Wednesday, August 05, 2009

Buy around Rs.215-220 Target Rs.310 8-12months

Sintex Industries Textile company forayed into the plastics business in 1975 with storage tanks and gradually expanded into doors, windows, frames and pallets. Company later commenced production of sheet moulding compound (SMC) and resin transfer moulded products along with a structured yarn dyeing business.
The company’s textiles division operates in niche areas like high-end men’s  shirting material and corduroy fabrics. Buyers include Lacoste, GAP, Marks & Spencer, etc. But the biggest gains for Sintex would come from its diversification into the housing and infrastructure sector.
Apart from the water tank business Sintex is into the infrastructure sector via its pre-fabrication business. This segment is likely to see exponential growth as the government concentrates on affordable housing.

Global Presence:-
With a view to strengthen the position, Sintex offers itself as a global solutions provider to clients both in India and abroad. To achieve this they have adopted an aggressive strategy of inorganic growth. Under this strategy they have acquired companies that are specialists in their respective areas -
Wausaukee Composites Inc. - USA
Nief Plastic SAS
Bright AutoPlast Pvt.Ltd.
Zeppelin Mobile systems India Limited

Further growth possible:-

  • Government spending on low cost housing and deficient rain fall would increase sales of Sintex and Textile business worst seems to be over - The Indian government, through its Union Budget 2009-10, reiterated its thrust on rural and urban spend through schemes such as Bharat Nirman, Jawaharlal Nehru National Urban Renewal Mission, Sarva Shiksha Abhiyan, etc. This is expected to sustain demand for Sintex’s pre-fabricated structures business in the form of rural classrooms, health clinics, toilets, worker shelters, etc.
  • Sintex’s monolithic construction business has an order backlog of Rs18b to be executed in the next two years.
  • Sintex’s French subsidiary, Nief, caters to auto, electricals, aerospace, defense, and medical equipment sectors. It has lowered its exposure to auto, and also extended its presence to Hungary and Tunisia. 
  • During the quarter, Sintex’s auto components subsidiary, Bright Autoplast commissioned its second unit in Chennai for ‘under the hood’ auto components for global OEMs. Towards end 2009, the unit will also produce electrical components for supplies to companies such as Schneider of Germany.
  • Sintex had made an initial payment of €7m (US$10m) towards the acquisition of Geiger, Germany, which has since gone into liquidation. As a result, Sintex has decided to write off the same (depending on the liquidator’s ruling, it may consider acquiring Geiger at a much lower valuation than the earlier €35m). 
  • Sintex has also indicated that it would go ahead with its capital expansion plans costing Rs 200 cr.

Technical Outlook Strong:-
SINTEX is making an Inverse Head & Shoulders pattern on weekly graph (shown below) and over medium term (8-12 months) the stock can reach Rs 310-330 while long term target can be (2-3 years) Rs 400-450. Short-term players can buy it near current levels with stops below Rs 200 and target Rs 235-240.

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