Midcap Pick: Sintex Industries a good Buy

Sintex is a market leader in the Indian plastics processing industry with an innovative product portfolio. The company has, over the years, leveraged its established market dominance in water tanks (~70% share) to tap other higher-margin segments.

Sintex is set to deliver a 45% sales CAGR in FY2008-FY2010E (53% FY2005-FY2008) through a strategy of innovation (it is the only company in India involved in monolithic construction) and acquisitions (four in the past year, which contributed US$249 mn to sales)

Monolithic construction (low-cost mass housing) – a relatively new segment for Sintex (9% of FY2008 sales) – has a current order book of US$375 mn (to be executed over FY2009 – FY2010). Sintex has successfully completed five acquisitions in the past two years (21% of FY2008 sales), achieving product and client diversification and acquiring superior technology and facilities near client locations.

Goldman Sachs recommends Sintex on a 12-month DCF-based target price of Rs664 implies 59% potential upside.

SSKI Coverage on Sintex Industries Ltd.