Sintex Industries Ltd’s financial results for the quarter ended December were a pleasant surprise for the Street. Consolidated revenue has gone up by 40%, over the same period last year, to Rs 1,186 crore. Growth has been good across its three segments—building material, custom moulding and textiles. The building material business includes prefabricated structures (housing and construction concepts) and monolithic constructions (low-cost, mass housing solutions), and it grew by a strong 76% to Rs 610 crore. Sintex’s monolithic segment currently has an order book of Rs 2,600 crore to be executed in 20-21 months, which offers good revenue visibility.
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The company’s monolithic segment is one of the main reasons for its working capital position to deteriorate in the recent past. That’s been a key worry among investors. Sintex hopes to improve the working capital position to 75-80 days as the current fiscal ends. In FY12, further improvement is expected, to about 65 days, the levels seen in 2007-08.
The second largest contributor to revenue, the custom moulding business, grew at a much slower pace of 15% to Rs 460 crore. Sintex’s textile business saw revenue rise by 29%, but on a low base as sales had declined in the December 2009 quarter. The firm does not expect such high growth rates to sustain in the textile business segment, once the base effect wears off.
The firm’s operating profit margins rose by about 230 basis points (bps) to 19.9% during the quarter. One basis point is one-hundredth of a percentage point. Though raw material costs jumped sharply, up by 54%, lower single-digit growth in employees’ cost and other expenditure helped margins improve. The performance of Sintex’s stand-alone business was much strong at the operating level, where margins improved by about 550 bps to 25.4%. Operating margins of subsidiaries slipped by 50 bps mainly due to a sharp spike in raw material costs.
Consolidated net profit increased by 55% to Rs 113 crore, with profit earned by subsidiaries up 109% to Rs 35 crore. Stand-alone net profit, too, increased at a robust rate of around 40%.
Sintex’s stock has fallen sharply by 22% since 1 December, when the BSE-200 index fell by 5%, on concerns of a slowdown in government orders. This fall factors in most of the negatives for the stock, making current valuations attractive. In fact, prospects look bright in the near term, with the firm hoping to see strong growth in the March quarter—as the fourth quarter is usually the strongest for Sintex.
Graphic by Yogesh Kumar/Mint
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