Company Update: Sintex Industries

DCN is a telecom infrastructure service provider whose product offerings and markets complement those of Sintex. The management expects DCN to post revenues of Rs750 million in FY09 with an EBITDA margin of around 27%.

In view of the tight economic conditions and rising inflation, we have estimated revenues of Rs650 million for DCN in FY09 with a 25% EBITDA margin, and a 25% growth in topline in FY10.

We have revised our estimates marginally upwards for FY09 and FY10 to factor in the acquisition. We feel that the deal size of Rs540 million, which is 3.3x DCN’s FY09E EBITDA, is justifiable.

However, since it does not have a major impact on Sintex’s valuations, we are keeping our target price unchanged at Rs587. We maintain a BUY recommendation on the stock.

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