SINTEX PLASTICS TECHNOLOGY LIMITED

- May 14, 2018

COMPANY SNAPSHOT

PRODUCTS

INDUSTRY OVERVIEW

MANAGEMENT

STRENGTHS

WEAKNESS

OPPORTUNITIES

FINANCIAL PERFORMANCE

PEER COMPARISON

INDEX

JOURNEY OF SINTEX

• Sintex was started by founders in 1904, a mere 114 years ago, with contract manufacturing relating to jute and cotton, acrossmultiple locations in India and as they realized they required a self-owned mill, so came BHARAT VIJAY MILLS (BVM).

• Thus in 1931, Dinesh and Arun Patel set up a textile unit in Kalol, Gujarat.

• In 1974, they ventured into Plastics segment and later in 1995, BVM was changed to Sintex Industries.

• And recently in September 2016, Sintex announced the demerger of its textile and plastic segment which was approved by NCLT inMarch 2017.

• Thus from getting Machines on Bullock carts to supplying products for Aerospace and Defence began its journey.

COMPANY SNAPSHOT

• Sintex Plastics Technology Ltd. (headquartered in Kalol, Gujarat) is a globally-respected conglomerate with a large and growingpresence in plastic processing.

• It started its journey in 1974 with Plastic Water Tanks and with increased competition in this segment; in 1990 they shifted fromB2C to B2B segment and entered into Liquid storage segment

• The company has two business operations:1. Custom Moulding - Sintex BAPL Ltd., Sintex NP SAS (Europe), BAPL – Rototech and Sintex Wausaukee Composites Inc. (US)2. EPC contracts for infrastructure projects - Sintex Prefab and Infra Ltd.

• It is also involved in the supply of dental implants, knee-replacements and hip-joints.

• The company enjoys global presence with 36 manufacturing facilities spread across India, Europe, North Africa & USA.

DEMERGER OF SINTEX

SINTEX PLASTICS TECHNOLOGY LIMITEDRevenueRs. 5,995 cr.

Sintex BAPL Ltd. - (66% of Revenue)Sintex Prefab & Infra Ltd. (34% of Revenue)

Revenue: Rs. 3,941.83 cr. EBIT Margin: 10.34%

Revenue: Rs. 2,052.85 cr.EBIT Margin: 18.29%

CUSTOM MOULDINGS

Overseas 52%

Domestic 48%

FY2017 Geographical Revenue Breakup

• In 2004-2005, Sintex decided to initiate its Custom Moulding Business (CMB) which helped them going global and is now amongTop 20 globally in custom moulding products and solutions for plastics and composite materials.

• The company is equipped with diverse capabilities of customized moulding which find applications in many industries such asAutomotives, Aerospace & Defense, Electrical, Mass Transit and Off-the-Road Vehicles, Medical imaging products etc.

• The company uses over 30 different custom moulding processes and technologies.

• These products enjoy steady demand because of their strength, tenacity, thermal andelectrical conductivity and corrosion resistance. Also, because composites are lightweight, theyhave witnessed an enormous surge in demand especially in the aerospace and transportationverticals.

• Sintex has presence in a diversified range of Technologies, Geographies and IndustrySectors/Customers i.e. no single customer contributes more than 5% of CMB sales.

CUSTOM MOULDINGS

Application-specific standard products

1. Caters to diverse sectors

2. Accounts for more than 70% of therevenue

3. Applications which are high on theGovernment’s priority list – Watermanagement, power theft, sewagemanagement, etc.

Customer specific products

1. Caters to automotive sector

2. Margins are high in this business

3. High switch over cost

4. Global CMB are completely customerspecific

CUSTOM MOULDINGS - EUROPE

CUSTOM MOULDINGS - USA

CUSTOM MOULDINGS - OVERSEAS

CUSTOM MOULDINGS - DOMESTIC

CUSTOM MOULDINGS – RETAIL & OTHERS

• Constituting 5%- 10% of the turnover commands high margins, Sintex manufactures a wide range of consumer-focused retailproducts which include water storage tanks, cold storage facility, environment friendly products, sub-groundstructures, interiors, electrical, etc.

• The Group enjoys a pan-India presence with 16 cutting-edge plastic processing facilities.

INDUSTRIAL CONTAINERS & FRP TANKS• Industrial containers are specially moulded tanks to store dyes, colours and chemicals for industrial uses. They also introduced

large-sized roto-moulded tanks (1000 ltrs and above) especially targeting the chemicals and textile sectors.

• The Group has received approvals from leading oil marketing companies namely IOC, HPCL and BPCL for installation in newdispensing stations, pan-India.

• In 2016-17, the Group received sizeable orders for its fuel underground storage tanks from HPCL, IOCL, Reliance and other oilmarketing majors. The Group was also successful in receiving bulk business from Britannia Industries, Rajasthan MedicalServices, Tamil Nadu Civil Supply Corporation, and ITC, among other renowned corporate.

WATER STORAGE SOLUTIONS

Sintex Triple Layer Tanks – Premium Product – 37% of the total water tank business ISI Grade Tanks Black Water Tanks Loft Water Tanks Reno Tanks – Standard tanks Renotuf Tanks – Low and mid market customer expectations Underground Water Storage Tanks (Sumps) Sintex FRP Tanks PUF Insulated Water Tanks Sintex SMC Panel Tanks Titus Water Tank - white triple wall water tanks for the mid-segment

• Commands more than a 60% market share.• The Group also developed an in-house shrink-wrap solution for superior product packaging which

eliminated in-transit damage to premium tanks.

SUB-GROUND STRUCTURES• This is basically sewage management solutions. This product basket comprises:

1. Septic Tanks: USP: Underground tank ; thus its space saving product In FY2016, SPTL closed a deal for providing septic tanks to the Ministry of Non-Renewable Energy.

2. Packaged waste water treatment solution: Developed Decentralized packaged waste water treatment solution in collaboration with Aqua Nishihara,

Japan – global leaders in this space. In FY2016 - the product was accepted as a part of the Clean Ganga Action Plan as well as by the Bill and

Melinda Gates Foundation for managing sewerage levels & it was connected to important drainage lines inCentre of Ahmedabad and the treated water was used for gardening.

The Group received MES approval from ENC office for MBBR technology. This approval will allow the Group toparticipate in large government projects initiated by MES, CPWD, Railway, ONGC, Police Housing, HousingBoards and other Government and private sector institutions.

3. Biogas Holders: Uses livestock excreta, as well as leftover food to generate biogas which can be used as fuel or fertilizers.

SMC PRODUCTS

• The Group is one of the largest manufacturers ofelectrical enclosures, catering to state electricityboards and circle offices pan-India.

• In the recent past, the Group graduated fromsupplying empty boxes to fully-fitted, ready-to-useenclosures for diverse applications, strengtheningits reputation as a preferred business partner.

• Sintex also started a retail distribution channel forcatering to small-ticket businesses, kick-startingrevenues.

• B-G Model (State Discoms and CGagencies)

• More than 70% of the revenue fromSMC business

Business from Electricity Board

• Caters to private sector

• Presence in Telecom Sector by developing energy saving equipments

Non-Electricity Board Business

• Group set up a retail outlet forelectrical products in Pune

• Small-volume businessRetail Segment

PREFABRICATED STRUCTURES

• Sintex commenced its prefabricated business in 2001 and today has 3 manufacturing plants in India.

• The company’s products cover 80% of India’s geography for execution with different materials for climatic conditions, utilitystructures, sanitation programmes and various other requirements.

• Products include: Classrooms, Bank Houses, Labour Camps, Anganwadis, Sheds, Housing, Security Shelters, Portable ATMs, PortableUrinals, Site Offices, Healthcare Infrastructure, Defence Shelters

Marquee Clients:

MONOLITHIC CONSTRUCTIONS

• Sintex commenced monolithic construction projects in 2005, and has evolved into one of the leading companies for monolithicconstruction for low cost housing.

• Monolithic buildings in India can address needs of mass and low cost housing of any kind wherein large number of units of similarconfigurations are required. They are useful in various government schemes for economically weaker sections as well as schemesfor communities.

Construction Speed

Cost-effectiveness

Labour

• Takes 6 months vs 2 years for conventional construction

• Zero maintenance costs

• Low labour requirement due to sped of construction.

65.77%

25.92%

2.70%

2.58%

1.08%

1.32%

GEOGRAPHICAL PRESENCE

The company’s operations pans across 9 countries and 4continents. In Europe 16 manufacturing locations, USA 2, Africa2 and 16 manufacturing locations across India .

PLASTIC INDUSTRY

• By 2020, plastics consumption of India is set to increase from the current 12 million metric tonnes per annum to 20 million metrictonnes per annum.

• Exports of Plastics finished goods are set to nearly double from US$7.9 billion currently to about US$15 billion in next 5 years.

• European or American cars uses approx. 120 kgs of plastics in car, while India’s average is about 60-70 kgs of plastic which offershuge growth potential for Indian plastic industry.

• India produces 3% of the global volume of composites but this is expected to double over the next five years propelled by anincreasing demand for automobiles (both four and two-wheelers),electronic goods and other consumer durables.

• The Indian composites market is expected to reach the US$2 billion-mark by 2021 growing at a CAGR of 14.1% between 2016 and2021.

COMPOSITES INDUSTRY

CUSTOM MOULDING INDUSTRY

• The global composites market generated revenues worth ~USD 69.50 Bn in 2015 and is projected to generate revenues worth USD106 Bn in 2022 at a CAGR of 7.11%.

• Fastest growing markets in India with over 12 % growth rate.

• Indian Automotive sector to grow 3.5 times between FY15 to FY26 as per SIAM.

STRENGTHS

• Present in 4 continents, across 9 countries including France, Germany andUSA.

• Majority of customers is Fortune 500 companies. No dependence on anysector or customer with diversified & balanced mix of products.

Global Footprint

• Building remote controls for devices using three different components Multipleinjection moulding, multiple materials, integrating electronics to create apacked product that is ready to ship – Less than 4 companies in the world areable to implement.

Tech Power

• Pre-approvals in 20 states: SPTL has approvals/pre-qualifications across IndiaEntry barriers in Prefab segment

1. Equity Dilution:Sintex has a long history of equity dilutions (QIP, Warrants, Rights Issues, FCCBs) to finance capex or repay old debts.

2. Entry into new unrelated businesses:

Monolithic failed. Any new business entries could hurt profitability if things don’t work out.

3. Decrease in prefab revenues:This is high commanding margins segment but exposure has been reduced due to less cash generation and increase

in promotion of CMB business.

4. Less promoter share holding and large no. of shares pledged:Promoters holds around 32% of shares while 52% is pledged which is a serious concern.

5. High debt:In 9MFy2018, they have a loan of Rs. 3200 cr. with a D/E ratio of 1.03.

WEAKNESS

MANAGEMENT

Promoters 31.96%

MF/FII1.49%FPI

17.73%

Others 48.81%

SHAREHOLDING PATTERN

Promoter shareholding’s have increased from 29.79% in August 2017 to 31.96% in March 2018. And shares pledged by thepromoters have decreased from 54.95% to 52.57%.

FUTURE OUTLOOK• Focused on capitalising on opportunities from two key Government initiatives:

1. Energy Efficient Street Lighting (EESL) -> conventional street lights will be replaced with energy efficient LED street lights2. AGDSM in which farmers would be provided for free, Energy efficient BEE Star rated pump sets of HP equal to their

sanctioned load, through multiple distribution desks in the project area.

• It contracted with KKR for funding of Rs. 1,250 cr. with an Interest Rate of 8.75% v/s 10.00%. Principal repayment has to be doneafter 3.5 years while interest to be paid for 1st 3 years will be around 4-4.5% and the remaining interest would be paid in future.

• By 2024, Sintex targets to source 1/5th of its energy consumption from environment friendly resources.

• During FY2018-19, plans for three new plants to cater to new OEM customers and new product lines.

• Roadmap for FY2020 is reduction of debt and focused improvement in ROCE and free cash flow. Large Capex will be done when they achieve Debt/ EBIDTA to less than 2x and as of present its around 3.8x.

• Increase in promoter stake by 10-11%.

• Due to cash delay in government projects, decided to get projects through dealers instead of getting it directly.

1,949.55

2,762.14 2,972.86

4,046.17 3,983.32 4,263.77

4,616.32

5,581.82

6,404.59 14.38%13.80%

12.99%

15.34%

12.96%12.17%

13.40%14.16%

13.43%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

-

1,000.00

2,000.00

3,000.00

4,000.00

5,000.00

6,000.00

7,000.00

2008 2009 2010 2011 2012 2013 2014 2015 2016

Sales PBIT Margin

TREND OF PLASTIC BUSINESS

Rs. in crore CAGR- 16.03%

TREND OF INFRA BUSINESS

370.93 702.72 783.97 918.99

10.25%

7.48%8.62%

7.70%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

-

100.00

200.00

300.00

400.00

500.00

600.00

700.00

800.00

900.00

1,000.00

2013 2014 2015 2016

Sales PBIT Margin

Rs. in croreCAGR - 35.31%%

SALES COMPOSITION

1,548.32 1,432.901,332.735,994.68

Rs. in cr

53.79% 58.65% 57.21% 57.70%

12.35%12.51% 11.22% 13.75%

16.96%13.85% 18.11% 14.68%

16.90% 14.99% 13.46% 13.87%

FY2017 Q1FY2018 Q2FY2018 Q3FY2018

Material Cost Employee Cost Other Man. Exp OPM

17.49% 15.31%

14.03%14.95%

7.00%

4.43%

1.82%

3.89%

FY2017 Q1FY2018 Q2FY2018 Q3FY2018

EBITDA Margin Net Profit Margin

MARGINS

13.32%

4.69%

13.47%

ROCE ROA ROE

Mar-17 9MFY2018

Total Loan 3,488.13 3,202.13

Debt/ Equity 1.12 1.03

Rs. in cr

FY2017

RETURN RATIOS

PEER COMPARISON

Name of the Company

CMP Market cap D/E P/E ROE ROCE OPM

Sintex Plastics 51 3,140 1.31 7.49 13.47% 13.32% 19.97%

SupremeIndustries

1,369 17,401 0.16 40.30 28.47% 38.07% 15.94%

Time Technoplast

146.85 3,320 0.55 19.76 11.87% 14.86% 14.89%

Rs. In crore

(As per screener)