Sinindus 20120215 (Good)

Interiors
CustomMolding
ElectricalEngineering
Industrial
PrefabricatedBuildings
Building&Construction
2ndFeb,2011

Sintex Industries Limited

Diversified | Initiating Coverage
Company Description
Buy
th
B P EQUITIES
15 February 2012
Stock Rating SELL
The Sintex group is one of the leading providers of plastics and niche textile-related BUY HOLD products in India. With global footprints spanning 9 countries, Sintex has a strong presence in the European, American, African, and Asian markets including countries like France, Germany and USA. In the textile division, the company manufactures high-value, yarn-dyed structured fabrics, corduroy > 15% -5% to 15% and items relating to home textiles. In the plastic division, the company manufactures the following: storage solutions for water, oil and fuel; prefabricated structures, monolithic structures, industrial custom moulded products, consumer custom moulded products and interiors products. Sector Outlook Investment Rationale Monolithic Business-Short term pain but long term gain Sintexs monolithic business is witnessing a temporary slowdown due to government inefficiencies regarding payment delays and inaction on passing of orders which has prompted the company to moderate its execution of existing orders. However this will help the company to conserve its cash and also reduce its working capital days as monolithic business is more working capital intensive than capital intensive. We believe that Sintexs strong order book of ~ Rs 30 bn which is to be executed over the next two years and governments continued thrust on various low cost housing schemes for low and middle income groups would provide this business strong growth momentum in the long run. Robust growth in prefabrication business The companys prefab business witnessed a decline in the last two years due to a slowdown in BT shelter business (telecom). However we expect the company to achieve ~19% CAGR over FY11FY14E on the back of governments increased spending on social welfare programmes like National Rural Health Mission and Sarva Shiksha Abhiyan which are the key growth drivers for this business. Sintex enjoys high margins (~18-20%) in this business and we believe with utilizations expected to reach optimum levels in FY13 the company would be able to sustain ~19% margins going forward. Custom Mouldings to benefit from synergies due to foreign acquisitions
Stock CMP (Rs) Target Price (Rs) BSE code NSE Symbol Bloomberg Reuters Key Data Nifty 52WeekH/L(Rs) O/s Shares (mn) Market Cap (Rs mn) Face Value (Rs) Average volume
< -5%
Bullish
96 122 502742 SINTEX SINT IN SINT.BO
5,416 195/58.7 272.99 26,153 1.00
The companys custom moulding business grew at 26% CAGR over FY08-FY11 as the use of com- 3 months posites in place of metals grew substantially. The company has increased its geographical presence 6 months and tapped new markets and clients via its overseas subsidiaries which has helped augment its reve1 year nues and margins. We believe that as more processes are transferred to India and as more composites from India are supplied overseas synergies would be achieved which would help expand margins going forward.
Share Holding Pattern (%)
71,47,890 46,09,633 30,74,823
Valuation & Outlook The company currently is facing pressure due to slowdown in its monolithic and custom moulding business, high working capital days and issues regarding its FCCB repayment. However we believe all these issues are short term in nature and the stock price has already factored in these issues. We expect the companys revenues to grow at 9% CAGR on a conservative basis. At CMP the stock is trading at 6.3x FY13E P/E and 5.2x FY13E EV/EBITDA. We initiate coverage on Sintex Industries Ltd with a BUY rating and have arrived at target price of Rs 122 which implies ~27% upside from the current levels. We have valued the stock at 8x FY13E EPS which is ~33% discount to its long term average P/E. (We had issued a pre-initiating coverage report on 19th Jan 2012 when price was Rs 73 with a target price of Rs 95)
YE March (Rs mn) Net Sales Sales Growth (Y-o-Y) EBITDA EBITDA Growth (Y-o-Y) Net Profit Net Profit Growth (Y-o-Y) Diluted EPS Diluted EPS Growth (Y-o-Y) No of Diluted shares (mn) EBITDA (%) NPM (%) RoE (%) RoCE (%) Debt / Equity (x) P/E (x) P/BV (x) EV/EBITDA (x)
Source: Company, BP Equities Research
25.6% 8.9% 30.6%
35.0%
Promoter
FII
DII
Others
Key Financials FY10 FY11 33,192 44,837 5.9% 35.1% 5,380 8,155 3.1% 51.6% 3,290 4,600 1.2% 39.8% 12.14 16.97 1.2% 39.8% 271.0 271.0 Key Ratios 16.2% 18.2% 9.9% 10.3% 17.9% 21.1% 8.6% 10.6% 1.4x 1.2x Valuation Ratios 7.9x 5.6x 1.3x 1.1x 8.0x 5.4x
FY12E 46,910 4.6% 7,563 -7.2% 3,024 -34.3% 11.16 -34.3% 271.0 16.1% 6.4% 11.8% 7.3% 1.1x 8.6x 1.0x 6.1x
FY13E 51,677 10.2% 8,024 6.1% 4,132 36.6% 15.25 36.6% 271.0 15.5% 8.0% 14.2% 9.1% 0.5x 6.3x 0.8x 5.2x
FY14E 57,764 11.8% 8,660 7.9% 5,524 33.7% 20.38 33.7% 271.0 15.0% 9.6% 16.4% 12.1% 0.3x 4.7x 0.7x 4.3x
Relative Price Chart
180 150 120 90 60 Feb-11 May-11 Aug-11 Nov-11 Feb-12
Sintex
Research Analyst Jinit Mehta
Relative Nifty
jinitmehta@bpwealth.com 022-61596408

Investment rationale
Initiating Coverage
Monolithic Business (~30% FY11 revenues) - Short term pain but long term gain
Savings in cost and time Monolithic Construction is used in low cost mass housing solutions like slum rehabilitation, Janta housing and low & middle income group houses. The construction method involves filling the hollow plastic frame work with concrete at the site. Under Monolithic, the time taken to cast an entire floor is ~7days as compared to 20 days taken under the conventional brick and mortar method. Apart from saving substantial time, cost under monolithic is also 8-10% less than the traditional method. These benefits have encouraged various housing boards to implement monolithic construction for its housing projects due to which 90% of Sintexs order book consists of government orders. Higher EBITDA margins compared to peers Sintex has pioneered the monolithic construction business in India and currently is the leader in this business having an order book of Rs 30 bn and enjoys EBITDA margins higher than any of its competitors in this space. The company enjoys ~18-20% margins compared to that of its competitors who on average enjoy 10-12% margins primarily due to the fact that Sintex uses plastic formwork compared to aluminium formwork used by its competitors like L&T, Shapoorji Pallonji and BE BIllimora. Sintexs cost of manufacturing plastic formwork is lower as it manufactures the plastic in-house and is able to recycle and use them again. Also as the company is an experienced player with superior technology, it is able to execute large scale projects, thus enabling it to enjoy higher margins on the back of better economies of scale. Efficiencies comes in executing large order size rather than constructing single buildings in this business. Average revenue per site for the company is Rs 750 mn now as compared to Rs 350-500 mn earlier. Working capital intensive Monolithic construction is more working capital intensive than capital intensive in nature. For Rs 1,000 mn monolithic order, Rs 400-450 mn would be working capital requirement whereas only Rs 150 mn would be the capital expenditure requirement due to which smaller players find it difficult to compete with Sintex Industries which being an experienced and premier player has the expertise to execute large working capital intensive orders.
Monolithic Construction
Growth Drivers:
Market Opputunity: Rs 15,000 bn
1) Higher spending on mass housing 2) Participation with private sector 3) Huge shortage (>50mn houses) 4) Decongestion of cities 5) Slum rehabilitation 6) Owning house than renting (easy f inance)
Competitive Advantage: 1) Fast implementation 2) Innovative and cost competitive 3) Lean and Mean organisation with lead time advantages
Stategy: 1) Building execution capabilities 2) Bidding f or larger projects 3) Joint developer model
Source: Company Presentation
Institutional Research
BP Equities Pvt. Limited (www .bpw ealth.com) BP Equities reports are also available on Bloomberg [BPEP <GO>]
15/2/2012

Delay tactics used by government hurting Monolithic Business currently The companys monolithic business is currently facing a slow down due to governments inactivity on growth oriented projects. As mentioned earlier, 90% of this business order book consists of government orders due to which any slowdown in governments activity directly affects Sintexs business. Monolithic segment is currently facing headwinds due to delay in payments by the government, delay in site clearances and deferring of orders. Increase in the working capital cycle The sluggish government activities has led to execution delays in Sintexs monolithic business. Being a working capital intensive business, the average working capital days in this segment has remained high due to the previously mentioned government delays faced by the company. This has prompted the company to moderate its execution of orders to conserve more cash which would help the company improve its working cycle. Long-term prospect looking good for monolithic business Although the monolithic business is facing a slow down currently, the long term potential for this business is huge on the back of continued thrust in government spending on various social infrastructure programmes. Programmes such as Indira Awas Yojana, JNNURM and Rajiv Awas Yojana focuses on building low cost housing & slum rehabilitation which provides Sintex Industries with huge business opportunities. Going forward, the government is expected to increase its spend on such programmes through its 12th Five Year Plan (2012-13 to 2016-17).
Initiating Coverage
Figure: Governments capex on social infrastructure programmes
Rs bn FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012
Indira Awas Yojana 28 26 40 54 89 100 100
JNNURM (BSUP) 3 10 15 19 23 29
JNNURM (IHSDP)
Rajiv Awas Yojana Govts spend on social infrastructure programmes is expected to increase considerably in 12th Five year plan (2012-13 to 2016-17)
5 5 6 11 12
2 13 13
Source: www.indiabudget.nic.in, BP Equities Research
Figure: Monolithic Construction Order Book

35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12
Current order book is ~Rs 30 bn and the company has guided to a slowdown in execution of orders to conserve cash and improve working capital
Monolithic Order Book (Rs mn)

Source: BP Equities Research
15/2/2012

Monolithic Business: Revenue growth The companys monolithic business has grew at 85.2% CAGR from FY08-FY11 to Rs 13,350 mn (~30% of FY11 revenues) on the back of continuous spend by the government on various social infrastructure programmes. However we expect the company to achieve 2.3% CAGR in its revenues over FY11-FY14E due to considerable slowdown in its order book execution and delay in payments by the government.
Initiating Coverage
Figure: Monolithic Business Revenue Growth

15,000 12,500 86% 10,000 7,500 5,000 8% 2,500 0 FY08 FY09 FY10 FY11 -10% FY12E FY13E FY14E 59% 115% 120% 100% 80% 60% 40% 10% 20% 0% -20%
We expect the company to post negative growth of 10% in FY12 due to slowdown in order execution and delay in payments.
Monolithic Revenues (Rs mn)

Y-o-Y Growth
Monolithic Business: EBITDA margins This segment enjoys high EBITDA margins due to its superior technology and manufacturing capabilities. However going forward we expect the margins to decline as competition in this business is expected to increase due to low entry barriers in this business due to which we believe the margins to decrease by 400 bps over FY11 to FY14 to ~16%.
Figure: Monolithic Business EBITDA Margin

3,000 2,500 2,000 1,500 1,000 500 0 FY08 FY09 FY10 FY11 FY12E FY13E FY14E 19.0% 18.5% 19.0% 17.3% 17.0% 16.0% 15.0% 10.0% 5.0% 0.0% 20.0% 25.0% 20.0%
We expect decrease in the EBITDA margins to 16-17% from 19-20% earlier going forward
EBITDA (Rs mn)

EBITDA Margin
15/2/2012
Initiating Coverage
Robust growth in prefabrication business (~14.5% FY11 revenues)
Considerable saving in execution time Prefabs are used worldwide and are common in housing and construction and have been revolutionizing construction methods in India. They can be used for building temporary as well as permanent residences, setting up of schools, dispensaries, orphanages, police stations, defense shelters and telecom BT shelters. Prefabs are structures which are made out of plastic, steel and concrete in the factory and are than transported to the sites where they are assembled. Prefab construction results in 10-15% cost saving and 60-70% saving in execution time compared to conventional construction methods. Typically a prefabrication structure can be put together in ~10 days starting from the fabrication process in the manufacturing plant to completion of the installation work at the site. Large geographical presence The companys prefab business was not initially accepted by the state governments and the company was finding it difficult to get approvals for its projects. However after the Bhuj earthquake in 2001, Sintex built lot of shelters and clinics within a short period of time which helped the companys product and technology being accepted due to which the company started receiving new orders. Currently the company has approvals from 17 state governments and covers~65 to 70% of Indias geography due to its six state-of-the-art manufacturing plants across India with each plant catering to ~1,500 km radius geographical area. The company may set up a manufacturing plant in the North-Eastern part of India considering the robust demand being witnessed for prefab from that region. Currently ~70% of the companys prefab business comes from the government and the balance 30% from private players with private players generally placing orders to construct cold-storage chains, agricultural sheds and bunk houses. Maintaining high EBITDA margins The company has been performing well in this segment and has been delivering healthy EBITDA margins of 18-20% consistently over the past few years. The key to deliver healthy margins in this business is the speedy execution of the project as the construction site is usually located in far off remote regions. Logistics, raw materials and kit making constitute 25%, 25-30% and 25% of total cost respectively. Since logistics cost forms a major part of the total cost it is important for the team to take all the necessary tools & equipment and components required for installation before leaving the factory. If any necessary component is left behind, it becomes unviable for the team to return to the factory to get that component considering the high logistics cost involved due to which the company assures that all required items are taken along with the team before leaving the factory. Figure: Companys prefab plants location and serving of states Existing Prefab Plant Location Approved States Delhi Punjab Haryana Himachal Pradesh Uttar Pradesh Gujarat Rajasthan West Bengal Assam Bihar Maharashtra Madhya Pradesh Chhattisgarh Tamil Nadu Kerala Uttar Pradesh Bihar
BP Equities Pvt. Limited (www .bpw ealth.com) BP Equities reports are also available on Bloomberg [BPEP <GO>] 15/2/2012 6
Baddi (Himachal Pradesh)
Kalol (Gujarat)
Kolkata (West Bengal)
Nagpur (Maharashtra)
Salem (Tamil Nadu) Dadri (Uttar Pradesh)


Robust growth
Companys prefab business has grown 14.6% over FY10 to FY11 even though there has been a slowdown in the BT shelter business. The key demand drivers for the companys prefab business is governments spend on social infrastructure programmes like Sarva Shiksha Abihyan and National Rural Health Mission which has provided Sintex ample business opportunities in the education, healthcare and sanitation space. We expect the government to increase its spend on such social infrastructure programmes in its 12th Five Year Plan (2012-13 to 2016-17) on the back of which we expect Sintex to post robust growth of 20% CAGR over FY12E-FY14E. Also Sintexs prefab division is currently better positioned than its monolithic business which is facing delays in order approval and release of payments. The prefab business has a smaller ticket size of ~Rs 1 mn compared to monolithics average ticket size of ~Rs 75mn due to which the likelihood of payment delay in the prefab business is significantly less. The average execution time of project is also considerably less in prefab compared to monolithic business (~10 days in prefab) due to which postponement/cancellation of order is less in the prefab business.
Initiating Coverage
Prefab Business
Growth Drivers:
Market Opputunity: Rs 100 bn
1) Increasing Govt. spending on rural inf ra, education, health, sanitation, orphanages, police stations, army barracks, agri-sheds, cold chain solution and worker shelters 2) Higher inf ra spending will spur demand
Competitive Advantage: 1) Product portf olio 2) Presence across country gives leading logistics edge 3) Lead time advantage 4) Multiple solutions, multiple market segments
Stategy: 1) New products in warehousing and agrisheds 2) Expansion in remaining states
Figure: Governments capex on social infrastructure programmes

250 210 200 178 150 100 100 72 66 50 82 107 100 131 121 131 141 150 154
0 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012
Sarva Shiksha Abhiyan (Rs bn)

Source: www.indiabudget.nic.in, BP Equities Research
National Rural Health Mission (Rs bn)
15/2/2012

Figure: Prefab Business Revenue Growth
12,000 10,000 8,000 6,000 1.2% 4,000 2,000 -15.7% 0 FY08 FY09 FY10 FY11 FY12E FY13E FY14E -20% -10% 0% 14.6% 15.5% 20.0% 30% 20% 10%
Initiating Coverage
20.0%
Companys prefab business is expected to show robust growth going forward and we believe it would grow at 18.5% CAGR over FY11-FY14E
Prefab Revenues (Rs mn)

Y-o-Y Growth
Figure: Prefab Business EBITDA Margin

2,500 2,000 1,500 1,000 500 0 FY08 FY09 FY10 FY11 FY12E FY13E FY14E 18.7% 19.7% 16.6% 20.5% 19.0% 19.0% 18.0% 25% 20% 15% 10% 5% 0%
The prefab business, we believe, might face some pressure on its margins due to which we expect its margins to decrease by 250 bps by FY14E.
EBITDA (Rs mn)

EBITDA Margin
15/2/2012
Initiating Coverage
Custom Mouldings to benefit from synergies (~41% FY11 revenues)
Long term replacement for metals The custom moulding business manufactures composites which is potentially seen as a long term replacement for metals. Composites are made by combining two or more different materials to manufacture a new material, for e.g. a mixture of polymer and high end epoxy can produce fiberglass which is an immensely versatile material combining its light weight with an inherent strength to provide a
weather resistant finish. Fiberglass finds its applications in various products and industries such as aviation industry, building of boats and spots car bodies, telecommunications industry, storage tanks etc.
Key benefits of composites

Lightweight yet strong Higher strength
Corrosion and chemical resistance Elastic and non conducive
Leading player in India
The raw materials cost of composites are 15-20% costlier than metal prices. However costs are driven down as application and volumes grow since 60-65% of total cost is raw material cost whereas the rest is employee cost. Sintex is a leading player in the custom moulding segment in India with manufacturing plants across the country and having presence in various segments.
Market Segments

Automotive Electrical Aerospace & Defense Medical Mass Transit
Industrial Trucks & Tractors Construction Recreation Wind Energy Doormatics & House hold products
Margin expansion due to synergies
The company, in the past few years has grown inorganically having made acquisitions in India and abroad to move up the product value chain and gain access to new clients and superior technology. It acquired six companies in OECD countries thereby having presence in four continents and eight countries with low cost manufacturing bases. The acquisitions would help the company expand its margins due to deployment of superior technology at India and outsourcing by overseas subsidiaries for low cost manufacturing in India.
Figure: Custom Moulding Business-Acquisition History
Company Name Wausaukee Composites Country USA Acquisition Date Jun-07 Custom Moulding Business Auto & medical imaging, Mass transit, etc. Automotive, electrical, aeronautics and defence sector Automotive sector Structural plastic and composite components Plastic products for the automotive industry Acquisition Price USD 20.5 mn FY 11 Revenues INR 1,700 mn
Nief Plastics S.A. (further acquired AIP and Simop/Simco) Bright Autoplast Pvt Ltd Nero Plastic Geiger Technik
France
Jun-07
EUR 40.2 mn
INR 9,470 mn
India USA Germany
Sep-07 Dec-07 Jul-08
INR 1489.0 mn USD 4.7 mn USD 10 mn
INR 2,730 mn Merged with Wausaukee Written Off
15/2/2012
Initiating Coverage
Custom Moulding
Growth Drivers:
Market Opputunity: ~$ 15 bn Global
1) Higher usage of composites as replacement to metals 2) New verticals 3) Weight reduction f or f uel ef f icciency 4) Light weight yet strong
5) Resilent weather ability 6) Chemically inert and high electrical inulation
Competitive Advantage: 1) Technology 2) Penetration in OEMs 3) Fortune 500 customers 4) Foot print across 4 continents 5) Low cost manuf acturing bases
Stategy: 1) Collaboration among subsidiaries 2) Increasing client mining 3) Acquired tecnology and clients through acquisition 4) Labor arbitrage and synergy drives
Figure: Custom Mouldings Main and Secondary Processes Main Processes Rotational molding (multi layer, Insert molding) PVC extrusion Injection molding of thermoplastics (gas assisted, In mould inserts) Blow molding Singe/twin sheet thermoforming Custom molding and custom extrusion Injection molding of thermosets Sheet molding compounds Pultrusion Resin transfer molding Chop-hoop-winding Light RTM and vacuum bag infusion molding Liquid composite molding Open mold (Hand Lay-up) Reaction injection molding Soft-touch Continuous/Discontinuous panels Secondary Processes Tooling Design and development Jigs and Fixtures Insitu Foaming PU painting and others Powder coating Silk screening Pad printing Cosmetic improvement (Decorations) Laser etching Ultrasonic welding Plastic and metal welding Plastic fabrication Metal fabrication Sheet metal cutting, bending, sheering Press breaking Roll forming Robotic water jet cutting and bonding Assembly and sub-component assemblies
15/2/2012
10
Initiating Coverage
Domestic Custom Moulding Business (~9% FY11 revenues)
Sintexs domestic custom moulding business caters to the electrical equipment, automotive and household space and manufactures tamper-proof SMC Meter Boxes, cross arms for power transmission grids, polymeric insulators etc. This segment has grown at 7.4% CAGR over FY09-FY11 and we expect the segment to grow at~12% CAGR over FY11-FY14E on the back of growing demand from the electrical and automotive industry. We believe that the various government initiatives undertaken to provide electricity to rural India and continued impressive growth in the automobile sector would drive the demand for the companys domestic composites products going forward. Sintex has been able to achieve margins in the range of 22-24% in the past few years in this segment and we expect the company to maintain margins at 21-23% going forward.
Figure: Domestic Custom Moulding Business Revenue Growth

6,000 5,000 4,000 3,000 2,000 1,000 0 FY09 FY10 FY11 FY12E FY13E FY14E 2.0% 13.0% 10.0% 10.0% 18% 15% 12% 9% 6% 3% 0%
15.0%
Revenues (Rs mn)

Revenue Growth
Figure: Domestic Custom Moulding Business EBITDA Margins

1,500 1,250 1,000 750 500 250 0 FY09 FY10 FY11 FY12E FY13E FY14E 22.0% 21.0% 23.0% 24.3% 22.5% 25.5% 24.0% 23.5% 22.5% 21.0% 19.5% 18.0%
EBITDA (Rs mn)

EBITDA Margin
15/2/2012
11
Initiating Coverage
Acquisition of Bright Brothers (~6.2% FY11 revenues)
Sintex acquired Bright Brothers in September 2007 for Rs 1,489 mn to enter the domestic automotive segment. The company today is a Full Solution Supplier and has been offering innovative solutions to its customers for the past 34 years. The company employs range of plastic technologies like Injection moulding with gas assisted PEP & Sequential flow technology , Blow moulding , Vacuum forming , PU foaming , Vibration welding , Ultrasonic welding , PU painting and sub-assemblies. The company has six manufacturing plants across India and manufactures products like Instrument panels, Dash boards, Pillar Trims, Radiator Grills, Air vents, Grab handles and under the hood components. Bright Brothers has grown at ~46.6% CAGR over FY09-FY11 to post revenues of Rs 2,730 mn in FY11 and we have estimated a very conservative 12.5% CAGR over FY11-FY14E as we expect a slowdown in the Indian automobile sector. We expect the EBITDA margins to remain in the 14-16% range going forward. Sintex believed that it would benefit from synergies between Nief (acquired in June 2007) and Bright and would cater to clients like Maruti, Hyundai, Tata Motors, M&M, General Motors, Ashok Leyland, Nissan, Force Motors, TVS, Honda etc.
Figure: Bright Brothers Revenue Growth

4,000 3,200 2,400 1,600 10.0% 800 0 FY09 FY10 FY11 FY12E FY13E FY14E 12.5% 15.0% 60% 42.9% 50% 40% 30% 20% 10% 0%
50.4%
Bright's Revenues (Rs mn)

Revenue Growth
Figure: Bright Brothers EBITDA Margins

750 16.0% 600 15.0% 450 300 150 0 FY09 FY10 FY11 FY12E FY13E EBITDA Margin FY14E 14.5% 15.0% 14.0% 13.0% 12.0% 16.1% 16.0% 17.0%
14.0%
14.0%
EBITDA (Rs mn)

15/2/2012
12
Initiating Coverage
Acquisition of Nief Plastics (~22% FY11 revenues)
Sintex acquired Nief Plastics in June 2007 for EUR 34.77 mn. Nief currently has 9 plants in France, 2 in Eastern Europe (Hungary and Slovakia) and 2 in Northern Africa (Tunisia and Morocco) and deliver customers in the fields of automotive, electrical/electromechanical industry, aeronautics/defense, household appliances, medical, construction, sport and leisure etc with a strong client base like Scheider, Faurecia, Siemens, Legrand, ABB, Areva and Alstom. Nief has provided Sintex access to superior manufacturing technology and strong client base and has helped the company gain a foothold in the European plastic components market due to its competitive pricing and technical qualifications. Sintex has also crated a strong presence in the automotive and electrical composite market due to the synergies achieved between Nief Plastics and Bright Autoplast. Niefs revenues has been growing at 16.4% CAGR over FY09-FY11 and we expect the company to grow at 9.5% CAGR over FY11-FY14E. Nief has been achieving ~12% EBITDA margins in this business and we expect the margins to remain in the range of 10-11% going forward.
Figure: Nief Plastics Revenue Growth

14,000 12,000 10,000 8,000 10.1% 6,000 4,000 2,000 0 FY09 FY10 FY11 FY12E FY13E Revenue Growth FY14E 5% 0% 8.5% 10.0% 10.0% 10% 15% 23.2% 25% 20%
Nief Revenues (Rs mn)

Figure: Nief Plastics EBITDA Margins

1,500 1,250 1,000 750 500 250 0 FY09 FY10 FY11 FY12E FY13E FY14E 10.0% 10.5% 11.5% 11.0% 12.0% 12.0% 12.5% 12.0% 11.5% 11.0% 10.5% 10.0% 9.5% 9.0%
EBITDA (Rs mn)

EBITDA Margin
15/2/2012
13
Initiating Coverage
Acquisition of Wausaukee Composites Inc (~3.8% FY11 revenues)
Sintex acquired Wausaukee Composites Inc in June 2007 for USD 20.5 mn. The acquisition helped Sintex to enter the US composite market and gain access to a number of Fortune 500 companies. Wausaukee is based in Wisconsin (USA) and is a leading manufacturer of highly-engineered composite components for Original Equipment Manufacturer (OEM) customers in the Construction Equipment, Agricultural Equipment, Mass Transportation, Wind Energy, Medical and Security Imaging, Commercial Site Furnishing, Therapeutic Systems, Corrosion-Resistant Materials Handling and recreation Industries. The company has total four manufacturing plants located in the Midwestern United States and provides composite plastic and fiberglass components to more than 35 OEM customers globally, producing more than 100,000 units annually. Wausaukee acquired Nero Plastics in December 2007 for USD 4.7 mn and generated revenues of Rs 603.4 mn in CY10. Nero Plastics is a custom moulder of low and medium volume and structural plastic and composite components. Wausaukees revenues had a negative CAGR of ~7.5% over FY09-FY11 and is expected to grow at 6.6% CAGR over FY11FY14E with EBITDA margins in the range of 9-10%.
Figure: Wausaukees Revenue Growth

2,500 15.7% 2,000 1,500 1,000 500 -26.0% 0 FY09 FY10 FY11 FY12E FY13E FY14E -30% 0.0% 10.0% 10.0% 10% 0% -10% -20% 20%
Wausaukee's Revenues (Rs mn)

Revenue Growth
Figure: Wausaukees EBITDA Margins

250 200 7.0% 150 100 50 0 FY09 FY10 FY11 EBITDA (Rs mn)
10.0%
10.1% 9.0%
9.5%
10.0%
12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0%
FY12E
FY13E EBITDA Margin
FY14E
15/2/2012
14
Initiating Coverage
Figure: Custom Moulding Business-Segmental break-up of revenues and EBITDA

Rs mn Nief Plastics Revenue Revenue Growth (%) EBITDA EBITDA Margin (%) Wausaukee Composites Revenue Revenue Growth (%) EBITDA EBITDA Margin (%) Bright Autoplast Ltd Revenue Revenue Growth (%) EBITDA EBITDA Margin (%) Domestic Custom Moulding Revenue Revenue Growth (%) EBITDA EBITDA Margin (%) Total Custom Moulding Revenue Revenue Growth (%) EBITDA EBITDA Margin (%) 13,910 54.0% 1,932 13.9% 14,825 6.6% 2,177 14.7% 18,170 22.6% 2,752 15.1% 19,871 9.4% 2,596 13.1% 21,933 10.4% 3,027 13.8% 24,295 10.8% 3,503 14.4% 3,470 -15.8% 763 22.0% 3,540 2.0% 814 23.0% 4,000 13.0% 972 24.3% 4,600 15.0% 966 21.0% 5,060 10.0% 1,139 22.5% 5,566 10.0% 1,308 23.5% 1,270 217.5% 203 16.0% 1,910 50.4% 267 14.0% 2,730 42.9% 440 16.1% 3,003 10.0% 420 14.0% 3,378 12.5% 490 14.5% 3,885 15.0% 583 15.0% 1,987 94.8% 139 7.0% 1,469 -26.0% 147 10.0% 1,700 15.7% 172 10.1% 1,700 0.0% 153 9.0% 1,870 10.0% 178 9.5% 2,057 10.0% 206 10.0% 7,183 105.8% 826 11.5% 7,906 10.1% 949 12.0% 9,740 23.2% 1,169 12.0% 10,568 8.5% 1,057 10.0% 11,625 10.0% 1,221 10.5% 12,787 10.0% 1,407 11.0% FY09 FY10 FY11 FY12E FY13E FY14E
Figure: Custom Moulding FY11 Revenue Mix
Figure: Custom Moulding FY11 EBITDA Mix
22.9%
35.0% 42.1%
52.6% 16.0% 8.5%

15.8% 6.2%
Nief Plastics Bright Autoplast Ltd

Wausaukee Composites Domestic Custom Moulding
Nief Plastics Bright Autoplast Ltd

Wausaukee Composites Domestic Custom Moulding
15/2/2012
15
Initiating Coverage
Textile Business (~9.9% FY11 revenues)
Sintexs textile division is a profitable and high-margin segment operating under the brand name of BVM. The division is the largest producer of corduroy and structured fabric in India and specializes in distinctive products catering to the niche upper segment of fashion industry. Sintex operates a state-of -the-art composite mill at Kalol in Gujarat and it is the only organized corduroy mill in India which is into continuous fabric processing. The company manufactures unique fabrics with new designs (nearly 50,000 per annum) and finishes which cannot be duplicated and has the capability to deliver designs with variety of weaving including Dobby, Jacquard and double beam etc. Sintex has alliances with various European design houses and a UK bases textile marketing company which helps the company gain traction in its business. The company provides fabrics to reputed brands like Arrow and Van Heusen and indirectly sells fabrics to global retail majors like Armani, Hugo Boss, Diesel, Burberry, DKNY, S.Oliver, Zara, Mexx, Meggimo Dotti, Banana Republic etc. The company focuses on high-end structured dyed yarn fabrics considering its niche market positioning and provides fibre to fabric facilities. The textile division can be segregated into 1) High end mens structured shirting fabrics and 2) Yarn-dyed corduroy and ultima cotton yarn based corduroy. The textile divisions revenue has grown at 9% CAGR over FY08-FY11 and we expect it to grow at 7% CAGR over FY11-FY14E. Sintexs textile business is a high margin business and we expect the company to achieve EBITDA margins in the range of 22-23% going forward.
Figure: Textile Divisions Revenue & EBITDA Growth

6,000 5,000 4,000 3,000 2,000 1,000 0 FY09 FY10 FY11 FY12E FY13E FY14E -6.5% -10% 29.0% 20.0% 24.0% 7.0% 7.0% 27.0% 23.0% 22.5% 22.0% 20% 7.0% 10% 0% 40% 30%
Textile Revenues (Rs mn) Revenue Growth

EBITDA (Rs mn) EBITDA Margin
Storage tanks business (~4.5%vFY11 revenues)
Sintex has become synonymous with water storage tanks since the time it began to manufacture tanks in 1975. The company manufactures both overhead and underground storage tanks and is the market leader in this segment. In the initial years there was great demand for this product as customers preferred this over the traditional brick and mortar tanks and there were few competitors. Currently this business contributes ~4.5% to the total business and enjoys EBITDA margins in the range of 11%. The business has grown at 18.5% CAGR over FY08-FY11 and we expect it to grow at 12.3% CAGR over FY11-FY14E with EBITDA margins in the range of 8-10%.
15/2/2012
16

Financial Analysis
Initiating Coverage
Sintexs Revenue Growth
The companys net sales has grown at ~25% CAGR over FY08-FY11 to Rs 44,344 mn on the back of 85.2% CAGR in monolithic business and 26.2% CAGR in custom moulding business during the same period. We expect the company to grow at 9% CAGR over FY11-FY14E on the back of 18.5% CAGR in prefab business and 10.2% CAGR in custom moulding business. We believe monolithic business to witness a considerable slowdown and expect its revenue contribution to fall from 30% in FY11 to 25% in FY14 on the back of muted revenue growth of 2.3% CAGR over FY11-FY14E.
Figure: Companys Consolidated Revenue Growth

60,000 50,000 30.00% 40,000 30,000 20,000 10,000 FY08 FY09 FY10 FY11 FY12E FY13E FY14E 5.9% 4.6% 0.00% 10.2% 11.8% 10.00% 20.00% 36.5% 40.00%
35.1%
Revenues (Rs mn)

Growth %
Sintexs EBITDA Margins
We expect the companys EBITDA margin to decline to 15% by FY14 from 18.2% in FY11 due to declining trend in margins of monolithic and prefab business. The companys net profit margins are also expected to show a sharp decline in FY12 to 6.4%. However we believe it to improve in FY13 and FY14 on account of lower interest outgo and achieve 8% and 9.6% respectively. Figure: Companys Consolidated EBITDA and Profit Margins
9,000 7,500 6,000 10.0% 4,500 3,000 1,500 FY08 FY09 FY10 FY11 FY12E FY13E FY14E NPM (%) 10.4% 9.9% 18.2% 16.2% 16.1% 15.5% 15.0% 10.3% 8.0% 6.4% 9.6% 12.0% 8.0% 4.0% 0.0% 20.0% 16.0%
17.7%
16.6%
EBITDA (Rs mn)
PAT (Rs mn)
EBITDA Margin (%)
15/2/2012
17
Initiating Coverage
Sintexs FCCB analysis
Sintex had raised USD 225 mn of FCCBs in FY08 to finance its overseas acquisitions. The conversion price is set at Rs 246.5 and looking at the current market price it seems highly improbable that the FCCBs would be converted due to which the company would have to redeem the FCCBs. The company has to redeem USD 290 mn of FCCBs including the premium payable. It has USD 110 mn of FCCBs lying unutilized in an escrow account outside India and the balance the company is going to raise via ECB of USD 110 mn and raise USD 70mn from its subsidiaries and the holding company to redeem its FCCBs. The companys RoCE would improve after redemption of its FCCBs as there would be reduction in capital employed (denominator) due to which we believe companys RoCE to increase from 7.3% in FY12E to 9.1% in FY13E. We believe the company would generate enough free cash flow in FY13E to redeem its FCCBs comfortably.
Figure: Companys Consolidated RoE and RoCE

25.0% 20.0% 15.0% 10.0% 5.0% 0.0% FY08 FY09 FY10 RoE (%)
20.9%
19.9% 17.9%
21.1% 16.4% 14.2% 11.8%
11.2%
10.0%
10.5% 8.7% 7.3%
12.1% 9.1%
FY11
FY12E RoCE (%)
FY13E
FY14E
Figure: Companys Free Cash Flow

7,000 4,000 1,000 (2,000) (5,000) (8,000) (5,802) (7,708) FY08 FY09 FY10 FY11 FY12E FY13E FY14E (4,484) 433 (494) 3,734
4,729
Free Cash Flow (Rs mn)

15/2/2012
18
Initiating Coverage
Figure: Assumptions-Revenue Growth and EBITDA Margins for Subsidiaries and Business Segments
FY08 Monolithics Revenues (Rs mn) Growth % EBITDA (Rs mn) EBITDA Margin (%) % of Revenues Prefabs (excluding Zep Infratech) Revenues (Rs mn) Growth % EBITDA (Rs mn) EBITDA Margin (%) % of Revenues Zep Infratech Revenues (Rs mn) Growth % EBITDA (Rs mn) EBITDA Margin (%) % of Revenues Custom Moulding Domestic Revenues (Rs mn) Growth % EBITDA (Rs mn) EBITDA Margin (%) % of Revenues Nief Plastics Revenues (Rs mn) Growth % EBITDA (Rs mn) EBITDA Margin (%) % of Revenues Wausaukee Composites Revenues (Rs mn) Growth % EBITDA (Rs mn) EBITDA Margin (%) % of Revenues Bright Autoplast Revenues (Rs mn) Growth % EBITDA (Rs mn) EBITDA Margin (%) % of Revenues Tanks Revenues (Rs mn) Growth % EBITDA (Rs mn) EBITDA Margin (%) % of Revenues Textiles Revenues (Rs mn) Growth % EBITDA (Rs mn) EBITDA Margin (%) % of Revenues Total Consolidated Business Revenues (Rs mn) Growth % EBITDA (Rs mn) EBITDA Margin (%)
FY09 4,520 115.2% 836 18.5% 15.0% 5,580 4.5% 1,116 20.0% 18.5% 1,110 -12.6% 200 18.0% 3.7% 3,470 -15.8% 763 22.0% 11.5% 7,183 105.8% 826 11.5% 23.8% 1,987 94.8% 139 7.0% 6.6% 1,270 217.5% 203 16.0% 4.2% 1,410 -9.6% 85 6.0% 4.7% 3,680 7.0% 1,067 29.0% 12.2% 30,210 32.8% 5,236 17.3%
FY10 7,190 59.1% 1,366 19.0% 22.0% 4,300 -22.9% 774 18.0% 13.1% 1,340 20.7% 161 12.0% 4.1% 3,540 2.0% 814 23.0% 10.8% 7,906 10.1% 949 12.0% 24.2% 1,469 -26.0% 147 10.0% 4.5% 1,910 50.4% 267 14.0% 5.8% 1,620 14.9% 162 10.0% 5.0% 3,440 -6.5% 688 20.0% 10.5% 32,715 8.3% 5,328 16.3%
FY11 13,350 85.7% 2,670 20.0% 30.1% 5,294 23.1% 1,088 20.6% 11.9% 1,170 -12.7% 234 20.0% 2.6% 4,000 13.0% 972 24.3% 9.0% 9,740 23.2% 1,169 12.0% 22.0% 1,700 15.7% 172 10.1% 3.8% 2,730 42.9% 440 16.1% 6.2% 1,980 22.2% 257 13.0% 4.5% 4,370 27.0% 1,049 24.0% 9.9% 44,334 35.5% 8,050 18.2%
FY12E 12,015 -10.0% 2,073 17.3% 25.9% 6,115 15.5% 1,162 19.0% 13.2% 1,351 15.5% 257 19.0% 2.9% 4,600 15.0% 966 21.0% 9.9% 10,568 8.5% 1,057 10.0% 22.8% 1,700 0.0% 153 9.0% 3.7% 3,003 10.0% 420 14.0% 6.5% 2,317 17.0% 232 10.0% 5.0% 4,676 7.0% 1,075 23.0% 10.1% 46,344 4.5% 7,394 16.0%
FY13E 12,976 8.0% 2,206 17.0% 25.2% 7,337 20.0% 1,394 19.0% 14.3% 1,622 20.0% 308 19.0% 3.2% 5,060 10.0% 1,139 22.5% 9.8% 11,625 10.0% 1,221 10.5% 22.6% 1,870 10.0% 178 9.5% 3.6% 3,378 12.5% 490 14.5% 6.6% 2,548 10.0% 229 9.0% 5.0% 5,003 7.0% 1,126 22.5% 9.7% 51,420 11.0% 8,290 16.1%
FY14E 14,274 10.0% 2,284 16.0% 24.8% 8,805 20.0% 1,585 18.0% 15.3% 1,946 20.0% 350 18.0% 3.4% 5,566 10.0% 1,308 23.5% 9.7% 12,787 10.0% 1,407 11.0% 22.2% 2,057 10.0% 206 10.0% 3.6% 3,885 15.0% 583 15.0% 6.8% 2,803 10.0% 224 8.0% 4.9% 5,353 7.0% 1,178 22.0% 9.3% 57,477 11.8% 9,124 15.9% 15/2/2012 19
2,100 400 19.0% 9.2% 5,340 1,080 20.2% 23.5% 1,270 150 11.8% 5.6% 4,120 1,090 26.5% 18.1% 3,490 314 9.0% 15.3% 1,020 31 3.0% 4.5% 400 80 20.0% 1.8% 1,560 140 9.0% 6.9% 3,440 963 28.0% 15.1% 22,740 4,248 18.7%

Company Overview
Sintex Industries Ltd is one of the leading providers of plastics and niche textile-related products in India. Sintex has a global presence with its footprints spanning nine countries and having strong presence in the European, American, African and Asian markets. The company was established in 1931 and has pioneered innovative concepts in plastics and textile sectors in India. The company has 36 manufacturing plants in India and abroad and manufacture various products such as custom moulding products, prefabricated structures, monolithic construction, FRP products, textile products and water storage tanks.
Initiating Coverage
Management Team
Rahul A Patel - Managing Director - He holds a bachelors degree in communications and has completed his MBA from USA. He has more than 24 years of experience in textile and plastics
Amit D Patel - Managing Director - He holds a bachelors degree in commerce and has completed his MT from USA. He has 18 years of experience in textiles, chemical and plastics.
S B Dangayach - Managing Director - He has a B.Sc (Hons) degree and has done his PGDBA
from IIM Ahmedabad. He has 3 decades of experience in plastics.
L.M. Rathod - Group CFO and CS - He is a graduate in commerce and law and has completed
his MBA and FCS. He has 2 decades of experience in corporate finance, company law and taxation.
Sunil Kanojia - Group President - He is a graduate in engineering and a MBA from IIM Ahmedabad. He has 23 years of domestic and international experience across industries.
Institutional Research BP Equities Pvt. Limited (www .bpw ealth.com) BP Equities reports are also available on Bloomberg [BPEP <GO>] 15/2/2012 20

Key Concerns
Initiating Coverage
Government inaction affecting monolithic business
The companys monolithic business is facing execution slowdown and payment delays due to government inaction in releasing payments and passing orders which is impacting Sintexs working capital as monolithic business is a working capital intensive business. Further any slowdown in government initiatives on its social infrastructure spending would hurt the company as 90% of its monolithic order book consists of government orders.
Slowdown in US and Europe economy
Sintexs overseas subsidiaries may face pressures on its revenue and margin front on the back of continuing slowdown in the global economy especially in the Euro zone.
Slowdown in automotive segment
There has been a considerable hike in interest rates in India which has caused a slowdown in the automobile sector in India during FY12 along with other factors. Sintexs domestic custom moulding business is driven by the automobile segment (Bright Autoplast Ltd) and any further interest rate hikes would hurt Sintexs custom moulding business.
15/2/2012
21

Valuation
Sintex Industries Ltds revenues grew at ~25% CAGR over FY08-FY11and we have in our estimates taken a very conservative revenue growth of 9% CAGR over FY11-FY14E. However we believe that the current market price has already factored in the slowdown in business, concerns over FCCB repayment and issues regarding the power venture. We expect the company to generate considerable free positive cash flow in FY13E to be able to redeem its FCCB comfortably which will also improve its D/E ratio to 0.3 by FY14. At CMP the stock is trading at 6.3x FY13E P/E and 5.2x FY13E EV/EBITDA. We initiate coverage on Sintex Industries Ltd with a BUY rating and have arrived at target price of Rs 122 which implies ~27% upside from the current levels. We have valued the stock at 8x FY13E EPS which is ~33% discount to its long term average P/E. Figure: 1 year forward P/E Band
450 400 350 300 250 200 150 100 50 0
Initiating Coverage
Source: C.Line, BP Equities Research
Peer Comparison
Figure: Peer Comparison
Mcap (Rs bn) Sintex Ind Ltd IVRCL Ltd Nagarjuna Construction L&T Construction Average Supreme Ind Time Technoplast Plastics Average Motherson Sumi Sona Koyo Steering Auto Ancillaries Average Raymond Arvind Mills S Kumar Nationwide Textiles Average
Source: Bloomberg Estimates, BP Equities Research
Apr-07 Jun-07 Aug-07 Oct-07 Dec-07 Feb-08 Apr-08 Jun-08 Aug-08 Oct-08 Dec-08 Feb-09 Apr-09 Jun-09 Aug-09 Oct-09 Dec-09 Feb-10 Apr-10 Jun-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12
Sintex Ind Ltd 5.0 X 10.0 X 15.0 X 20.0 X 25.0 X
P/E (x) FY12E FY13E 8.6 23.6 13.5 17.1 18.0 6.3 14.5 10.3 15.2 13.3 9.5 6.9 8.2 12.8 5.1 8.9 10.2 7.4 2.2 6.6
EV/EBITDA (x) FY12E FY13E 6.1 7.9 9.6 12.0 9.8 7.5 5.8 6.7 9.2 4.0 6.6 6.5 7.3 4.1 6.0 5.2 6.8 8.5 10.5 8.6 6.0 4.8 5.4 6.7 3.3 5.0 5.8 7.0 3.4 5.4
RoE FY12E 11.8% 1.1% 3.7% 18.3% 7.7% 32.9% 15.1% 0.2 19.2% 16.4% 17.8% 14.4% 24.0% 14.4% 17.6% FY13E 14.2% 1.4% 4.7% 17.7% 7.9% 33.4% 16.9% 0.3 25.1% 23.4% 24.3% 14.8% 15.0% 16.0% 15.3%
EBITDA Margins FY12E FY13E 16.1% 11.2% 10.2% 13.9% 11.8% 14.0% 17.6% 0.2 8.6% 12.0% 10.3% 15.2% 15.2% 19.8% 16.7% 15.5% 11.5% 10.4% 13.8% 11.9% 14.8% 17.7% 0.2 9.2% 12.7% 10.9% 15.4% 14.1% 20.6% 16.7% 22
26.0 15.5 15.6 822.3
24.8 10.0
12.1 8.8 10.5
67.8 2.8
19.0 7.9 13.4
22.9 26.1 11.6
11.7 9.2 2.7 7.9
15/2/2012

Income Statement
YE March (Rs mn) Net Sales Y-o-Y Growth (%) Other Operating Income Total Revenues Less: Operating Expenses EBITDA Y-o-Y Growth (%) Less: Depreciation EBIT Less: Interest Paid Add: Non Operating Income Profit Before Tax Less: Taxes Profit After Tax Adjusted Profit After Tax Y-o-Y Growth (%) Adjusted Diluted EPS Y-o-Y Growth (%) FY10 32,816 7% 375 33,192 27,811 5,380 3% 1,445 3,936 731 878 4,083 772 3,311 3,290 40% 12.14 1.2% FY11 44,752 36% 86 44,837 36,683 8,155 52% 1,491 6,664 1,089 518 6,092 1,508 4,584 4,600 40% 16.97 40% FY12E 46,809 5% 102 46,910 39,347 7,563 -7% 1,793 5,771 1,534 509 4,746 1,132 3,614 3,468 -25% 12.80 -25% FY13E 51,420 10% 257 51,677 43,653 8,024 6% 1,832 6,191 1,080 1,034 6,145 1,413 4,732 4,579 32% 16.90 32% FY14E 57,477 12% 287 57,764 49,104 8,660 8% 1,890 6,770 752 1,155 7,173 1,650 5,524 5,524 21% 20.38 21% YE March (Rs mn) Liabilities: Equity Capital Reserves & Surplus Net Worth Minority Interest Total Loans Deferred Tax Liability Capital Employed Assets: Gross Block Less: Depreciation Net Block Capital WIP Investments Goodwill Deferred Tax Assets Current Assets: Inventories Sundry Debtors Cash & Bank Balance Loans & advances Total Current Assets Less: Current Liabilities & Provisions: Sundry Creditors Provisions Total Current Liabilities & Provisions Capital Applied
Initiating Coverage
Balance Sheet
FY10 271 19,198 19,469 190 26,303 2,050 48,012 FY11 FY12E FY13E FY14E 271 23,745 24,016 0 27,738 2,495 54,248 271 26,658 26,929 0 28,988 2,495 58,411 271 30,673 30,944 0 16,610 2,495 50,048 271 35,983 36,255 0 11,570 2,495 50,319
25,581 33,276 36,976 38,176 39,376 7,746 9,156 10,931 12,763 14,653 17,834 24,120 26,045 25,413 24,723 1,716 1,363 1,363 600 600 2,222 3,216 3,775 3,775 3,775 2,665 2,190 2,190 2,190 2,190 357 438 438 438 438 3,411 3,770 4,057 4,664 5,112 10,121 14,229 15,617 16,905 18,109 9,295 9,861 9,233 768 677 8,157 5,147 6,952 7,713 8,621 30,983 33,007 35,859 30,051 32,520
Key Ratios
YE March (Rs mn) Key Operating Ratios: EBITDA Margin (%) Tax / PBT (%) Net Profit Margin (%) RoE (%) RoCE (%) Current Ratio (x) Dividend Payout (%) Book Value Per Share (Rs.) Financial Leverage Ratios Debt/ Equity (x) Interest Coverage (x) Interest / Debt (%) Growth Indicators % Growth in Gross Block (%) Sales Growth (%) EBITDA Growth (%) Net Profit Growth (%) Diluted EPS Growth (%) Turnover Ratios Debtors (Days of net sales) Creditors (Days of Raw Materials) Inventory (Days of Optg. Costs)
FY10 16.2% 18.9% 9.9% 17.9% 8.6% 3.9x 5.8% 72 1.4x 7.4x 3.0% 7.5% 7.1% 3.1% 1.2% 1.2% 108 52 45
FY11 FY12E FY13E FY14E 18.2% 24.8% 10.3% 21.1% 10.6% 3.1x 4.5% 89 1.2x 7.5x 4.0% 30.1% 36.4% 51.6% 39.8% 39.8% 112 64 38
3,947 3,317
6,417 3,420
7,027 3,454
7,982 3,496
9,225 3,548
16.1% 15.5% 15.0% 8,015 10,644 11,259 12,418 13,926 27.4% 25.5% 23.0% 48,012 54,248 58,411 50,048 50,319 6.4% 8.0% 9.6% Source: Company, BP Equities Research 13.6% 15.8% 16.4% 8.1% 9.9% 12.1% 3.2x 2.4x 2.3x Free Cash Flow Analysis 3.9% 4.6% 5.2% YE March (Rs mn) FY10 FY11 FY12E FY13E FY14E 99 114 134 3,936 6,664 5,771 6,191 6,770 EBITA 744 1,650 1,413 1,425 1,557 Less: Adjusted Taxes 1.1x 0.5x 0.3x 3,192 5,014 4,358 4,766 5,213 NOPLAT 4.9x 7.4x 11.5x 1,445 1,491 1,793 1,832 1,890 Plus: Depreciation 5.4% 4.7% 5.3% 4,636 6,505 6,151 6,599 7,103 Gross Cash flow 7,504 (959) 2,820 1,916 1,291 Less: Increase in Working Capital 11.1% 3.2% 3.1% (2,867) 7,464 3,331 4,683 5,812 Operating Cash flow 4.6% 9.9% 11.8% 1,197 7,423 3,718 437 1,200 Less: Net Capex -7.2% 6.1% 7.9% 269 (688) 77 (88) (117) Less: Increase in Net Other Assets -34.3% 36.6% 33.7% (4,333) 729 (463) 4,334 4,729 FCF From Operation -34.3% 36.6% 33.7% 130 312 (559) 0 0 Less: Inc./(Dec.) in Investment (4,463) 417 96 4,334 4,729 FCF after Investment 117 115 110 Plus: Gain/(loss) on Exceptional Items 0 0 (611) (600) 0 65 67 69 Prior Period and Minority Interest (21) 16 21 0 0 38 39 38 (Adjustments) (4,484) 433 (494) 3,734 4,729 Total FCF
Valuation Ratios
YE March (Rs mn) Adjusted P/E (x) P/BV (x) P/CEPS (x) EV/EBIDTA (x) FY10 7.9x 1.3x 5.5x 8.0x FY11 5.6x 1.1x 4.3x 5.4x FY12E 7.5x 1.0x 4.9x 6.1x FY13E 5.7x 0.8x 4.0x 5.2x FY14E 4.7x 0.7x 3.5x 4.3x
15/2/2012
23
Research Desk
Tel: +91 22 61596464
Institutional Sales Desk
Tel: +91 22 61596403/04/05
Disclaimer Appendix Analyst (s) holding in the Stock : Nil Analyst (s) Certification: We analysts and the authors of this report, hereby certify that all of the views expressed in this research report accurately reflect our personal views about any and all of the subject issuer (s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation (s) or view (s) in this report. Analysts aren't registered as research analysts by FINRA and might not be an associated person of the BP Equities Pvt. Ltd. (Institutional Equities). General Disclaimer This report has been prepared by the research department of BP WEALTH Pvt. Ltd. and BP EQUITIES Pvt. Ltd, is for information purposes only. This report is not construed as an offer to sell or the solicitation of an offer to buy or sell any security in any jurisdiction where such an offer or solicitation would be illegal. BP WEALTH Pvt. Ltd. and BP EQUITIES Pvt. Ltd have exercised due diligence in checking the correctness and authenticity of the information contained herein, so far as it relates to current and historical information, but do not guarantee its accuracy or completeness. The opinions expressed are our current opinions as of the date appearing in the material and may be subject to change from time to time. Prospective investors are cautioned that any forward looking statement are not predictions and are subject to change without prior notice. Recipients of this material should rely on their own investigations and take their own professional advice. BP Wealth or any of its affiliates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. BP Wealth Pvt. Ltd. or any of its affiliates or employees do not provide, at any time, any express or implied warranty of any kind, regarding any matter pertaining to this report, including without limitation the implied warranties of merchantability, fitness for a particular purpose, and non-infringement. The recipients of this report should rely on their own investigations. BP Wealth and/or its affiliates and/or employees may have interests/ positions, financial or otherwise in the securities mentioned in this report. Opinions expressed are our current opinions as of the date appearing on this material only. While we endeavor to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This report is not directed to or intended for display, downloading, printing, reproducing or for distribution to or use by any person in any locality, state and country or other jurisdiction where such distribution, publication or use would be contrary to the law or regulation or would subject to BP Wealth or any of its affiliates to any registration or licensing requirement within such jurisdiction.
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Interiors

Sintex Industries Limited

96 122 502742 SINTEX SINT IN SINT.BO

5,416 195/58.7 272.99 26,153 1.00

71,47,890 46,09,633 30,74,823

25.6% 8.9% 30.6%

Relative Price Chart

180 150 120 90 60 Feb-11 May-11 Aug-11 Nov-11 Feb-12

Sintex Industries Limited

Market Opputunity: Rs 15,000 bn

Source: Company Presentation

Sintex Industries Limited

Figure: Governments capex on social infrastructure programmes

Rs bn FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012

Indira Awas Yojana 28 26 40 54 89 100 100

Source: www.indiabudget.nic.in, BP Equities Research

Figure: Monolithic Construction Order Book

Monolithic Order Book (Rs mn)

Sintex Industries Limited

Figure: Monolithic Business Revenue Growth

Monolithic Revenues (Rs mn)

Figure: Monolithic Business EBITDA Margin

EBITDA (Rs mn)

Sintex Industries Limited

Robust growth in prefabrication business (~14.5% FY11 revenues)

Baddi (Himachal Pradesh)

Kolkata (West Bengal)

Salem (Tamil Nadu) Dadri (Uttar Pradesh)

Sintex Industries Limited

Market Opputunity: Rs 100 bn

Stategy: 1) New products in warehousing and agrisheds 2) Expansion in remaining states

Source: Company Presentation

Figure: Governments capex on social infrastructure programmes

0 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012

Sarva Shiksha Abhiyan (Rs bn)

National Rural Health Mission (Rs bn)

Sintex Industries Limited

Prefab Revenues (Rs mn)

Figure: Prefab Business EBITDA Margin

EBITDA (Rs mn)

Sintex Industries Limited

Custom Mouldings to benefit from synergies (~41% FY11 revenues)

Key benefits of composites

Lightweight yet strong Higher strength

Corrosion and chemical resistance Elastic and non conducive

Leading player in India

Automotive Electrical Aerospace & Defense Medical Mass Transit

Margin expansion due to synergies

India USA Germany

Sep-07 Dec-07 Jul-08

INR 1489.0 mn USD 4.7 mn USD 10 mn

INR 2,730 mn Merged with Wausaukee Written Off

Sintex Industries Limited

Market Opputunity: ~$ 15 bn Global

Source: Company Presentation

Source: Company, BP Equities Research

Sintex Industries Limited

Domestic Custom Moulding Business (~9% FY11 revenues)

Figure: Domestic Custom Moulding Business Revenue Growth

Revenues (Rs mn)

Figure: Domestic Custom Moulding Business EBITDA Margins

EBITDA (Rs mn)

Sintex Industries Limited