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INSTITUTIONAL EQUITY RESEARCH

Page | 2 | PHILLIPCAPITAL INDIA RESEARCH

Sintex Industries (SINT IN) On the cusp of a re‐rating INDIA | MIDCAP | Initiating Coverage

17 July 2015

Sintex is a market leader in plastic prefab and storage tanks in India. Its new spinning (textiles) project should create significant shareholder value because of cost advantage and marginal cost of funding (alleviating capex concerns). Overall, its wide product portfolio and well‐established distribution network with strong brand name provide significant growth potential. We expect rerating in valuation with (1) improved cash flows, (2) better working‐capital cycle, and (3) earnings CAGR of 26% over FY15‐17. We initiate coverage with a BUY rating and a TP of Rs 155 based on 8x our FY17 EPS. Strong product portfolio, diversified revenue stream Sintex has built a strong product portfolio in plastic (3,500+ products) over the past 30 years. It derives 44% revenue from custom moulding (26% overseas, 18% India) and 45% from building material including pre‐fabricated plastics, monolithic, and storage tanks. Its textile segment (10% of revenue) is focused on value‐added products and primarily caters to readymade garments and high‐end fabric used in suiting and shirting. The company has evolved into a projects and solution provider from a pure plastics company, thereby reducing business risk.

Custom moulding (CM) is poised for significant growth Global and domestic acquisitions helped the company to acquire technology and increase geographic reach with new products. Custom moulding represents significant opportunities both globally and domestically for the company, which has integrated technology and shifted manufacturing to low‐cost locations such as Hungary, Slovakia, and India. Overseas CM (60% of revenue) should continue healthy growth (with Fortune‐500 clients) while domestic CM will benefit from strong growth in the automobile segment along with upcoming capacity expansion. Carmakers and two‐wheeler companies in India have lined up investments of ~US$ 5bn (Rs 310bn) and Rs 85bn respectively over the next five years, providing long‐term growth prospects for the CM business. Over FY15‐17, we expect overseas CM to report a revenue CAGR of 17% (Rs 25.1bn revenue in FY17) and domestic CM to see a CAGR of ~25% (Rs 19.8bn in revenues by FY17).

Building material to get support from government and CSR activities Sintex’s building‐material segment includes prefab (47%), monolithic (20%), infrastructure (23%), and storage tanks (11%). The company is a major beneficiary of the government’s spending on healthcare, education, and corporate‐CSR initiatives with its strong distribution network of over 1,000 dealers/distributors and 20,000 retailers in the domestic market and diverse product portfolio. The company is focusing on cash flows resulting in controlled growth in monolithic and infrastructure. Prefab and storage business will see a revenue CAGR of 22% and 13% respectively over FY15‐17. Building material will see revenue CAGR of 12% to Rs 40.1bn over FY15‐17.

Sustainable cash flow and improving working capital cycle Sintex has intentionally slowed down the bidding for new projects in the monolithic and infrastructure segments (these caused its receivable cycle to stretch because of some of the government projects). It has been able to improve net working capital to 44% sales from 59% in FY14 and reduce receivable days by 10 to reach 120 in FY15. The recovery in working capital cycle and better capital allocation will improve return ratios significantly.

Valuations At CMP of Rs 103, the stock trades at 5.3x our FY17 expected earnings and 4.7x EV/EBITDA. In the past five years, it has traded in a P/E range of 5x‐12x and average EV/EBITDA of around 7x. We have valued the company at 8x our FY17 EPS of Rs 19.5 to arrive at a price target of Rs 155, translating into an EV/EBITDA valuation of 6x. We initiate coverage with a BUY rating.

BUY CMP Rs 103 TARGET Rs 155 (+52%) COMPANY DATA O/S SHARES (MN) : 446MARKET CAP (RSBN) : 47MARKET CAP (USDBN) : 0.752 ‐ WK HI/LO (RS) : 136 / 67LIQUIDITY 3M (USDMN) : 7.9PAR VALUE (RS) : 1 SHARE HOLDING PATTERN, % PROMOTERS : 34.0FII / NRI : 39.5FI / MF : 2.2NON PROMOTER CORP. HOLDINGS : 4.7PUBLIC & OTHERS : 19.7 PRICE PERFORMANCE, %

1MTH 3MTH 1YRABS 3.5 ‐12.7 12.5REL TO BSE ‐2.2 ‐11.1 2.1 PRICE VS. SENSEX

Source: Phillip Capital India Research KEY FINANCIALS Rs mn FY15 FY16E FY17ENet Sales 70,066 83,577 104,860EBIDTA 11,824 14,445 18,147Net Profit 5,506 6,208 8,717EPS, Rs 12.3 13.9 19.5PER, x 8.3 7.4 5.3EV/EBIDTA, x 7.0 6.2 4.7P/BV, x 1.0 0.9 0.8ROE, % 11.7 11.8 14.3Debt/Equity (%) 91 99 90

Source: PhillipCapital India Research Est. Vikram Suryavanshi (+ 9122 6667 9951) [email protected]

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SINTEX INDUSTRIES INITIATING COVERAGE

Strong product portfolio, diversified revenue stream Sintex has built a strong product portfolio in its plastic division over the past 30 years through continuous innovation and customization and manufactures more than 3,500 types of plastic products. It derives 44% of its revenue from custom moulding (26% overseas, 18% India) and 45% from building materials including pre‐fabricated plastics, monolithic, and storage tanks. Sintex enjoys market leadership in storage tanks, prefabs, and monolithic and has evolved into a projects and solution provider from a purely plastics products company. FY15 revenue break up (Rs 70bn)

Source: Company, PhillipCapital India Research

Building materials business: prefabs, monolithic, and storage tanks • Caters to various industries such as construction, telecom,

industrial construction, warehousing etc. • Its monolithic construction panels are used for various civil

constructions by public sector entities including local administrations, municipal government bodies well as the defence sector for the construction of low‐budget housing, schools, health centres, and waste management.

Custom‐moulding business: Domestic and Overseas • Caters mainly to OEMs in automobile, aerospace, medical

imaging, marine, and off‐the‐road vehicles. Textiles business • Focused on value‐added products with forward integration. • Primarily caters to readymade garments. • Manufactures high‐end fabric used in suiting and shirting.

Custom moulding is poised for significant growth Custom moulding business saw a revenue CAGR of 16% in FY10‐15 (Rs 31bn in FY15). Overseas CM accounts for 60% with a revenue CAGR of 14%, while domestic CM saw a CAGR of 18% over FY10‐15. Overseas business should continue double‐digit growth while domestic business is linked to the growth of the automotive sector. Overseas CM has Fortune‐500 clients as customers and caters to the global market. The consolidation of its Groupe Simonin acquisition in FY15 is ongoing and it will take 3‐4 quarters to explore its full potential. Over FY15‐17, we expect overseas CM to report a revenue CAGR of 17% (Rs 25.1bn revenue in FY17) and domestic CM to see a CAGR of ~25% (Rs 19.8bn in revenues by FY17). 1) Overseas and domestic acquisitions are extending its capabilities and reach Custom moulding represents significant opportunities, both globally and domestically. Sintex has integrated technology and shifted manufacturing to low‐cost locations such as Hungary, Slovakia, and India. It is present in four continents and nine countries with a diversified product base – from electrical to aerospace. Sintex acquired two units of the German group Poschmann in 2012 ‐ one in Germany, (renamed as NP Poschmann) and NP Polska in Poland, which enabled geographic diversity and access to German‐origin global brands both in the automotive (Bosch, Porsche, and Pier Burg) and non‐automotive spaces (Siemens, Grohe, Wilo, and Vorwerk). Sintex strengthened its business in the American markets with the acquisition of Wausaukee Composite Inc. All these acquisitions have augmented the technical capabilities of the company and have provided reputed clientele in

CM India18%

CM Overseas26%

Prefab21%

Monolithic9%

Infrastructure11%

Storage tank5%

Textile10%

Global and domestic acquisitions helped the company to acquire technology and increase geographic reach with new products.



respective industries, thereby providing the opportunity to cross‐sell its products across customer segments. Its acquisition of Simonin, a French plastics products company, is expected to add € 50mn revenue in FY16 and has extended its capabilities in composites (i.e., metal and metal‐over‐moulded with plastic parts) which is seeing strong growth. The company has completed the restructuring of its US‐based Wasoki with (1) management change and (2) product rationalization, which should result in a margin improvement of 80‐92bps over the next two years. 2) Indian auto players have major investments – to benefit Sintex’s custom

moulding Its Indian subsidiary, Bright Autoplast, should benefit from strong growth in the automobile segment along with upcoming capacity expansion. Bright Autoplast caters to all major domestic OEM players and is absorbing technology and customers from overseas subsidiaries Nief Plastics and Wausaukee. Carmakers and two‐wheeler companies in India have lined up investment worth ~US$ 5bn (Rs 310bn) and Rs 85bn respectively over the next five years, providing long‐term visibility for Sintex’s custom moulding business. Suzuki Gujarat is investing Rs 85bn for a capacity of 750,000 units per annum. Honda is investing Rs 35.6bn in its two‐wheeler and car businesses in India as it looks to hike production capacity. Mahindra & Mahindra and Renault plan of Rs 40bn and Rs 50bn respectively. Sintex is setting up new plants for M&M and Schneider. It has also secured approvals from large and respected global and Indian brands for new products, which will lay the foundation for robust growth in the coming years. Capital expenditure plans of major auto players in India (Rs bn)

Source: Company, PhillipCapital India Research Sintex has recently started Light Resin Transfer Moulding (LRTM) and Vacuum Assisted Resin Transfer Molding facilities at Pune, Maharashtra. This technology has been acquired from Sintex Wausaukee Composites Inc USA and will be used for manufacturing large‐sized exterior and interior parts for automotive, mining, and construction‐equipment, mass‐transit, and medical‐equipment OEMs. The facility is equipped with gel coat spray booth, trimming booth, adhesive dispenser, and online paint shop. It can produce 18,000 parts per year. The LRTM and VARTM technology is best suited to produce large parts from 1 sq. mt. to 5 sq. mt. up to 10,000 parts annually. The new facility is expected to achieve 100% capacity utilization in FY16 and will further increase capacity in FY17.

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Building material to benefit from government and CSR activities Sintex’s building material segment includes prefab (47%), monolithic (20%), infrastructure (23%), and storage tank (11%). With its strong distribution network of over 1,000 dealers/distributors and 20,000 retailers in the domestic market and diverse product portfolio, the company is a major beneficiary of government spending on healthcare, education, and corporate CSR initiatives. Prefab and storage business should report revenue CAGRs of 22% and 13% respectively over FY15‐17. The company is focusing on cash flows resulting in controlled growth in monolithic and infrastructure. Overall, building material should report revenue CAGR of 12% over FY15‐17. Building material segmental revenue (Rs mn)

Year FY10 FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY10‐15

CAGR (%)FY15‐17E CAGR (%)

Building Products 14,460 21,900 20,320 22,720 27,340 31,760 35,446 40,168 21% 22%Prefab 5,640 6,500 7,220 9,730 11,740 14,800 17,760 22,200 ‐3% 3%Monolithic 7,200 13,400 10,870 10,290 9,110 6,210 6,521 6,586 0% ‐3%Infra ‐ ‐ ‐ ‐ 3,400 7,290 7,290 6,926 16% 13%Storage tank 1,620 2,000 2,230 2,700 3,090 3,460 3,875 4,456 16% 12%Source: Company, PhillipCapital Sintex is a leader in the fast‐growing building material market Sintex is in a leadership position for prefabs structures and monolithic construction materials through continuous introduction of new products. The government’s push for affordable housing with faster execution is positive for prefab and monolithic businesses. Monolithic has gained acceptability in the market and has latent demand from affordable housing due to cost and time benefits. Strong unmet demand in India for affordable housing India needs ~ 7mn houses every year, almost 75% of which constitute affordable housing. The qualification with the governments is the primary entry barrier for monolithic construction and prefabs. Sintex is pre‐qualified with 17 state governments for its prefabs and monolithic construction panels. Significant housing shortage in India Segment Monthly per capita expenditure (Rs) Estimated No of Households (mn) Housing shortage (mn) % ShortageEconomically weaker section 0‐3,300 21.81 21.78 99.9%Low income group 3,301‐7,300 27.57 2.89 10.5%Mid income group 7,301‐14,500

16.92 0.04 0.2%High Income group 14,501 +Total Shortage 66.3 24.71 37.3%Source: Technical Group 11th Five year Plan (FY07‐12) Sintex has executed a township development project in Delhi (600 units) and in Ahmadabad (900 units). The company has forayed into new geographies like Pondicherry, parts of Rajasthan and UP, and is moving up the value chain in the monolithic segment by undertaking housing projects for the mid‐income group (MIG) and high‐income group (HIG) and increasing exposure to the defence, police, and private sectors. It is increasing business volume by undertaking G+7/G+13 housing projects against G+4 projects earlier. Significant shortages of housing and government support are expected to provide long‐term growth opportunities for monolithic. Sintex has products for water purification in villages, healthcare centres, or classrooms and agri‐sheds. Therefore, its products fit very well into the government’s various projects towards cleanliness, sanitation, healthcare and education. A bit on this below:



Swacch Bharat Mission and Clean India to drive Sintex’s revenues Both schemes will address open defecation, disposal of solid waste, and liquid waste through recycling. In India around 65‐70% (~600mn) population in rural households still have poor or no access to toilets. As per the Ministry of Urban development and drinking water and sanitation, the government’s programme would cover 10.4mn households and provide 250,000 seats of community toilets and 260,000 public toilets and solid waste management for 4,041 statutory towns. The total cost of the programme over the next five years is estimated at Rs 620bn with central outlay earmarked at Rs 146bn. Sintex has developed efficient low‐cost bio‐toilets, which could see significant demand from the Swacch Bharat Mission apart from its prefab products. Sintex Prefab Toilets command 90‐95% market share. Private sector CSR initiatives will also drive revenue Increased outlay towards addressing drinking water and sanitation issues is creating demand for prefab products. A large outlay from the corporate kitty is available to boost the government’s campaign and ~Rs 70‐80bn per annum is expected to be spent through CSR for education, healthcare, sanitation, and environmental products. Other initiatives that are likely to result in higher business for Sintex Healthcare spending: This is expected to grow at 18% pa to fulfil the target density for hospitals beds and healthcare workers across rural and urban areas. Sarva Shiksha Abhiyan (SSA): The government’s flagship programme for achieving universal elementary education in a time‐bound manner is worth US$ 11bn, of which a third is for classroom infrastructure. The scheme intends to build 1mn primary classrooms and 0.28mn secondary classrooms by 2022 for 100% urban and 75%+ rural penetration — this will create opportunities for prefab. Cold storage and warehousing facilities: India loses ~20% of perishable products (20% of banana, ~10% of oranges, and ~17% of potatoes) due to inadequate warehousing and cold storage infrastructure. According to National Horticultural Board, 90% of fruits and vegetables that India produces have no storage facilities. The opening up of the retail sector and emphasis on wastage reduction will drive the demand for cold storage and warehousing. Sintex manufactures sandwich panels for cold chains and warehousing. Refrigerated warehouse capacity (per capita in M3) India’s perishable products (mtpa)

Source: Media, Company presentation Biogas: Family‐size biogas plants are a new opportunity — diverting human/animal‐kitchen waste to generate clean cooking gas with organic fertiliser a by‐product. Sintex is the only company with a government approval in family‐size biogas plants.

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Spinning project to add Rs 1.4bn to EBITDA in FY17 Sintex has a rich experience in textiles and has maintained high margins consistently with value‐added products such as structured dyed yarn fabrics. The company is setting up a cotton‐yarn spinning plant with capacity of 320,000 spindles at Pipavav, Gujarat, with a capital expenditure of Rs 18bn. The investment in spinning is expected to benefit from (1) favourable structural change in the global yarn market with growing export opportunities and (2) support from state and central government’s textile policy (details in text box below). Raw materials and power are major costs for spinning projects accounting for 68% and 14% of total costs. The availability of quality raw material and uninterrupted power supply at attractive rates along with marginal capital cost (effective interest cost of ~2‐3%) would result in a significant cost advantage. The project is also benefiting from its location advantage — of being in close proximity to efficient container‐port APM terminals, as it would export ~80% of its volumes. Typical cost break up of spinning mill

Source: Industry, PhillipCapital India Research The company is producing compact yarn, resulting in better quality and realization than normal carded spinning yarn. We have assumed revenue of Rs 10.6bn and EBITDA of Rs 1.43bn in FY17.

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Spinning project to add Rs 1.4bn EBITDA in FY17

Source: Company, PhillipCapital India Research Estimates

Gujarat Government’s New Textile Policy India is the third largest producer of cotton in the world after USA and China and exports ~25% of production. It is gaining share in the international market with Chinese focus on food grains and other priority crops. For China and other countries, the cost of production is increasing mainly due to high labour intensity in spinning — this is opening up opportunities for Indian suppliers. The Gujarat government has announced a new textile policy, which we believe would be a major driver for changing the outlook for spinning units. Gujarat produces ~70% of India’s cotton (grew to 12.3mn bales from 2.3mn bales 10 years ago), but transports it to outside states (mainly Tamil Naidu) to manufacture yarn. These states are power deficit, thereby increasing cost of production. The state government has announced attractive benefits resulting in an IRR yield of ~14‐18% and payback of 3‐4 years, which is expected to benefit Sintex’s spinning project. Details of the Gujarat government’s new textile policy 7% interest subsidy over and above 4% TUF from the central government

resulting in a marginal cost of borrowing of ~2%. Gujarat state has surplus power, which will be available for spinning units at a

subsidized rate (Rs 1 per unit less than standard rates). Duty exemption @ 15% on power tariff is also possible. VAT refund till cost of project is recovered. Additionally, the central government has allocated Rs 116bn under TUFS (Technology Upgradation Scheme) in the 12th Five Year Plan Period (2012‐2017).

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Improving working capital cycle The company had high working‐capital intensity due to (1) its large product range (2) the monolithic construction business that largely caters to the government segment (many of its customers are large PSUs demanding longer credit periods) and (3) infrastructure business. Receivables increased to 130 days in FY14 from 114 in FY11 with outstanding at Rs 20.8bn. Net working capital (excluding cash) as percentage of sales increased to 56% in FY14 from 30% in FY11. However, now, Sintex has intentionally slowed down bidding for new projects in monolithic and infrastructure (where the receivable cycle was being stretched due to some of the government projects). It has been able to improve net working capital to 44% sales from 59% in FY14 and reduce receivable days by 10 to touch 120 in FY15. The loans and advance increased by 239% to Rs19.5bn in FY15 from Rs 5.7bn in FY11 mainly due to advances on ongoing projects. Recovery in working capital cycle, better capital allocation, and significantly improved return ratios provide upside. Working capital (ex‐cash) as % of sales


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Financials Sintex’s FY09‐15 revenue CAGR was 14%. The company has consistently maintained healthy EBITDA margins (14.5%‐16%) over the last five years, despite the weak economy. We expect revenue CAGR of 22% over FY15‐17 with 40bps margin improvement to 17.3%, resulting in earnings CAGR of 26% (FY17 revenue at Rs 104bn, net profit at Rs 8.71bn). We see EBITDA CAGR at 24% to Rs 18.1bn. Higher growth in the high‐margin businesses such as domestic custom moulding (margin at ~20% vs. 10% in overseas CM) and prefab should support the company’s margins. Its overseas business’ clients are all Fortune‐500 companies, mainly for their global supply. Therefore, Sintex does not expect a significant impact of the EU crisis, as the overseas business will be more linked to global automobile growth. The company has a regular capex of ~Rs 1.4bn per annum and is spending ~Rs 1.5bn on capacity addition in custom molding and prefabs. The pending capital expenditure for its textile spinning project of Rs 8bn is expected to be complete in FY16. We have assumed average tax rate of 30% compared to effective tax rate of 25.5% in the past two years as some of the plants are coming out of tax exemptions. FCCB is fully converted and equity capital is now 444mn shares (35% increase yoy). Revenue to cross Rs 100bn in FY17 ‐ CAGR of 22% 40bps improvement in margins to 17.3% in FY15‐17

Profit CAGR of 26% to Rs 8.7bn (FY15‐17) Return ratios to improve, ROE of 14.3% in FY17


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Segmental revenue (Rs mn) FY10 FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18ECustom Molding 14910 18600 19370 23590 25660 31080 38299 44958 51544India 5450 6700 8220 10610 10600 12700 15875 19844 23416Overseas 9460 11900 11150 12980 15060 18380 22424 25114 28128Building Products 14460 21900 20320 22720 27340 31760 35446 40168 46759Prefab 5640 6500 7220 9730 11740 14800 17760 22200 27084Monolithic 7200 13400 10870 10290 9110 6210 6521 6586 7244Infra 0 0 0 0 3400 7290 7290 6926 7618Storage tank 1620 2000 2230 2700 3090 3460 3875 4456 4813Textiles 3450 4400 4680 4730 5460 7240 8109 9082 9808Total revenue 32820 44900 44370 51040 58460 70080 81853 94208 108112yoy growth 6.8 36.8 ‐1.2 15.0 14.5 19.9 16.8 15.1 14.8Spinning Project 0 0 0 0 0 0 1724 10652 12224Total 32820 44900 44370 51040 58460 70080 83577 104860 120335yoy growth 6.8 36.8 ‐1.2 15.0 14.5 19.9 19.3 25.5 14.8EBITDA margins (%) Custom Molding 14.7 14.7 14.3 12.0 13.3 14.1 14.2 14.6 14.7India 20.0 21.5 19.2 19.0 19.3 20.0 20.0 20.0 20.0Overseas 11.8 11.2 11.0 7.0 9.0 10.0 10.1 10.3 10.3Building Products 17.2 20.0 16.3 17.5 20.3 19.0 18.8 19.5 19.8Prefab 17.0 19.8 17.0 19.0 26.0 26.0 25.0 25.0 25.0Monolithic 19.0 21.2 17.2 18.0 20.7 17.0 17.0 17.0 17.0Infra 7.0 10.0 9.0 9.0 9.0Storage tank 10.0 13.0 9.9 10.0 12.0 12.0 12.0 12.0 12.0Textiles 19.0 24.0 22.9 21.0 25.0 25.0 25.0 25.0 25.0Spinning project 9.0 13.5 13.9Total 16.3 18.3 16.2 15.5 17.6 17.5 17.1 17.3 17.4

Source: Company, PhillipCapital India Research Sustainable cash flows; FCCB dilution usefully absorbed Investment in infrastructure and overseas acquisitions led to a significant increase in fixed asset and working capital. It’s capital expenditure over FY09‐15 was around Rs 36.5bn with additional working capital requirement of Rs 15.3bn. The balance sheet size increased from Rs 41.6bn in FY09 to Rs 92.5bn with asset turnover of 0.8x. The company had a total debt of ~Rs 42.9bn with a D/E of 0.9x in FY15. Sintex issued an FCCB of US$ 225mn on March 2008 to finance expansion and working capital requirement. However, slowdown in global economy after2008 and tighter liquidity led to refinancing of the FCCB in November 2012, thereby impacting the valuation of the company. The company has successfully absorbed the conversion of FCCB into equity with ~35% dilution and equity shares have increased to 444mn. It has completed major investments and has an annual EBITDA of around Rs 14bn and cash profit of Rs 9bn. We expect rerating in valuation with improved cash flows and balance sheet. Improving balance sheet


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Valuations: Rerating is inevitable Sintex’s valuation were impacted due to economic cycles, stretched working capital, and increased leverage. However, its revenue profile has changed significantly in favour of value‐added products and the company is in a strong position to capitalize on economic recovery and the government’s focus on affordable housing, education, and healthcare. Its new spinning project is expected to create significant shareholder value because of cost advantage and marginal cost of funding (alleviating capex concerns) Sintex will continue to benefit from its leadership position in prefabricated structures (prefabs) and water tanks in the domestic market. Improvement in working capital management, its well‐established distribution network with strong brand name and integration of its overseas subsidiaries will support valuation rerating. At its CMP of Rs 103, the stock trades at 5.3x our FY17 expected earnings and 4.7x EV/EBITDA. In the past five years it has traded at a P/E of 5x‐12x and average EV/EBITDA of around 7x. We have valued the company at 8x our FY17 EPS of Rs 19.5 to arrive at a price target of Rs 155, translating into an EV/EBITDA valuation of 6x FY17. We are initiating coverage with a BUY rating. P/E chart (1 yr forward)


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Business Risks • Susceptibility to volatility in raw material prices: Major raw materials used for

plastic products (~56%% of raw material cost, ~35% of revenue) are derivates of crude oil. Significant fluctuation in raw material prices may affect the company’s margins.

• The company derives 60% revenue from overseas in its custom moulding business out of which ~40% is in US dollars and 60% is in euros. Currency volatility could impact revenue growth and profitability.

• Sintex has undertaken large‐sized capacity expansion cum modernization projects in textiles and plastics — the combined project costs is Rs 9.5 bn. Any delay in execution of the project and creating a market for its products would impact financials.

About the Company Sintex operates in two segments — textiles and plastics — that contributed around 10% and 90% respectively to consolidated revenue. It has 36 manufacturing plants spread over nine countries and four continents. Textile segment is focused on men’s shirting in the premium fashion category. The product mix in the plastics division primarily comprises prefabs, monolithic constructions, industrial custom moulding, water tanks, transmission & distribution accessories, fibre reinforced plastics (FRP), and storage tanks. Sintex is a market leader in water tanks and prefabs in India. Its established presence in the water tanks business has made brand Sintex a generic name. The company has created a global footprint across the continents of USA and Europe through strategic acquisitions. Its infrastructure projects include EPC in power, creating check posts for state governments, creating pollution management infrastructure, and a low‐cost housing project. Infrastructure business is also executing the Sintex group’s EPC contract worth ~Rs 14bn (spinning project in Gujarat). Sintex Business snapshot (FY15)

Source: Company, PhillipCapital; Note:* includes Infra revenue of Rs 7.29 bn at EBITDA of 10 %

Custom Molding

44%

Building Products

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Textile

10%

● Introduced prefab structures like school, toilet, primary health center, agri‐sheds,RO water enclosures, etc

● Presence in USA, Europe and North Africa

● Acquired companies to gain technology and customers

● Designed and introduced Monolithic

● Construction in India to address mass and low cost housing needs

● Niche market: Focus on high end structured dyed yarn fabrics

● Alliances with various European design houses like Armani, Hugo, etc.

● Products molded and fabricated to OEMs across market segment like aerospace & defense, automotive, electrical.

India Overseas Storage TanksPrefab Monolithic

●Make popular liquid storage tanks, doors, windows, profilrs, frames, pallets, etc.

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Revenue Contribution%

FY11‐15 Rev CAGR%

FY15 EBITDA Margin%



Financials

Income Statement Y/E Mar, Rs mn FY14 FY15 FY16E FY17ENet sales 58,426 70,066 83,577 104,860Growth, % 15 20 19 25Total income 58,426 70,066 83,577 104,860Raw material expenses ‐35,601 ‐43,038 ‐51,325 ‐64,851Employee expenses ‐6,331 ‐7,202 ‐8,288 ‐9,646Other Operating expenses ‐7,071 ‐8,003 ‐9,519 ‐12,216EBITDA (Core) 9,423 11,824 14,445 18,147Growth, % 27.2 25.5 22.2 25.6Margin, % 16.1 16.9 17.3 17.3Depreciation ‐2,548 ‐2,605 ‐3,131 ‐3,771EBIT 6,876 9,219 11,313 14,376Growth, % 28.4 34.1 22.7 27.1Margin, % 11.8 13.2 13.5 13.7Interest paid ‐2,894 ‐2,835 ‐3,598 ‐3,811Other Non‐Operating Income 993 964 1,121 1,855Pre‐tax profit 4,975 7,348 8,837 12,421Tax provided ‐1,180 ‐1,863 ‐2,651 ‐3,726Profit after tax 3,795 5,485 6,186 8,695Others (Minorities, Associates) 13 21 22 23Net Profit 3,807 5,506 6,208 8,717Growth, % (8.1) 44.6 12.7 40.4Net Profit (adjusted) 3,807 5,506 6,208 8,717Unadj. shares (m) 313 424 446 446Wtd avg shares (m) 446 446 446 446 Balance Sheet Y/E Mar, Rs mn FY14 FY15 FY16E FY17ECash & bank 2,720 4,250 8,602 15,724Debtors 20,785 23,054 27,477 34,475Inventory 4,511 5,170 8,014 10,055Loans & advances 19,099 19,507 15,605 12,484Other current assets 1,445 1,554 1,787 2,055Total current assets 48,560 53,535 61,486 74,793Investments 3,058 5,281 5,469 5,666Gross fixed assets 55,218 72,540 82,921 86,442Less: Depreciation ‐17,205 ‐19,810 ‐22,941 ‐26,712Add: Capital WIP 1,255 1,506 1,807 1,200Net fixed assets 39,268 54,237 61,787 60,930Total assets 90,886 113,052 128,742 141,390 Current liabilities 10,241 16,985 17,173 18,674Provisions 1,230 1,462 1,608 1,769Total current liabilities 11,471 18,447 18,782 20,443Non‐current liabilities 43,976 47,626 57,274 60,193Total liabilities 55,447 66,073 76,055 80,636Paid‐up capital 594 424 446 446Reserves & surplus 34,844 46,554 52,241 60,308Shareholders’ equity 35,439 46,978 52,687 60,754Total equity & liabilities 90,886 113,052 128,742 141,390 Source: Company, PhillipCapital India Research Estimates

Cash Flow Y/E Mar, Rs mn FY14 FY15 FY16E FY17EPre‐tax profit 4,975 7,348 8,837 12,421Depreciation 2,548 2,605 3,131 3,771Chg in working capital ‐7,187 3,532 ‐3,265 ‐4,524Total tax paid ‐771 ‐458 ‐2,209 ‐3,105Cash flow from operating activities ‐435 13,026 6,494 8,563Capital expenditure ‐7,067 ‐17,574 ‐10,682 ‐2,914Chg in investments ‐1,755 ‐2,223 ‐189 ‐197Cash flow from investing activities ‐8,822 ‐19,796 ‐10,870 ‐3,111Free cash flow ‐9,257 ‐6,770 ‐4,376 5,451Equity raised/(repaid) 1,481 7,431 704 683Debt raised/(repaid) 2,681 2,245 9,206 2,299Dividend (incl. tax) ‐256 ‐497 ‐521 ‐651Cash flow from financing activities 3,918 9,201 9,412 2,354Net chg in cash ‐5,339 2,431 5,036 7,805 Valuation Ratios

FY14 FY15 FY16E FY17EPer Share data EPS (INR) 8.5 12.3 13.9 19.5Growth, % (8.1) 44.6 12.7 40.4Book NAV/share (INR) 79.5 105.4 118.2 136.2FDEPS (INR) 8.5 12.3 13.9 19.5CEPS (INR) 14.3 18.2 20.9 28.0CFPS (INR) (3.2) 27.1 12.0 15.0DPS (INR) 0.5 1.0 1.0 1.2Return ratios Return on assets (%) 6.6 7.2 7.0 8.2Return on equity (%) 10.7 11.7 11.8 14.3Return on capital employed (%) 9.9 10.8 11.3 13.4Turnover ratios Asset turnover (x) 0.8 0.9 0.9 1.1Sales/Total assets (x) 0.7 0.7 0.7 0.8Sales/Net FA (x) 1.6 1.5 1.4 1.7Working capital/Sales (x) 0.6 0.5 0.4 0.4Fixed capital/Sales (x) 0.1 0.0 0.0 0.0Liquidity ratios Current ratio (x) 4.7 3.2 3.6 4.0Quick ratio (x) 4.3 2.8 3.1 3.5Interest cover (x) 2.4 3.3 3.1 3.8Dividend cover (x) 17.4 13.0 14.0 15.7Total debt/Equity (%) 114.8 91.4 99.0 89.6Net debt/Equity (%) 107.1 82.3 82.6 63.7Valuation PER (x) 12.1 8.3 7.4 5.3PEG (x) ‐ y‐o‐y growth (1.5) 0.2 0.6 0.1Price/Book (x) 1.3 1.0 0.9 0.8Yield (%) 0.5 0.9 1.0 1.2EV/Net sales (x) 1.2 1.2 1.1 0.8EV/EBITDA (x) 7.5 7.0 6.2 4.7EV/EBIT (x) 10.2 8.9 7.9 5.9



Contact Information (Regional Member Companies)

SINGAPORE Phillip Securities Pte Ltd

250 North Bridge Road, #06‐00 Raffles City Tower, Singapore 179101

Tel : (65) 6533 6001 Fax: (65) 6535 3834 www.phillip.com.sg

MALAYSIA Phillip Capital Management Sdn Bhd B‐3‐6 Block B Level 3, Megan Avenue II,

No. 12, Jalan Yap Kwan Seng, 50450 Kuala Lumpur Tel (60) 3 2162 8841 Fax (60) 3 2166 5099

www.poems.com.my

HONG KONG Phillip Securities (HK) Ltd

11/F United Centre 95 Queensway Hong Kong Tel (852) 2277 6600 Fax: (852) 2868 5307

www.phillip.com.hk

JAPAN Phillip Securities Japan, Ltd

4‐2 Nihonbashi Kabutocho, Chuo‐ku Tokyo 103‐0026

Tel: (81) 3 3666 2101 Fax: (81) 3 3664 0141 www.phillip.co.jp

INDONESIA PT Phillip Securities Indonesia

ANZ Tower Level 23B, Jl Jend Sudirman Kav 33A, Jakarta 10220, Indonesia

Tel (62) 21 5790 0800 Fax: (62) 21 5790 0809 www.phillip.co.id

CHINA Phillip Financial Advisory (Shanghai) Co. Ltd.

No 550 Yan An East Road, Ocean Tower Unit 2318 Shanghai 200 001

Tel (86) 21 5169 9200 Fax: (86) 21 6351 2940 www.phillip.com.cn

THAILAND Phillip Securities (Thailand) Public Co. Ltd.

15th Floor, Vorawat Building, 849 Silom Road, Silom, Bangrak, Bangkok 10500 Thailand

Tel (66) 2 2268 0999 Fax: (66) 2 2268 0921 www.phillip.co.th

FRANCE King & Shaxson Capital Ltd.

3rd Floor, 35 Rue de la Bienfaisance 75008 Paris France

Tel (33) 1 4563 3100 Fax : (33) 1 4563 6017 www.kingandshaxson.com

UNITED KINGDOM King & Shaxson Ltd.

6th Floor, Candlewick House, 120 Cannon Street London, EC4N 6AS

Tel (44) 20 7929 5300 Fax: (44) 20 7283 6835 www.kingandshaxson.com

UNITED STATES Phillip Futures Inc.

141 W Jackson Blvd Ste 3050 The Chicago Board of Trade Building

Chicago, IL 60604 USA Tel (1) 312 356 9000 Fax: (1) 312 356 9005

AUSTRALIA PhillipCapital Australia

Level 37, 530 Collins Street Melbourne, Victoria 3000, Australia

Tel: (61) 3 9629 8380 Fax: (61) 3 9614 8309 www.phillipcapital.com.au

SRI LANKA Asha Phillip Securities Limited

Level 4, Millennium House, 46/58 Navam Mawatha, Colombo 2, Sri Lanka

Tel: (94) 11 2429 100 Fax: (94) 11 2429 199 www.ashaphillip.net/home.htm

INDIA PhillipCapital (India) Private Limited

No. 1, 18th Floor, Urmi Estate, 95 Ganpatrao Kadam Marg, Lower Parel West, Mumbai 400013 Tel: (9122) 2300 2999 Fax: (9122) 6667 9955 www.phillipcapital.in

Management (91 22) 2300 2999

Kinshuk Bharti Tiwari (Head – Institutional Equity) (91 22) 6667 9946(91 22) 6667 9735

Research Economics Midap

Dhawal Doshi (9122) 6667 9769 Anjali Verma (9122) 6667 9969 Amol Rao (9122) 6667 9952Nitesh Sharma, CFA (9122) 6667 9965

Infrastructure & IT Services Portfolio StrategyBanking, NBFCs Vibhor Singhal (9122) 6667 9949 Anindya Bhowmik (9122) 6667 9764Manish Agarwalla (9122) 6667 9962 Deepan Kapadia (9122) 6667 9992Pradeep Agrawal (9122) 6667 9953 TechnicalsParesh Jain (9122) 6667 9948 Logistics, Transportation & Midcap Subodh Gupta, CMT (9122) 6667 9762

Vikram Suryavanshi (9122) 6667 9951Consumer, Media, Telecom Production ManagerNaveen Kulkarni, CFA, FRM (9122) 6667 9947 Metals Ganesh Deorukhkar (9122) 6667 9966Jubil Jain (9122) 6667 9766 Dhawal Doshi (9122) 6667 9769Manoj Behera (9122) 6667 9973 Database Manager

Oil&Gas, Agri Inputs Deepak Agarwal (9122) 6667 9944Cement Gauri Anand (9122) 6667 9943Vaibhav Agarwal (9122) 6667 9967 Editor

Pharma Roshan Sony 98199 72726Engineering, Capital Goods Surya Patra (9122) 6667 9768Ankur Sharma (9122) 6667 9759 Mehul Sheth (9122) 6667 9996 Sr. Manager – Equities SupportHrishikesh Bhagat (9122) 6667 9986 Rosie Ferns (9122) 6667 9971

Sales & Distribution Ashvin Patil (9122) 6667 9991 Sales Trader Zarine Damania (9122) 6667 9976Shubhangi Agrawal (9122) 6667 9964 Dilesh Doshi (9122) 6667 9747 Kishor Binwal (9122) 6667 9989 Suniil Pandit (9122) 6667 9745Sidharth Agrawal (9122) 6667 9934 ExecutionBhavin Shah (9122) 6667 9974 Mayur Shah (9122) 6667 9945

Corporate Communications

Vineet Bhatnagar (Managing Director)

Jignesh Shah (Head – Equity Derivatives)

Automobiles



Disclosures and Disclaimers PhillipCapital (India) Pvt. Ltd. has three independent equity research groups: Institutional Equities, Institutional Equity Derivatives and Private Client Group. This report has been prepared by Institutional Equities Group. The views and opinions expressed in this document may or may not match or may be contrary at times with the views, estimates, rating, target price of the other equity research groups of PhillipCapital (India) Pvt. Ltd. This report is issued by PhillipCapital (India) Pvt. Ltd. which is regulated by SEBI. PhillipCapital (India) Pvt. Ltd. is a subsidiary of Phillip (Mauritius) Pvt. Ltd. References to "PCIPL" in this report shall mean PhillipCapital (India) Pvt. Ltd unless otherwise stated. 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Securities and Derivatives markets may be subject to rapid and unexpected price movements and past performance is not necessarily an indication to future performance. This report does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. Investors must undertake independent analysis with their own legal, tax and financial advisors and reach their own regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. In no circumstances it be used or considered as an offer to sell or a solicitation of any offer to buy or sell the Securities mentioned in it. The information contained in the research reports may have been taken from trade and statistical services and other sources, which we believe are reliable. PhillipCapital (India) Pvt. Ltd. or any of its group/associate/affiliate companies do not guarantee that such information is accurate or complete and it should not be relied upon as such. Any opinions expressed reflect judgments at this date and are subject to change without notice Important: These disclosures and disclaimers must be read in conjunction with the research report of which it forms part. Receipt and use of the research report is subject to all aspects of these disclosures and disclaimers. Additional information about the issuers and securities discussed in this research report is available on request. Certifications: The research analyst(s) who prepared this research report hereby certifies that the views expressed in this research report accurately reflect the research analyst’s personal views about all of the subject issuers and/or securities, that the analyst have no known conflict of interest and no part of the research analyst’s compensation was, is or will be, directly or indirectly, related to the specific views or recommendations contained in this research report. The Research Analyst certifies that he /she or his / her family members does not own the stock(s) covered in this research report. Independence/Conflict: PhillipCapital (India) Pvt. Ltd. has not had an investment banking relationship with, and has not received any compensation for investment banking services from, the subject issuers in the past twelve (12) months, and PhillipCapital (India) Pvt. Ltd does not anticipate receiving or intend to seek compensation for investment banking services from the subject issuers in the next three (3) months. PhillipCapital (India) Pvt. Ltd is not a market maker in the securities mentioned in this research report, although it or its employees, directors, or affiliates may hold either long or short positions in such securities. PhillipCapital (India) Pvt. Ltd may not hold more than 1% of the shares of the company(ies) covered in this report. Suitability and Risks: This research report is for informational purposes only and is not tailored to the specific investment objectives, financial situation or particular requirements of any individual recipient hereof. Certain securities may give rise to substantial risks and may not be suitable for certain investors. Each investor must make its own determination as to the appropriateness of any securities referred to in this research report based upon the legal, tax and accounting considerations applicable to such investor and its own investment objectives or strategy, its financial situation and its investing experience. The value of any security may be positively or adversely affected by changes in foreign exchange or interest rates, as well as by other financial, economic or political factors. Past performance is not necessarily indicative of future performance or results. Sources, Completeness and Accuracy: The material herein is based upon information obtained from sources that PCIPL and the research analyst believe to be reliable, but neither PCIPL nor the research analyst represents or guarantees that the information contained herein is accurate or complete and it should not be relied upon as such. 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The research analyst(s) preparing the research report is/are resident outside the United States (U.S.) and are not associated persons of any U.S. regulated broker‐dealer and therefore the analyst(s) is/are not subject to supervision by a U.S. broker‐dealer, and is/are not required to satisfy the regulatory licensing requirements of FINRA or required to otherwise comply with U.S. rules or regulations regarding, among other things, communications with a subject company, public appearances and trading securities held by a research analyst account. This report is intended for distribution by PhillipCapital (India) Pvt Ltd. only to "Major Institutional Investors" as defined by Rule 15a‐6(b)(4) of the U.S. Securities and Exchange Act, 1934 (the Exchange Act) and interpretations thereof by U.S. Securities and Exchange Commission (SEC) in reliance on Rule 15a 6(a)(2). If the recipient of this report is not a Major Institutional Investor as specified above, then it should not act upon this report and return the same to the sender. Further, this report may not be copied, duplicated and/or transmitted onward to any U.S. person, which is not the Major Institutional Investor. In reliance on the exemption from registration provided by Rule 15a‐6 of the Exchange Act and interpretations thereof by the SEC in order to conduct certain business with Major Institutional Investors, PhillipCapital (India) Pvt Ltd. has entered into an agreement with a U.S. registered broker‐dealer, Marco Polo Securities Inc. ("Marco Polo").Transactions in securities discussed in this research report should be effected through Marco Polo or another U.S. registered broker dealer. PhillipCapital (India) Pvt. Ltd. Registered office: No. 1, 18th Floor, Urmi Estate, 95 Ganpatrao Kadam Marg, Lower Parel West, Mumbai 400013

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