What are the prospects of Sintex Industries ?
-Madhur
Sintex Industries, which we know primarily as a manufacturer of overhead water tanks, was originally a textile manufacturer called Bharat Vijay Mills (established in 1931). In 1995 it changed its name to Sintex Industries. Its major businesses include building products (contributes 48 per cent of total revenue), custom mouldings (42 per cent) and textiles (10 per cent).
In its rush to grow, the company has taken on a significant amount of debt. It raised $225 million through foreign currency convertible bonds (FCCBs) for investing abroad. These are due for redemption in FY13.
Since FY08, Sintex has been trying to expand its custom moulding business. It has spent around Rs 550 crore on acquisitions. The acquisitions, Bright in India and Nief in Europe, have recovered after initial hiccups.
Over the last five years, Sintex has posted an average operating profit margin of 18.8 per cent and average net profit margin of 10 per cent.
The stock is currently trading at a price-to-earnings (P/E) ratio of 8.3 which is below its five-year median P/E of 15.3. Based on a five-year compounded annual growth rate (CAGR) of 15.3 per cent in earnings per share (EPS), its price-to-earnings to growth (PEG) ratio comes to an attractive 0.5.
Currently concerns regarding high capex, working-capital needs, and FCCB repayment are affecting the stock’s performance. These concerns are here to stay in the near to medium term.
This article was originally published on February 10, 2012.
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