The Hindu Business Line : Sintex Industries: Buy

INVESTORS can consider taking exposure in the Sintex Industries stock which, at Rs 120, trades at 15 times its trailing 12-month earnings. Higher volumes in the textiles and plastics divisions, more than doubled the revenues in the first half of FY-05. Sintex is likely to sustain this rapid growth as opportunities open up in the textile sector, through its tie up with Canclini of Italy, and in the unexplored plastic oil storage tank market.

Of late, the company's textile division, which accounts for 28 per cent of the revenues, has been growing at a healthy pace. Sintex is among the larger manufacturers of structured fabrics and has a strong presence in the corduroys segment. It supplies to leading brands in both the international and domestic markets, including Espirit, Tommy Hilfiger, Raymond and Madura Garments. Its tie-up with Canclini Tessile of Italy has given it a foothold in the European market. The collaboration accounted for 15 per cent of its capacity in FY-05; and is expected to move up to 45 per cent over a three-year period. Sintex plans to tap opportunities in the domestic and international markets by increasing its loom capacity 33 per cent to 24 million meters. Sintex, now almost synonymous with plastic water tanks, has diversified its consumer portfolio by moving into other products in the plastic processing industry. Besides manufacturing a range of building materials, it also makes plastic sections as a substitute for wooden furniture. It also supplies inventory storage systems for industrial purposes.

The company has moved into prefabricated buildings. It plans to set up plants to tap the northern and eastern regions. Sintex has also ventured into waste management solutions. The company recently acquired Zepplin Mobile Systems to consolidate its position in the prefabricated shelter business. Sintex is diversifying its risk in the plastics processing business by venturing into custom mouldings.

With a range of processing methods, it would be able to effectively meet client specifications. To tap growth the oil retailing sector, Sintex has introduced petroleum storage tanks. A strong ramp up in oil retailing infrastructure provides ample opportunity for growth. Fibre reinforced plastic (FRP) tanks, besides being cheaper than the concrete ones, are low on maintenance.

Sintex plans to start commercial production of FRP tanks by December. It reported a 50 per cent growth in revenues in the first half of FY-06 at its textile division. Gross margin of the division increased by 3 percentage points on the back of higher volumes. Higher volumes at the plastics division contributed to a 50 per cent increase in gross profits.

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