BackSintex: strong revenue growth but margins disappoint
Sintex's operating profit margin for the December quarter declined by 88 basis points compared with the year-ago
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When about 90% of the business performs well on the revenue front, overall earnings growth is naturally going to be strong. That’s what happened to Sintex Industries Ltd in the December quarter. The company’s building materials and custom moulding businesses, which together contributed about 90% of its consolidated revenue last quarter, grew by 34% over the same period last year.
Of the two, the custom moulding business, including products customized for specialized applications, has performed better. The textile business, which contributed rest of the revenue, grew by 22%. Therefore, the company’s total revenue increased by 32.7%, the strongest in the past three quarters, to ₹ 1,826 crore.
The prefab structures segment saw healthy traction last quarter, driven by strong execution for classrooms, healthcare centres, farm sheds and other products launched in recent years. On the other hand, the monolithic construction segment, including housing construction solutions, delivered a muted performance during the quarter. Both prefab structures and monolithic construction segments are part of Sintex’s building materials business. In the custom moulding business, the international business has performed better than the local business.
Strong revenue growth, however, did not translate into commensurate operating profit performance. Sintex’s operating profit margin for the December quarter declined by 88 basis points compared with the year-ago quarter to 16.7%, as raw material costs and employee costs remained higher. One basis point is 0.01%. Sintex’s operating margin had increased in the September quarter. Thus, pre-tax profit before exceptional items increased at a slower pace than revenue. However, a considerable decline in tax outgo meant Sintex’s net profit increased by as much as 91% to ₹ 162 crore.
Looking ahead, Sintex hopes that with easing interest rates and growing level of economic activity, its business should see exciting times. The company has delivered decent financial results in the past few quarters. Shareholders recognize that. Small wonder then Sintex’s shares have jumped a huge 163% so far in this fiscal year whereas the S&P BSE 500 index has gone up 38%. Of course, if the stock’s outperformance has to continue, the company will have to keep the momentum going on its financial performance.
The writer doesn’t own shares in the above-mentioned companies.
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