THE market was not happy with the 29% net profit growth for the June 2010 quarter reported by Sintex Industries, which saw the scrip end 0.2% lower on Monday, when the BSE’s benchmark index Sensex gained 0.6%. The company’s consolidated net sales were 37.5% higher against the year-ago period at Rs 910.6 crore with a net profit at Rs 79.1 crore.
Although the company improved its operating profit margin by 190 basis points to 15.1%, its net profit margin weakened by 50 basis points to 8.7%. Three major factors — a sharp fall in other income, a spurt in interest cost and higher tax burden — pulled the bottomline growth lower. The company’s consolidated numbers received a booster with subsidiaries doing well during the quarter. The net profit of the subsidiaries jumped 67.7% to Rs 20.7 crore while the standalone profit of the parent company was up only 20.5%. Again on the standalone basis, the textile business that had been performing below par in the past, came up strongly to post a 68% jump in pre-interest-and-tax earnings to Rs 11.4 crore. The segment profit reached a double-digit number, after being in low single digit for four straight quarters. In the company’s largest segment of plastic goods, the proportion of building materials increased as the sales of this sub-segment jumped nearly 80% YoY against around 10% growth in moulded products.
With these results, the company’s profit for the trailing 12 months stands at Rs 321 crore, discounting the current market capitalisation at 13.7 times. The company has been carrying over Rs 1,000-crore cash balance in the hope of an acquisition while it is carrying an order book worth Rs 2,300 crore in monolithics business to be executed over the next 22 months. These factors can drive the company’s growth in the coming quarters. However, another round of economic slowdown in the European or US economies could stifle the improving performance of its subsidiaries.
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