Sintex Industries Profit Dips On Forex Loss

Shailendra Lotlikar / 11 Jan 2013

Sintex Industries has not been able to stand up to street expectations in the Dec 2012 quarter. While revenue growth has been in line with what was expected, profits have dipped owing to forex losses.

Sintex Industries declared quite a disappointing set of number for Q3FY13. On a consolidated basis, the total income of the company increased by 23% to Rs 1427 crore (in line with street expectations) while Net profit of the company plunged by 35 per cent to Rs 54 crore on a YoY basis. Profitability was majorly dragged by forex losses which stood at Rs 45 crore for the quarter, against a gain of Rs 13.53 crore in the corresponding period. The net profit came well below street expectations of around Rs 76 crore which led to the stock closing lower by almost half a per cent at Rs 68.65 per share.

Sintex Industries is a dominant player in the plastics business and a majority of its revenues (around 92%) come from this segment. The company is also into the textile business, which brings in the balance 8% of its revenues. For the December quarter of 2012, the plastics business witnessed a growth of 25% with revenues of Rs 1044 crore while the Textile business witnessed a growth of just around 1% with revenues of Rs 115 crore. Its Plastics business is further divided into Prefabricated Building Systems (account for around 20% of total revenues), Monolithic Construction (23%), Storage Tanks (4%) and Custom Mouldings (45%). Sintex witnessed a growth of more than 20% in most of the above mentioned segments, except for storage tanks where there was no growth at all in this quarter.

EBITDA increased by 35% to Rs 220 crore on a YoY basis. The EBITDA margin increased by 135 basis points to 15.4% thanks to a decline in the raw material costs during the quarter. The ratio of raw material cost to total income, declined by 300 basis points to 54.74%, while the Net Profit margin declined by 332 basis points to 3.75%, mainly on account of the forex loss.

Consolidated Financial Numbers of Sintex Industries 
Particulars12-Dec11-Dec% Change
Net Sales 1420.31 1158.37 22.61
Total Income 1427.21 1160.81 22.95
Raw Material Expense 781.34 670.61 16.51
Total Expense 1207.39 997.68 21.02
EBITDA 219.82 163.13 34.75
Depreciation 51.95 46.71 11.22
Interest  31.17 35.39 -11.92
Tax 41.97 28.31 48.25
Net Profit 53.63 82.2 -34.76
Sintex has managed to refinance its FCCBs debt worth USD 291 million which was due in March 2013. On November 28, 2012, it allotted USD 140 million, 7.5 % Foreign Currency Convertible Bonds which would be due in 2017 and would be convertible into fully paid up equity shares of the company at Rs. 75.60. The company has also raised funds through a QIP and another issuance of Preference shares worth around USD 50 million. And the balance of around USD 100 million (Rs 605 crore) would be paid through internal accruals. As of March 2012, it had a cash of Rs 720 crore in its books.

The stock is available at TTM Price to Earnings multiple of 7x which apparently looks attractive. However, one should be cautious while entering this counter or if one holds shares of the company. Going ahead, we believe that the company might face some headwinds in terms of foreign exchange fluctuations which might affect its earnings.

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