Having gone deeper into the most recent Annual Report and Quarterly Report, I believe SiL is not as bad as I had thought looking at the superficial numbers. I guess, the sharp fall in prices influenced my Analysis.
One main reason for the fall of Sintex is that its PE went as high as 24 in 2008. Meaning, investors had high expectations. Then, 2009 showed a big jump in EPS from 17 to 24, that is 30%... very attractive. But, this is hard to sustain.
Now EPS is only 11.2. So the new investors who had high growth expectations bailed out quick which crashed the PE to all time low of 1.7
This is when the stock started looking attractive. With manageable debt, international and pan-national presence, core-operations and headquarters in Gujrat, most industry-friendly state... Sintex is probably a good bargain. However, one must watch for the following points in the coming quarters:
1) Gross Profit Margin.
The Director has admitted in his recent Annual Report that the rising-cost has been a factor of worry. This point alone can eat into all future prospects. From this angle, the June quarter has been bad. Net profit margin took a fall from 7.5% in June '12 to a meager 4.5% in June '13. I do not think that SiL can bear more cuts.
2) Increased Debtor Days and Increased Working Capital.
There is nothing more disappointing than a company unable to manage its everyday operations. Shows weakness in doing business.
One main reason for the fall of Sintex is that its PE went as high as 24 in 2008. Meaning, investors had high expectations. Then, 2009 showed a big jump in EPS from 17 to 24, that is 30%... very attractive. But, this is hard to sustain.
Now EPS is only 11.2. So the new investors who had high growth expectations bailed out quick which crashed the PE to all time low of 1.7
This is when the stock started looking attractive. With manageable debt, international and pan-national presence, core-operations and headquarters in Gujrat, most industry-friendly state... Sintex is probably a good bargain. However, one must watch for the following points in the coming quarters:
1) Gross Profit Margin.
The Director has admitted in his recent Annual Report that the rising-cost has been a factor of worry. This point alone can eat into all future prospects. From this angle, the June quarter has been bad. Net profit margin took a fall from 7.5% in June '12 to a meager 4.5% in June '13. I do not think that SiL can bear more cuts.
2) Increased Debtor Days and Increased Working Capital.
There is nothing more disappointing than a company unable to manage its everyday operations. Shows weakness in doing business.
