Sintex Industries Companyanalysis92384293424

8/10/2019 Sintex Industries Companyanalysis92384293424

1/16

COMPANY ALLOTED FOR ANALYSISSINTEX INDUSTRIES LTD.INDUSTRY SECTORPLASTIC INDUSTRY

PLASTIC INDUSTRY ANALYSIS

GLOBAL PERSPECTIVE-

Last few years have been tumultuous for plastics and petrochemical sector due to steep rise

in oil prices, which has adversely affected the global economies. However, considering the

feed stock advantage and abundance of oil reserves newer petrochemical complexes are

being established in Middle-east countries. i.e. Oman, Saudi Arabia, UAE, etc. It is

projected that by the end of 2010, Ethylene capacity in Middle-East would reach to about

35 million tons per annum and Polypropylene (PP) capacity to touch about 7 million tonnes

per annum.

The US Petrochemical sector may lose Export competitiveness as most of the Ethylene

capacities in USA are Ethane based, which are not cost competitive and are capable to

produce only Polyethylene (PE). Similarly, the revamping of European Petrochemical

Complexes would be imperative as they are based on old and expensive technology and are

not cost competitive with the Middle-East companies having the biggest advantage of raw

material at their door-step. China, Middle-East and India would be the major global players,

where expansion and augmentation of existing petrochemical capacity would take place in

the next 5 years.

Worldwide Plastics Industry witnessed a steady growth in the year 2007 which is reflected

in the increased consumption figures of all types of Plastics materials.

Asia has been worlds largest plastics consumer for several years, accounting for about30%

of the global consumption excluding Japan, which has share of about 6.5%. Next to Asia is

North America with 26% share, then Western Europe with 23% share in the global market.

The key growth segment remains Packaging which accounted for over 35% of the global

consumption. Amongst the individual Plastics Materials, Polyolefin accounted for 53% o

the total consumption, (PE with 33.5%, PP with 19.5%) followed by PVC 16.5%, PS-

8.5%, PET & PU - 5.5%, Styrene copolymers (ABS, SAN, etc)3.5% other engineering &

high performance & speciality plastics, blends, alloys, thermosetting plastics13%.

In recent years, significant aspect of plastics material growth globally has been the

innovation of newer application areas for plastics such as increasing plastics applications in

automotive field, rail, transport, defence & aerospace, medical and healthcare, electrical &

electronics, telecommunication, building & infrastructure, furniture, etc.Plastics have become the key drivers of innovations & application development. Polymer-

Electronics is one such area which has opened up new avenues for plastics; from organic

light emitting diodes to electro-optical and bio-electrical complements, from low-cost


2/16

plastic chips to flexible solar cells. New plastics can conduct electricity and emit light.

While polymers will not replace silicon as semiconductors, they do offer completely new

opportunities for low-priced mass-manufactured products. Radio-frequency identification

(RFID) tags in smartcards for identification and access control, payment and ticket systems,

price labels, product tracking systems in the logistics chain or packaging that monitors

product quality many things are in offing. Growth-trend of plastics has proved that there

has been a quiet Plastics revolution taking place in the material sector.

Global Per capita consumption of Plastics is ( in Kgs)

World Average 26

North America 90

West Europe 65

East Europe 10

China 12

India 5.0

South East Asia 10

L. America 18

INDIAN PERSPECTIVE-

Over the years, India has made significant progress in the industrial world with healthy

economic growth. On purchase power parity basis, it is one of the top five global economics

and is expected to be the third largest by the turn of this decade. Plastics, one of the fastest

growing industries in India, have a vital role to play.

Indian Plastics Industry is expanding at a phenomenal pace. Major international companies

from various sectors such as automobiles, electronics, telecommunications, food processing,packing, healthcare etc. have set-up large manufacturing bases in India. So, demand for

plastics is rapidly increasing and soon India will emerge as one of the fastest growing

markets in the world.

The next two decades are expected to offer unprecedented opportunities for the plastic

industry in India. This would necessitate industry initiatives to foster investments, grow the

market, upgrade quality standards, enhance global participation, encourage Indian industry,

to adopt and adapt to world class technology and manufacturing practices


3/16

Despite instability in International prices of polymer materials in 2006 - 07, plastics

industry in the country has consolidated its performance by consuming about 5.0 million

tonnes of polymers, as compared to Chinese consumption of about 30 million tonnes in

2007. Indian plastics industries are enthusiastic about the acceleration of the growth engine

in the next 3 to 5 years due to capacity expansion of existing petrochemical complexes and

setting up of new crackers in the country currently.

Reliance Industries Ltd., (RIL) has about 75% share of Indian Petrochemical Cracker

capacity, followed by medium sized capacity of Gas Authority of India Ltd. (GAIL) and

Haldia Petrochemicals Ltd., (HPL). I

Indian Oil Corporation (IOC) has also planned an 800 K tonnes naphtha cracker at Panipat

at an investment of Rs.6300 crores to produce 800 KT of PE and PP each at Panipat. IOC

would also be setting up a production capacity 150 KT PP at Chennai by year 2009 as well

as styrene, which is not being produced in India.

TABLE Current Indian Petrochemicals Capacities (in KT)

Producer & Location PP HDPE LDPE HD/LL PTA PS PVC

RIL, Hazira 350 - - 400 - - 300

RIL, Jamnagar 600 - - - 800 - -

RIL Patalganga 60 - - - 300 - -

IPCL, Nagothane 60 - 80 220 - - -

IPCL, Vadodara 75 - 80 - - - 55

IPCL, Gandhar - 160 - - - - -

GAIL, Auriya - 100 - 160 - - 150

HPL, Haldia 210 200 - 260 - - -

BRPL, Bongaigaon - - - - - - -

Finolex, Pisranpar - - - - - - 130

LG Poly, Vizag - - - - - 80 -

Supreme, Mumbai - - - - - 240 -

Chem Plast, Metturdam - - - - - - 60

DCW, Sahupuram - - - - - - 60

DCM, Shriram, Kota - - - - 400 - 35

RPRL, Abu - - - - - 16 -

BASF Styrenics, Bharuch - - - - - 60 -

Mitsubishi, Haldia - - - - - - -TOTAL 1355 460 160 1040 1500 360 790

Grand Total 5665


4/16

Typical Polymer consumption pattern of different polymers

Polymer KT

LDPE/EVA 275

LLDPE 550 1745

HDPE 920

PP 1300

PVC 1000

PS 225

PET Film 135

Bottle 100 235

SAN/ABS 90

Polyamide 35

Polycarbonate 72

Polyacetal 8 125

PET/PBT 7

Others 3

Thermoset 100

Total 4820

The top 100 players account for just 20% of the industry turnover. The total number o

players in the sector is more than 25,000. However, the degree of fragmentation,

worldwide, is a large and despite the small size of operations of the players, they are able to

operate profitably. Further, the high growth in demand ensures that the market is able to

absorb the excess capacity in quick time. Overall, the degree of competition can beconsidered high in the Indian plastic processing industry.

The sector has a significant presence of the unorganised sector, which accounts for more

than 70% of the industry turnover. More than 95% of the firms in the industry are

partnership, proprietorship or private limited companies. Further, these small companies get

significant advantages in taxes.

These firms thus provide significant level of competition to the organised sector companies,

which combined together are making losses. The organised sector companies thus need tobuild up significant brand image to survive against the competition from the unorganised

sector. The key organised sector players include Nilkamal Plastics Limited and Supreme

Industries Limited.


5/16

Statistics of Plastics Industries in India :Current Status

Major Raw Material Producers 15 Nos.

Processing Units 25,000 Nos.

Turnover (Processing Industry) Rs.85,000 CroresCapital Asset (Polymer Industry) Rs.55,000 Crores

Raw Material Produced approx 5.3 MMT

Raw Material Consumed approx 5.1 MMT

Employed Direct/Indirect 3.3 Million

Export Value approx. US $ 1.90 Billion

Revenue to Government approx. Rs.7300 Crores

By 201112

Demand Potential 12.5 MMT

Additional Employment 4.0 Million

Investment Potential Rs.84,000 Crores

VISION 2015Indian Plastics Industry :

Consumption of Polymers @ 15% CARG 18.9 Million tonnes

Turnover of plastics Industries Rs.1,33,245 crores

Additional Employment Generation 7 Million

Requirement of AdditionalPlastics Processing Machines

68113 Nos

Additional Capital InvestmentIn Machines (2004-2015)

Rs.45,000 crores


6/16

RECENT HAPPENINGS IN PLASTIC INDUSTRY:-

1)Indian Plastic Industry in the next 5 years-

The plastic industry in India has made significant achievements since its modest but promising beginning

by commencing production of polystyrene in 1957.

Plastic industry in India symbolizes a promising industry and at the same time helps in creating new

employment opportunities for the people of India.

The Indian plastic processing industry is highly fragmented and comprises 30,000 firms. Barring 10- 15%

of the firms, which can be classified as medium scale operations, all the units operate on a small-scale

basis.

Trends in the Industry:-

- Plasticulture- A win-win situation!

- Emergence of flexible packaging- Plastics in Medicare

- Increasing usage of PVC

A large investment in telecom, ports, roads, power, and railways, has ensured that this sector continues to

grow at more than 10% p.a., for several years to come. The focus on plasticulture in the agricultural

sectorenvisaged coverage of 17 mn hectares under micro-irrigation schemes, will further boost the

prospects of the plastics industry.

The plastics processing industry is a source of great potential for global businesses. There is tremendous

scope for innovative technological up gradations and thus rapid growth of the sector. Overall turnover of

the plastic processing industrywhich currently stands at USD 17.5 Billion, is expected to touch USD

20.3 Billion in 2012 and further USD 27 Billion by 2015.

The Indian packaging industry is expected to become the fourth-largest packaging market in the world,

with revenues of US$43.7 billion in 2016. Flexible plastic packaging was the fastest-growing packaging

category in India, achieving a CAGR of 16.6% during the review period. During the review period, the

packaging industry benefitted from strong growth in the Indian retail market.

Other end-user markets from packaging, including pharmaceutical and processed food, have been

growing rapidly over the review period, both domestically and internationally. This demand from end-user markets is expected to remain high during the forecast period.

Key Highlights

- Indias retail growth and increased consumption of consumer products is driving the demand for

packaging in the country

- India is the sixth-largest packaging market in the world, with sales of US$24.6 billion in 2011

- The packaging industry is expected to grow at a CAGR of 12.3% during the forecast period, to become

the fourth-largest global market, with sales of US$43.7 billion in 2016

- The Indian food processing market is one of the largest in the world in terms of production,consumption and growth prospects

- Indias per capita annual packaging expenditure was US$20 in 2011, which is significantly lower than

the top 20 market average of US$347.6. The low per capita expenditure offers a huge business


7/16

opportunity for packaging companies

- Despite the Indian packaging industry undergoing some consolidation, it is still fragmented, especially

following the introduction of new companies in the country

2)Indian plastics industry set to clock strong growth in 2012

The Indian plastics industry is expanding at a phenomenal speed and also among the fastest growingsectors in the country. It is expected that this industry's turnover may rise to Rs 1,000 billion (Rs 100,000

crore) in 2012, according to Plastindia Foundation.

Plastindia Foundation, an apex forum of India's plastics industry, also estimated that the demand potential

will jump to 12.5-million metric tonnes. It is noteworthy that India's plastics processing sector is set to

grow from 69,000 machines to 150,000 machines by 2020.

India's demand for plastics in irrigation alone is projected to surpass 2.5 million tonnes by 2015. It is also

likely that this industry will employ nearly 4 million people in 2012 and 7 million people by the year

2015.

3)India wants to offer support to GCC nations for plastic industry

India is keen to offer support to Gulf Cooperation Council (GCC) nations in their focus on value addition,

from oil economy to polymers and plastic products.

Moreover, the booming Indian plastics industry has got the highest number of exhibitorsalmost half of

the overall participation - while the remaining are from China, France, Germany, Hong Kong, Iran, Japan,

South Korea, Saudi Arabia, Pakistan, Portugal, Qatar, Russia, South Africa, Spain, Switzerland, Taiwan,

Turkey, the UAE and the UK.

The packaging sector, which is a key driver of the plastics industry, in the UAE was worth $1.84 billion

during 2011, posting growth at a CAGR of 4.27%. It is likely to grow at a CAGR of 4.68% to reach $2.3

billion in 2016.

COMPETITOR ANALYSIS:-

Pricing- The commodity plastics market is characterised by a short term volatility in prices, but theirsteady rise over the longer term. Bulk polymers have always been subject to the cyclical effects of supply

and demand that characterise all Commodities, and current price rises for these commodity materials are

predominantly in response to growing demand in countries such as China and India. Short term shocks

can also be caused by the oil price.

The biggest competitor of Sintex Industries in the plastic sector is Grasim.The comparison between the two is as follows

Name Sintex Grasim

Share Price 63.15 2,634.80

Market Cap (Rs. Cr) 1,723.94 24,166.82Sales Turnover (Rs. Cr) 2,568.22 4,969.72

Net Profit (Rs. Cr) 229.69 1,177.00

Total Assets (Rs. Cr) 4,668.40 9,729.73


8/16


9/16

COMPANY ANALYSIS

Company ProfileBusinesses Divisions:-

Sintex Industries Ltd is one of the leading providers of plastics and niche textile-related products

in India.

The Sintex group is one of the leading providers of plastics and niche textile-related

products in India

Established in India in 1931, Sintex has a proven track record of pio neering innovative concepts

in plastics and textile sectors in India and an uninterrupted 77 years of dividend payment to its

shareholders.

The company is organized into two business segments namely, textile and plastics.

In the textile division, the company manufactures high-value, yarn-dyed structured fabrics,

corduroy and items relating to home textiles.

In the plastic division , the company manufactures the following: storage solutions for water, oil

and fuel; prefabricated structures, monolithic structures, industrial custom moulded products,

consumer custom moulded products and interiors products.

Location of headquarters & manufacturing facilities:-

The company is headquartered in Kalol in Gujarat with 13 branch offices across India.

The company is having eight manufacturing facilities located at Kalol, Kolkata, Daman,

Bangalore, Nagpur, Baddi, Salem and Bhachau in India.

They are having a strong presence in the European, American, African, and Asian markets

including countries like France, Germany and USA.

Establishment & Journey so far:-

1931-74 Incorporated as The Bharat Vijay Mills Limited in June 1931 Established composite textile mill in Kalol, Gujrat

1975-90 Commenced manufacturing of plastic moulded polyethylene liquid storage tanks including

water tanks. Introduced new plastic products like doors, window frames and pallets Plastic Sections for Conversion into Partitions, False Ceilings, Wall

panelling, Cabins, Cabinets, Furniture etc.

1995 Renamed to Sintex industries limited Commenced manufacturing of SMC moulded products, pultruded products, resin

transfer moulded products and injection moulded products Modernization and expansion of the textile unit Commenced structured yarn dyed business


10/16

2000-Till date Alliance with European design houses and a UK based textile marketing company Commenced production of pre-fabricated structures for classrooms, booths

kiosks and office rooms Acquisition of 74% stake in Indian subsidiary of Zeppelin Mobile systems Ltd.,Germany

Entered the housing sector with monolithic construction First international acquisition by acquiring 81% stake in Wasaukee Composites Inc., USA. Acquired 100% stake in Nief Plastic SA, a French company Acquired automotive business division of Bright Brothers Limited Wausaukee acquired 100% stake of its competitor, Nero Plastics Inc., USA Zeppelin acquired Digvijay Communications and Network Pvt. Ltd., Indore and

became the total solution provider for telecom sector

Share Holding Pattern :-

BSE: 502742 NSE: SINTEXEQ

ISIN code: INE429C01035

CURRENT STOCK PRIZE: 63.15 INR

Holder's Name No of Shares % Share Holding

Promoters 99608765 36.49%

Foreign Institutions 80152616 29.36%

General Public 33500556 12.27%

Other Companies 29921222 10.96%

Banks &Mutual Funds 13704582 5.02%

Financial Institutions 8548373 3.13%

Others 5776257 2.12%

Foreign NRI 1778495 0.65%

Top Management - Board Of Directors:-

Chairman Dinesh B Patel

Vice Chairman

Arun P Patel

Directors Ramnikbhai Ambani

Ashwin Lalbhai Shah

RooshiKumar Pandya

Indira J Parikh

Rajesh B Parikh

Lavkumar Kantilal

Managing Director Rahul A Patel

Amit D Patel

Company Secretary

S B DangayachL M Rathod

Deputy Company Secretary Hitesh T Mehta


11/16

Financial performance of Sintex Industries -

The consolidated revenue and EBITDA of the Company has grown at a CAGR of 43.9% and 45.3%

over the last four years. All business segments of Sintex Industries have registered consistent growth inboth top and bottom lines over the past four years.

The plastics division, which remains the mainstay of the companys business, accounted for 80.36% of

the total revenues with growth of 63.69% in FY11. Prefabricated structures, part of the plastics division

was the main driver of growth. This growth was driven by the demand for prefabricated structures such

as monolithic construction and BT shelters particularly to major telecom providers such as Bharti Airtel

and Reliance.

The textiles divisionsrevenues grew 9.51% during FY11 largely on account of a 49% rise in exports to

Euro-denominated nations like Italy and Spain - a natural hedge against a weakening US dollar. The

Company strengthened its business through alliance renewals with leading EU and UK design houses.

Sintex Industries Q1-2012 PAT drops to Rs.46.79 crore

Sintex Industries Ltd announced its Financial Results for the period ended June 30, 2012.

The company has posted net profit of Rs.467.936 million for the quarter ended June 30, 2012 as

compared to Rs.945.762 million for the quarter ended June 30, 2011, representing a decrease of 50.52%.

Total income was at Rs.10805.600 million for the quarter ended June 30, 2012 where as the same was at

Rs.11119.956 million for the quarter ended June 30, 2011, representing a decrease of 2.83%.

The company has reported an EPS of Rs.1.72 for the quarter ended June 30, 2012 as compared to

Rs.3.49 for the quarter ended June 30, 2011.

Shares of Sintex Industries Ltd was trading in BSE at Rs.66.60, up by Rs.2.10 or 3.26%. The stock hit

an intraday high of Rs.67.20 and low of Rs.61.90.

The total traded quantity was 35.58 lakhs compared to 2 week average of 9.06 lakhs .

SWOT ANALYSIS of SINTEX INDUSTRIES :-

STRENGTHS-

Indias prefabricated leader, leveraging a rich government/private sector customer mix.

Limited competition in growth segment such prefabricated buildings due to high entry barriers

Marketing concept as a base.

The decision making and creation of the product is based on our customer's wants and needs


12/16


13/16

and very fast growing business. It would now with the aid of new techniques and setups, focus on

different ancillary products that can be used by the automobile, aerospace and power sectors.

1) The acquisition of 100% stake in France based Nief Plastic will enable the company to establish

itself in the international plastic component and composite markets. This will provide ready access

to reputed automobile manufacturers such as Renault, Peugot, Alstom, Schneider, Faurecia etc. and

also deeper penetration into the EU markets with precision plastic auto-component products

2) The acquisition of 81% stake in Wisconsin based Wausaukee Composites will help it in spreading

its composite component footprint across the US. The company will automatically cater to Neros

reputed client base comprising Phillips, Siemens, Hitachi, Toshiba, GE, Caterpillar, New Holland

Tractors, Agco, Bobcat, Alstom and Amtrac among others.

3) The acquisition of the automotive plastic division of Bright Brothers has enabled the company to

assume control of five strategically located manufacturing plants in Pune, Sohna, Chennai,

Pithampur and Nasik, specialising in the manufacture of injection-moulded plastic components for

the automotive industry. Bright Brothers has leading automotive companies like Maruti Suzuki,Tata Motors, Honda, Mahindra & Mahindra and Hyundai as its clients.

Alliances to increase reach-

With a view to strengthen our position, we at Sintex aim to offer ourselves as a global solutions provider

to our clients both in India and abroad. To achieve this we have adopted an aggressive strategy of

inorganic growth. Under this strategy we have acquired companies that are specialists in their respective

areas.

1)Wausaukee Composites Inc. - USA

Front end marketing in US for Sintex products, manufactured across diversified processes

Access to OEM Fortune 500 customer base

Access to superior technology

Sinetx LCC advantage to leverage volume business for Wausaukee

2)Nief Plastic SAS

Access to Niefs strong customer base

A route to enter the European plastic components market with competitive pricing and technical

qualifications

Potential synergies with Bright Autoplast to create a strong presence in automotive composite

and electrical market

3)Bright AutoPlast Pvt.Ltd. , India

4)Zep Infratech Limited,India
http://www.sintex.in/alliances.html#wahttp://www.sintex.in/alliances.html#nphttp://www.sintex.in/alliances.html#bahttp://www.sintex.in/alliances.html#zmhttp://www.sintex.in/alliances.html#zmhttp://www.sintex.in/alliances.html#bahttp://www.sintex.in/alliances.html#nphttp://www.sintex.in/alliances.html#wa


14/16

PRODUCT INNOVATIONS-

With its state of art technology, it has witnessed an enormous growth in its two segments viz.

'Prefabricated Structure' and 'Monolithic Construction'. These divisions will be the major growth drivers

over the next few years. Sintex is present in the textile business, producing high quality fabrics under thebrand BVM for its prestige clients Armani, Versace, Tommy Hilfiger and more. It has formed an

alliance with the UK based textile entity to further improve in the areas of design, structure and finishes

and to adapt some new innovations.

1)Prefab Structures and BT Shelters: Sintex has manufacturing plants spread across all five regions

of India to cater to the respective regions. Prefabs are ideal for schools, kiosks, huts, tent substitutes,

hospitals, police station, site offices etc. Strong demand is expected from municipal corporation, defense

bodies, hospitals, telecom industries, government school bodies and various other sections within India.

It also exports its prefabricated structures products to Africa and some parts of Asia for housing,

schools, medical centers, kiosk and among others.

2)Monolithic Construction: After establishing its name in Indian plastic industry it will realize its

name in monolithic construction business too. Sintex has made an entry into low cost housing projects in

nine states of India. It uses new and innovative techniques that reduce construction time and cost. This

has helped to grab huge orders from different government and municipal bodies. The demand for low

cost housing in India is expected to maintain for many years given the immense shortage. Sintex

currently has an order backlog of Rs22bn, which we believe will grow over time.

EXPANSION STRATEGIES/ INVESTMENT RATIONALE :-

Sintex is known as a plastic water tank manufacturer in India, over the years the name has becomesynonyms with water storage tanks. However since then it has come a long way and has diversified

itself into various other businesses, albeit in the same product, plastics. It now has the ability to use its

plastics in various forms in various industries. They have entered the construction and housing space,

automobile ancillaries, and power ancillaries to name a few. In addition the products of Sintex have

been accepted by the markets and these divisions have been growing rapidly and have been the growth

drivers.

1)Prefabricated Structures and BT shelters has smoothen the road ahead

One of the major changes in construction technology has been prefabricated structures. In a country like

India that has a massive dearth of infrastructure, prefabricated structures (better known as prefabs) have

a huge positive implication. Prefabs have a sprawling market in India in areas ranging from large

industrial and

commercial construction to mass housing. Over the past few years the construction techniques in India

have seen a major improvisation thanks to the adoption of global practices. In the context of prefabs, the

main application areas have so far been industrial buildings, workshops, etc. Mass housing, as a demand

driver, is yet to be tapped. In rural areas in particular, though housing projects are sponsored by the

government, there is very little supervision that results in poor quality of construction. The biggest

advantage of prefab structures is that there is no room for error in terms of the basic structures. These

structures have been tested and are known to be able to stand firm even in high winds and strong rains.These prefab structures have a life expectancy of 30 years and it usually takes a significantly shorter

time to construct.


15/16

Prefab business has not only contributed to the revenue growth, but also further strengthens the

operating margins. Prefabs have managed to generate an EBIDTA margin of 18% for the FY10. We

believe margins could sustain at these levels going forward given the mass orders expected from

government. Sintex uses honeycomb concrete between plastic channels, which makes prefab structures

lighter and easier to transport. As the name suggests, these structures are pre-made at the factory and

minimum work is done on the actual site. This reduces the cost by 25-40% and the time for erection by

85-90% as compared to conventional structures.2)Monolithic construction key growth driver

Sintex's entry into real estate business has accelerated its growth levels significantly. Monolithic

contributes 22-25% to its revenues and is expected to rise going forward. This segment caters to the low

cost housing segment, where a major chunk of its sales comes from the government and state municipal

bodies. Currently it operates in 7 states of India and has an order book of Rs 22bn. on hand. It has

chalked out plans to expand its construction business to all parts of India over the next few years. This

division has been growing at a CAGR of 80% since FY08. Given the acute shortage of housing and the

ever increasing demand of low cost housing in India we expect the order flow to remain robust. This

will ensure this division post a growth of 30% over the next few years. The monolithic division

generates an operating margin of 15% at the present moment. We believe going forward as project sizes

and number of projects increase the operating margins of the company could increase marginally.

3)Composite plastic division

The uses of plastic as a substitute for metals has grown significantly with its application in various

manufacturing industry like automobile, medical, packaging, aerospace etc. With its unique properties

like injection moulded, vacuum moulded and various other features plastic can be made in any form as

per the requirements and its end use application. The demand for plastic went through the roof, driven

largely by its use in automobile industries, which are replacing metal for plastic in the production of car

and other vehicles. Sintex is one of the dominant player in Indian plastic industry has realized the

opportunity and potential in the automobile industry and acquired one company in India, Bright AutoPlast Pvt. Ltd and two companies

internationally, Nief Plastics SA of France and Wausaukee Composite Inc in the USA. Through its

alliance with these companies, Sintex has laid a strong foundation for its custom moulding division, with

a reach in all geographies along with India. Sintex manufactures various products like fuel tanks, cable

trays, bus seats, satellite dish, meter boxes, polymeric insulators and other accessories catering to auto

and rural and urban electrification industries. Besides this it manufactures plastic products used in

aerospace and wind mills.

Valuations-With higher growth expectation from Monolithic, Prefab and its Custom Moulding divisions, we expect

revenue to grow 25 to 30% over next couple of years. At the current price the stock is trading at a P/E of

10.8x and 8.2x and an EV/EBIDTA of 10.9x and 8.9x for FY11E and FY12E respectively. Experts prefer

the P/E multiple of 13x for FY11E & arrive at a price target of Rs.432 and thus recommend a BUY on

Sintex Industries with an upside potential of 20%.


16/16

Risks in the Business-

Delays in orders execution

Sintex major growth would be coming from its monolithic construction business which comprises an

order book of Rs23bn. These orders need to be executed within next 21 to 22 months. Given these are

government projects there is a strong possibility in delay of projects. Delay from the government end dueto time lag

between allotment of land and actual construction, delay due to modification of plans, delay due to

inability of workforce. These risks would remain, we would consistently keep an eye on execution of

these projects and update our numbers when required.

Rise in level of working capital requirements

Sintex's working capital requirements have moved up drastically since its entry into monolithic

construction business. Debtor days have increased to 120 days from 95 days, while creditor days have

declined to 50 from 35days. This increase in working capital cycle has led to negative operating cash

flow. If they are unable to control their working capital this would add pressure on the balance sheet and

profitability of the company.

Prices of raw materials

Raw material costs around 52 to 55 percent of total sales and around 60 percent of total expenditures.

High volatility in commodity prices can affect the company's margins and bottom line growth. Raw

material used in plastic are made from the petroleum products, where there prices are largely depends on

the prices of crude.

However given the pragmatic shift and increase in the use of plastic we feel most of the price rises would

be passed on to the end user.

Low entry barrier

Sintex may have the market cornered with its respective products and business segments, but theirsuccess may inspire others to enter the business and challenge their position. There are large numbers of

unorganised players in the prefabricated structure industry which we assume can lead to tough

competition in future. However with good economies of scale and its synergy with its overseas

subsidiaries Sintex outperforms in its all business divisions.

Documents

Sintex Industries Companyanalysis92384293424