Phillip Capital Sees 85% Potential Upside In Sintex Plastics Shares
Previously only two analysts had Sintex Plastics in their portfolio with a ‘Buy’ rating.
Phillip Capital initiated coverage on Sintex Plastics Technology Ltd. with an ‘Outperform’ rating and a target price of Rs 145, implying a potential upside of 85 percent.
Earlier in the year, Sintex Industries de-merged its custom moulding and prefab business into Sintex Plastics Technology, which was listed thereafter.
This de-merger will further increase focus on the businesses, improve free cash flow and also return ratios, the brokerage said.
The custom moulding business mainly caters to auto, electrical, aerospace and defense, providing 60 percent of the revenue for Sintex Plastics, which according to Phillip Capital should grow at a compounded annual growth rate of 11 percent over three financial years up to March 2020.
Although, the company's revenue is expected to grow at a CAGR of only 9 percent, for the same period, because of a muted financial year and controlled growth in two subsets of custom moulding business: monolithic and infra.
The company is a market leader with 60 percent of the share in plastic storage tanks with a strong retail portfolio. Hence, Phillip Capital foresees this retail segment to grow at a compounded annual growth rate of 20 percent till March 2020.
The company, according to the brokerage firm, has a strong execution ability in its prefab business which is driven by spending on healthcare, education and sanitation.
Operating profit and net profit are estimated to grow at a cagr of 6 and 10 percent respectively.