Sintex Plastic Ltd

Follow-up to my observation on Sintex Plastic.

  1. All the three factors I noted above have been fulfilled.
  • Infra will stabilize at Rs. 1000cr, which looks to be a very good base number
  • KKR has signed a deal for Rs. 1200cr of debt infusion into BAPL with a 125bps saving
  • Debt reduction of 500cr next year which to me looks conservative if capex sticks to 200cr
  1. My kitchen sink EPS of Rs. 4 looks good. Taking out the exceptional items, EPS this year is about Rs. 4.

  2. Next year Infra will decline by 700cr. However Infra is not earning any EPS much. At 1000cr sales and 12% margin, it will just about cover its interest and D&A cost. So about 40p hit on EPS.

  3. Even with a 10% increase in CM (400cr) and EBITDA margin of 15%, should boost EPS by about 75p.

  4. Net expect EPS of Rs. 4.3-4.5 next year. With an conservative PE of 15x, this stock should have a floor at Rs. 60.

They should sell the EU business and become a pure-play domestic CM business.

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As highlighted in conference call, KKR debt will offer debt at 8.75% instead of their current cost of 10%.
Mentioned that this will ensure that 90% of secured debt is from a single party.
They have also taken a 47 Cr hit due to prepayment. Management commented that this could be 90p EPS
It is a rupee 7 year debt. (I got it confirmed with over email)

They have declared one time losses of 136 Cr this FY year. It could be 2.6 EPS loss.

PS: This is the first company which replied to my email wrt investor queries.

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Full concall audio is here

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“MORGAN STANLEY FRANCE SAS” has bought 44,90,918 shares of Sintex Plastics @ 51.98 Rs. today 21-May-2018, bulk deal in NSE website.

Screen shot below.

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Although big players buying should give some sort of validation comfort, we should not read much into it. See their trade in Gitanjali:

If they are investors you know about (and are confident about their skills) then it would be more comforting.

Disclosure: Invested. No transactions in past 2 months

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Could please share the source
regards

Hi All,

My first post on Valuepickr.

I have been tracking Sintex Plastics for close to an year now. Not invested yet. While the management is talking the right language, it is pretty surprising to see the stock price movement, even after taking into account the management’s past mis-allocation, governance conerns.

Does anyone have any update. Thanks.

Your last sentence is itself an answer to yr post.Wherever there are concerns on governance ,the investors hesitate to transact till they get clarity.In addition, it’s performance has also bn below expected levels for quite sometime.

Hii,

I found this stock interesting after KKR invested 1200cr and Morgan Stanley also purchased some stock huge potential and KKR skin in the game gives me more confidence need some time for turnaround and to see how management use the rest of money in business.

Invested still holding for long term only.

KKR also did a similar transaction with Kwality and you can see where it is now. So placing too much comfort on KKR wouldn’t be smartest thing. I will be waiting to see the improvement in performance, before I build conviction to put in more capital in this stock.
Disclosure: invested
SJ

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KKR is investing in debt not equity, it is just a loan at a lower rate than banks. While it is beneficial it is hardly like they are taking a bet on company performance.

I have burnt my finger, invested @110.They are bunch of fraud.SPTL has no future.

Would be useful if you say your reasons why you say they are fraud?

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Do you have any solid reason to believe that management is fraud . If yes please post here

I have solid reasons to believe the management is totally incapable. Below are my reasons.

  1. besides Sintex being a household name a decade back, management’s inability to capitalize on this even after a decade. In the meantime, some other plastic stocks have sky rocketed.
  2. totally bad allocation of capital, be it bad acquisitions or diworsificarion in textile.
  3. always an overhang of debt and complex structuring issues such as FCCBs with massive equity dilution.
  4. inability to grow the core business in a meaningful way over the last decade.

Am pretty sure any long term investor would have been fed up with the management and ran away a along time back due to these issues. Probably this is a stock now for speculators.

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I am not saying they are fraud. But i was hearing the last conference call not sure if it was sintex industires or sintex plastic. If i heard it right the management was saying they used to spend 2000 crore on plant maintenance earlier and going forward they need to spend could bring it down to 200 crores . This was surprising to me as how can one drastically reduce the maintenance cost. EIther they were not allocating the capital efficiently earlier or somethings not right. You may want to listen to their conference call as i might have not heard it right.

Disc: Not invested

Management is not the best - far from it - but they are not frauds. Till a couple of years ago they were giving good growth in the plastics business and textiles well the industry has been in the doldrums and few have been able to outperform in that. Essentially they got caught in the over leverage and wrong expansion timing trap many companies fell into between 2006-2013 and are still suffering. Current management plan of getting out of government business, working on cash flows rather than book profit and focussing on consumer businesses makes sense - if they stick to it.

Technically stock is in a bad place but possibly makes sense to wait for a year or so, there is upside potential simply on value.

Guys, does anyone know why the compliance officer resigned and the auditor also resigned at the same time? now they have appointed KPMG which is a good sign but I am still concerned,

Anyone from ahemdabad who can comment on management? Maybe ask around for reasons for the resignations mentioned above?

any help would be much appreciated.

Regards,
Tanmay

Result is out.
Nothing great to write about.
Same old promises of debt reduction… Restructuring etc…

What about the auditor resignation though? Are you not worried about that?