Sintex Industries announced Q1 FY12 results yesterday and according to me the results were pretty good. Sintex Industries posted a net sales growth of 22% YoY, EBITA growth of 30% YoY and net profits growth of 20% YoY. Some analysts were expecting a net profit of 100 cr whereas the company gave a net profit of 95 crore and that 5 crore of below expectation has already hammered the stock from 187 to 172 now in two trading sessions. Should I be bothered that the company delivered 20% growth in profits and not 25%? No, not at all. The management had guided for a 20% growth and they delivered as they had said. Just because an analyst feels that company should have grown more, the results do not become a disappointment. Since when did a 20%+ growth in top line as well as bottom line become a bad set of numbers? Specifically when the management has actually guided for the same set of numbers in the past?

If one looks carefully the EBITA growth is clearly a winner, 30% is something really good. Net profits were just 20% above because they had to pay more tax. One of their plants that was ready 10 years ago was out of the exemption and thus tax paying was more. From second quarter, they’ll enjoy some advantage again as a new plant is getting ready. The management has guided for a stronger growth in the coming quarters and thus be assured that this company is definitely on the growth track.

Don’t panic and sell the stock assuming that the results were bad because the results were really good and the company is definitely going to do good in the long run. Continue to hold the stock and if you’re interested in further investing in the scrip, then wait for levels of around 160 where Sintex can be a really good investment pick.

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