Fw: Investor's Eye: Update - Sintex Industries; Viewpoint - Ashoka Buildcon

 

 

Investor's Eye [September 13, 2011]  Sharekhan www.sharekhan.com

Summary of Content STOCK UPDATE Sintex Industries    Cluster: Apple Green Recommendation: Buy Price target: Rs233 Current market price: Rs145 Annual report review Key points Strong all round performance; monolithic lifted the revenue growth: On a consolidated basis, Sintex Industries (Sintex) reported a robust all round performance for FY2011 with revenue and earnings growth for the year at 35.1% and 40% respectively. The monolithic segment (a part of the building material business) continued to grow at a very brisk pace clocking an 86% year-on-year (Y-o-Y) growth. It contributed approximately 30% to the consolidated revenue for the year. The other segments (barring Zeppelin) posted a decent show as well with the custom mouldings segment growing at 26.3% year on year (YoY) and the textiles segment growing at 25.9% YoY. Margin improvement across segments resulted in blended margin improvement: Led by revenue upliftment coupled with margin expansion across the segments, the EBITDA for FY2011 grew at 38.5% on a Y-o-Y basis and the blended EBITDA margin expanded by 50bps from 18.9% in FY2010 to 19.3% in FY2011. Zero coupon FCCBs keep the consolidated debt at elevated levels: On a consolidated basis, with Rs2,774 crore of debt on the books, the overall debt equity ratio looks elevated at 1.15x and has been hovering in the band of 1.1-1.35x over the last five years from the time the zero coupon convertible bonds were issued. Adjusting for the foreign currency convertible bonds (FCCBs; which are kept in an escrow account), the leverage position is manageable at 0.64x.  Working capital efficiency reflected in the free cash position: The working capital cycle improved considerably from 155 days in FY2010 to 103 days in FY2011, largely due to a strong execution coming from the monolithic business and a reduction in the debtors days (from 58 days to 45 days) coupled with reduction in loans and advances (down from 46 days to 42 days). Driven by efficiency coming from the working capital front, the free cash for the year came marginally positive at Rs49 crore. Return ratios improved: The strong growth in the earnings (40% YoY) and an improved working capital mix got translated into improved return metrics. The return on capital employed (RoCE) and return on equity (RoE) for the year stood at 13.1% and 19.2% respectively. We remain bullish: Looking at Q1FY2012 results, wherein the first quarter is seasonally a lean period, the monolithic business of Sintex continued to post a robust show on both, the execution and order inflow fronts. For the quarter, the incremental order inflow stood at about Rs375 crore with the total order book at Rs3,200 crore (2.3x its FY2011 monolithic revenue). This trend of execution, the new order momentum as well as the margin profile continue to provide us comfort on the revenue and profitability of the company. Further, the composite business is also on a strong footing, with new synergistic benefits taking shape in the form of margin expansion and new client additions. Post Q1FY2012 results and an encouraging management commentary, we maintain our estimates, rating and price target for the stock. We have a Buy rating on the stock with a price target of Rs233. At our price target the stock trades at 10.5x its FY2013E fully diluted earnings per share (EPS) of Rs22.2. VIEWPOINT Ashoka Buildcon    An experienced road BOT player  Ashoka Buildcon Ltd (ABL) is one of the few players to have experienced the full life cycle of a road BOT project. Further, it has witnessed an impressive growth rate both in terms of revenue and net profit over the past few years. Its revenue and PAT grew at a compounded annual growth rate (CAGR) of 59% and 45% respectively over FY2008-11. With 18 projects already operational and two more to get operational in this fiscal, there is good revenue visibility in terms of toll revenue. Moreover, its strong order book position provides strong revenue visibility for its EPC segment in the coming years. ABL being one of the major toll players is set to benefit from the tremendous opportunity available in the road sector. Based on our rough estimates, we expect its revenue and PAT to grow at a CAGR of 34% and 40% respectively. However, at the current market price it looks almost fairly valued as it trades at 1.3x and 1.1x its FY2012 and FY2013 book value respectively and 9x and 7x its FY2012 and FY2013 earnings respectively. Click here to read report: Investor's Eye

Regards, The Sharekhan Research Team myaccount@sharekhan.com   www.sharekhan.com to manage your newsletter subscriptions