Stock Views on SINTEX INDUSTRIES, ORCHID PHARMA

MACQUARIE on ORCHID PHARMA


Macquarie maintains `Outperform' rating on Orchid Pharmaceuticals with a target price of 415. Orchid reported FY11 sales of 1,720 crore, EBITDA of Rs420 crore PAT of Rs156 crore. Results were well ahead of the estimates and company guidance. Orchid has FCCB repayment ($163m) due in February 2012. Orchid announced that a fund-raising resolution of a maximum 1,000 crore has been considered by the board. Macquarie has already factored equity dilution of about 15 m shares (equivalent to FCCB equity conversion) into their model. They expect any shortfall to be met by additional debt. The upcoming launch of Imipenem by HSP and supply of bulk for Add Vantage device should boost growth in FY12. Given the limited competition for the products under contract, Macquarie expects this to be a significant growth driver, with EBITDA margin more than 30% Receivable/Inventory days came down to 105/126 days.

UBS INVESTMENT on SINTEX INDUSTRIES

UBS Investment initiates coverage on `Sintex' Industries with a Buy' rating and price target of 240. Sintex Industries (SINT), a diversified industrial company, is a key beneficiary of the government's non-cyclical and growing social spending on education, lowcost housing, healthcare and rural infrastructure in India. Its building products business has scale advantages and its custom moulding business looks well positioned to benefit from a recovery in the industrial cycle, and synergies from its acquisitions and their scaling up. UBS thinks concerns over SINT's capital discipline have been largely allayed by sharply lower working capital in FY11, divestment of unrelated investments, and management's focus on the core business. A growing monolithic construction order book provides growth and margin visibility in the near term. UBS thinks an improving growth trajectory, a stronger balance sheet (lower working capital, debt:equity at 0.3x in FY13E) and positive free cash flow from FY11E should support a re-rating of the stock.