97 18.21

PAT 363.40 510.36 692.51 839.95

Net Profit Margin(%) 6.22 7.33 8.62 8.66

DBFS RESEARCH

March 2015Sintex Industries

Consolidated Balance Sheet Mar '14 Mar '15 Mar '16 Mar '17

Sources Of Funds

Total Share Capital 31.12 42.30 42.30 42.30

Equity Share Capital 31.12 42.30 42.30 42.30

Share Application Money 28.31 28.21 28.21 28.21

Preference Share Capital 0.00 0.00 0.00 0.00

Init. Contribution Settler 0.00 0.00 0.00 0.00

Preference Share Application

Money0.00 0.00 0.00 0.00

Employee Stock Opiton 0.00 0.00 0.00 0.00

Reserves 3484.43 4529.76 4982.73 5730.15

Networth 3543.86 4572.06 5025.03 5772.45

Minority Interest 0.00 0.00 0.00 0.00

Long term borrowing 3210.39 3370.91 3033.82 2882.13

Deffered tax libalities (Net) 335.83 403.00 423.15 486.62

Other long term Libailities 62.34 71.69 78.86 90.69

Long term Provisions 15.05 14.30 15.73 19.66

Total Debt 3623.61 2961.66 3551.55 3871.19

Short term Borrowing 608.97 639.42 671.39 684.82

Trade Payable 822.43 986.92 1016.52 1169.00

Other Current liabilities 388.74 524.80 551.04 633.69

Short term Provision 107.92 124.11 130.31 136.83

Total CL & Provisions 1928.06 2275.24 2369.27 2624.34

Total Liabilities 9095.53 9808.96 10945.85 12267.98

Application Of Funds

Fixed Assets 3740.34 3844.27 4036.48 4359.40

Goodwill on consolidation 186.49 195.81 215.40 236.94

Non current investments 248.66 310.83 372.99 447.59

Deffered tax assets (Net) 6.95 7.65 9.94 18.39

Long term loans & Advance 1691.95 1607.35 1687.72 1856.49

Other non - Current Assets 46.66 0.00 22.61 50.00

Non current Assests 5921.05 5965.91 6345.14 6968.80

Inventories 451.10 473.66 497.34 571.94

Current Investments 57.13 59.99 56.99 62.69

Sundry Debtors 2078.46 2390.28 2509.79 2635.28

Cash and Bank Balance 271.98 646.80 743.81 781.01

Short term Loan & Advances 217.95 235.39 588.33 773.03

Other Current Assets 97.86 36.96 204.45 475.24

Total CA, Loans & Advances3174.48 3843.06 4600.71 5299.18

Net Current Assets 1246.42 1567.82 2231.45 2674.84

Total Assets 9095.53 9808.96 10945.85 12267.98

Contingent Liabilities 315.08 378.10 415.91 457.50

Book Value (Rs) 112.28 108.09 118.80 136.46

Liquidity Ratios Mar '14 Mar '15E Mar '16E Mar '17E

Market Price (As on 24.03.2015) 120.00 120.00 120.00 120.00

Common Equity Share (FV =1) 31.12 42.30 42.30 42.30

Market Capitalization + Reserve 7218.83 9605.76 10058.73 10806.15

Enterprise value 10570.46 11920.62 12866.47 13896.33

EBITDA 942.35 1225.22 1523.44 1767.42

EV/EBITDA 11.22 9.73 8.45 7.86

EPS 11.72 12.07 16.37 19.86

P/E Ratio 10.24 9.95 7.33 6.04

Book Value (Rs) 112.28 108.09 118.80 136.46

P/BV 1.07 1.11 1.01 0.88

Mar '14 Mar '15E Mar '16EMar '17E

Net Profit Before Tax after Extra

ordinary Item 481.43 679.68 962.17 1119.93

Other Inc/ dec In operating

Income -54.74 -50.00 -25.00 14.00

Add . Deprecication 254.76 262.95 289.24 303.71

Interest 289.38 297.85 307.22 344.02

970.83 1190.49 1533.63 1781.66

Less Direc tax 138.27 169.49 230.84 279.98

832.56 1070.99 1327.79 1487.68

Inc/Dec in WC -121 -164.49 65.74 102.46

CF From Operating Activity 711.56 906.51 1393.53 1590.14

Cash From Investing Activity

Purchase of Fixed Assets -1289.82 -689.00 -950.00 -1200.00

Sale of fixed assets 86.4 69.12 34.56 17.28

purchase/sale of investments 9.27 12 14 15

Fixed deposits with bank Realised11.46 5 6 2

Interest Received 6.41 28.78 30.24 31.68

Divdend Received 0.02 0.05 0.02 0.03

Net cash used in Investing

Activities -1176.26 -574.05 -865.18 -1134.01

Cash flow from Financing

Activities `

Proceeds from Equity Share &

Share Warrant 0 11.18 11.18 11.18

Proceeds from Debts 222.92 350 -250 83.33

Finance cost -336.52 -297.85 -327.64 -344.02

Divdend paid -25.47 -20.35 -20.35 -21.92

Net Cash used in Financing

Activities -139.07 42.98 -586.81 -271.43

Net Inc/Dec in cash and Cash

Equivalents -603.77 375.44 -58.46 184.70

Cash & cash Equivalents at the

Beginning 878.11 271.36 646.80 588.33

Exchange Differenc -2.98 0 -2.11 0

Cash & cash Equivalents at the

end of the Year 271.36 646.80 588.33 773.03

DBFS RESEARCH

March 2015Sintex Industries

Source: Company data DBFS Research Source: Company data DBFS Research

Business recovery cycle on track

SINTs business cycle is favorably poised withimprovement in macro outlook and likely uptick ingovernment and private spending in relatedverticals.

The company will be a major beneficiary fromgovernments strong focus on wide range ofinfrastructure and social improvement plans viz.Education, Health care, Sanitation, Housing etc.

SINTs most consistent business segment Prefab(20% sales mix and 27% CAGR in FY12-15) shouldaccelerate further with huge potential in publicand private spending in new set of socialinitiatives viz. CSR, Swash Bharat Mission etc.

Revival in mass housing projects through betterclarity on government plan in upcoming unionbudget should aid required drive to subduedmonolithic vertical

Automobile segment after a subnormal 3-4 yearsshould witness revival in both passenger andcommercial segments. This will drive growth indomestic composites, while overseas business (25%sales mix and 16% CAGR over FY12- 15) has beengradually becoming consistent with stabilizationof recent acquisitions.

Our base case revenue/EBITDA CAGR over FY15-17Eis ~14%/16%, which has upside risk from (a) newsources of revenue contribution in prefab segment(v/s current assumption of 22% FY15-17), (b)positive surprise from revival in monolithicbusiness from low base (v/s current assumption of15% FY15-17).

Spinning project to start in 1QFY16 phase wiseand in optimum capacity utilization (in FY17)will contribute INR15b+ of revenue and 23-24%EBITDA margin.

FCCB dilution concerns remain an impedimentalbeit a significant conversion ~50%) is behindwith further dilution risk of ~13%.

Other Announcements

Sintex Industries Limited isplanning greenfield textilesplant including spinning andknitting at Pipavav. Thecompany is planning toinvest around Rs 5500 crorefor the new project which isset to fully commission in2017-18.

Spinning projects : Thetrial runs for 100000spindles is expected tocommissions by April 2015and commercial productionshould commence by September2015. The balance 200000spindles work is in fullswing to being production byDecember 2015.

Valuation and views:

The stock trades at 6.04x FY17E EPS, 6.67x FY17E EV/EBITDA. We value SINT at 7.86x FY17EEV/EBITDA (v/s 8.45 x FY16E earlier) on the back of improved business outlook. This translatesinto fair value of INR152/share. However we also adjust for potential FCCB-linked dilution toreach target price of INR148/share (26% upside). Maintain Buy.

DBFS RESEARCH

March 2015Sintex Industries

DBFS RESEARCH

March 2015Sintex Industries

DBFS RESEARCH

March 2015Sintex Industries

About the Company

Sintex Industries BSE: 502742 (Earlier known as The Bharat Vijay Mills Ltd) is the world largest

producer of plastic water tank.[4] It is also Asia's largest manufacturer of corduroy fabrics.[5] Sintex

has a strong presence in the European, American, African, and Asian markets including countries like

France, Germany and USA. It is primarily in manufacturing textiles & plastic products. Its

manufacturing includes a wide range of plastic products including prefabricated structures, industrial

custom moulding products, monolithic constructions and water storage tanks. In the textile segment, the

company focuses on niche segment specializing in men's shirting.

DBFS RESEARCH

March 2015Sindex Industries

Analyst Certification

I Saji John hereby certify that the views expressed in this research report accurately reflect my personal views about the subject

securities and issuers. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific

recommendations or view expressed in this research report.

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Disclaimer

DBFS RESEARCH

March 2015Sintex Industries

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