Sintex reported below expected consolidated PAT of Rs573mn in Q2FY10. This is attributed to (1) below expected performance in standalone prefabs (revenues of Rs1.0bn versus expectation of Rs2.2bn) and monolithic construction vertical (revenues of Rs1.2bn versus expectations of Rs2.1bn), (2) one time write-off of technical know how expenses of Rs68mn, (2) forex loss related to FCCBs of Rs51mn. Adjusting for the extra ordinaries, APAT stood at Rs664mn, a decline of 8%yoy. The standalone performance was again a disappointment and subsidiaries reported yet another positive surprise (APAT of Rs103mn). We are increasing our net profit estimates for subsidiaries and reducing net profit estimates for the standalone business.
As a result, our consolidated earnings estimates stand reduced by 1% to Rs24.4 and Rs 29.3 for FY10E and FY11E respectively. At CMP of Rs248, the stock is trading attractively at 8.5x FY11E earnings and 1.5x FY11E Book Value. We assign a multiple of 10x 1 yr fwd earnings based on average valuations of the past 5 years. We continue to maintain a positive bias on Sintex amidst - (1) strong balance sheet with cash in hand of Rs12bn, (2) ROE of 18%, (3) strong and multiple growth drivers and (4) attractive valuations. We maintain our ‘BUY’ rating with a revised target price of Rs293 based on 10x 1-year fwd PER.
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