Sharekhan Investor's Eye

Sintex Industries
Cluster: Apple Green
Recommendation: Buy
Price target: Rs192.5
Current market price: Rs162

Price target revised to Rs192.5

Result highlights

* Sintex Industries Ltd (SIL) reported a revenue growth of 14.4% year on year (yoy) in Q3FY2006 to Rs210.3 crore. The revenue growth was marginally lower than our expectation, mainly because the plastic business grew at a slower growth rate of 5.2% yoy.
* The operating profit margin (OPM) saw a phenomenal improvement of 140 basis points yoy and of 80 basis points quarter on quarter (qoq) to 18.6%. The growth in the OPM was above our expectation. Accordingly, the operating profit (OP) saw a strong growth of 31.8% yoy to Rs39.2 crore.
* The revenues of the textile division grew at a robust 28.5% yoy in Q3FY2006 to Rs72 crore on the back of a strong growth in the Canclini business. Even the profit before interest and tax (PBIT) margin saw an improvement of 460 basis points yoy to 20.3%.
* The plastic division saw a slower growth of 5.2% yoy to Rs140.4 crore, mainly on account of a 28.1% decline in the tank business. The robust growth in the businesses of pre-fabricated structures (Pre-Fab) and custom mouldings (CM) helped the PBIT margin to improve by 550 basis points yoy.
* The strong volume growth in the Pre-Fab and CM businesses coupled with a 406.4% year-on-year (y-o-y) jump in the sales to the Canclini joint venture (JV) caused the profit after tax (PAT) to grow by 31% to Rs20.3 crore in the quarter.
*The company's earnings per share (EPS) for Q3FY2006 stood at Rs2.2 per share, in line with our expectations.
*We have introduced the consolidated earnings estimates for the FY2006-08 period and arrived at EPS estimates of Rs11.1 and Rs13.7 for FY2007 and FY2008 respectively. We have rolled over our price target to FY2008E consolidated earnings and arrived at the price target of Rs192.5, valuing the company at 14x.



Jaiprakash Associates
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs458
Current market price: Rs376

Price target revised to Rs458

Result highlights

* Jaiprakash Associates Ltd's (JAL's) Q3FY2006 stand-alone net profit at Rs57 crore was below our expectations of a net profit of Rs66 crore. The primary reasons were higher interest costs and lower other income. The net sales for the quarter were up 19.7% to Rs797 crore driven by a sharp 30% growth in the company's cement revenues.
* The operating profit margin (OPM) jumped by 340 basis points to 21% due to a sharp jump in the margins of the construction business. The OPM for the cement business fell marginally by 40 basis points during the quarter due to higher fuel costs. Overall, the operating profit during the quarter jumped by 43% to Rs167 crore.
* As the company commissioned a new 1-million-tonne grinding unit at its Tanda plant and a captive power plant during the quarter, its depreciation charge jumped by19% and interest cost increased by 15.5% during the period. Overall, its net profit during the quarter jumped by 27% to Rs57 crore.
* At the current market price of Rs376, the stock is discounting its FY2007 consolidated earnings by 13.5x and its FY2007 consolidated earnings before interest, depreciation, tax and amortisation (EBIDTA) by 7.1x. We maintain our Buy recommendation on the stock with a revised price target of Rs458. Our price target is based on the sum-of-parts valuation of the company.