Sintex Industries disappointed the Street by posting lower-than-expected results for the quarter ended September 2009. Its stock is down 1.6 per cent post results (since October 9 closing) as compared to the 3.6 per cent rise in the Sensex.
Positively, volumes grew a robust 15-20 per cent, which helped sustain top line and offset the substantial fall in raw material prices (like polymer). Since the plastics business accounts for roughly 90 per cent of revenues and raw materials are derivatives of crude oil, the fall in their prices is in line with crude oil prices and the benefits were passed to the consumers. Notably, despite the weak performance of the textile business, the company's operating profit margin remained stable at 18.2 per cent.
Going ahead, things are seen improving. For instance, its building materials segment, which accounts for about 45 per cent of consolidated revenues and includes pre-fabricated and monolithic products, grew marginally by 1.2 per cent on a y-o-y basis, but registered 20 per cent q-o-q revenue growth, led by higher execution of monolithic structures. Currently, the company's monolithic business (provides solutions for low-cost mass housing) has an order book of about Rs 1,500 crore, which provides good visibility.
Its custom moulding, which includes products for electric accessories, automotive and mass transit, among others, and accounts for another 45 per cent of consolidated revenues, reported flat revenues. This business, too, could see some growth in revenues this year as demand from automotive and other segments is improving.
While revenues and profits were down 5-10 per cent in H1 2009-10, Sintex is expected to report flat to 5 per cent growth in revenue and 8-10 per cent rise in net profit for the full year. At Rs 248, the stock is reasonably valued and is available at 9.5 times its estimated earnings for 2009-10 and 7.7 times 2010-11 earnings.