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Sintex Industries manages to improve operating margins in Q1

Sintex Industries manages to improve operating margins in Q1
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First Published: Tue, Jul 12 2011. 10 52 PM IST
Updated: Tue, Jul 12 2011. 10 52 PM IST
Investors of Sintex Industries Ltd don’t seem to be thrilled with the company’s June quarter earnings. The Sintex stock has lost 6.7% since the numbers were released on Monday to Rs 171.60, compared with a 2.3% decline in the benchmark BSE Sensex.
In the June quarter, Sintex’s operating performance was strong, with the company posting an increase of almost two percentage points in the consolidated operating profit margin to 17% compared with the same period last year. That was despite a sharp rise in total raw material costs. A slower pace of growth in employee costs and flat “other expenditure” helped operating performance. The March quarter operating margin was higher at 21%. But then, of course, the March quarter is typically stronger for Sintex.
The firm’s consolidated revenue has increased by 22% year-on-year to Rs 1,112 crore, driven by strong growth in the plastics business, which contributed about 89% to the total revenue. The majority of the remaining revenue comes from the textiles business.
In the plastics business, the building materials segment has performed comparatively better than the customs mouldings business.
The building materials business includes the prefabs business (housing concepts used to build temporary and permanent residences) and the monolithic construction business (low-cost housing solutions). The order book for the monolithic construction business stands at Rs 3,000 crore, Rs 100 crore more than the order book when the March quarter earnings were announced.
Lastly, net profit increased 20% to Rs 95 crore despite a higher tax outgo, higher interest expenses and decline in other income.
Meanwhile, the Sintex stock has outperformed the BSE-200 Index since the beginning of this fiscal. While most analysts are positive on the stock, those from Kotak Institutional Equities Research have raised some concerns on the stand-alone business. Some of the concerns mentioned in their post-results update include low asset turns (incremental sales/incremental capital expenditure) and earnings being led by rapid balance sheet expansion. They have a “sell” rating on the stock.
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First Published: Tue, Jul 12 2011. 10 52 PM IST