Sterlite Industries’ (Sterlite) consolidated net revenue for 4QFY2011 stood at `10,000cr, in line with our estimates of `9,896cr. However, net profit at `1,925cr was well above our estimate of `1,473cr mainly due to higher-than-expected profit from Zinc business.
Strong 4QFY2011 performance: Sterlite’s net revenue grew by 39.9% yoy to `10,000cr largely because of a) higher metal and concentrate sales volume and b) increased metal prices. Sterlite sold 477mn units of merchant power (higher by 17.8% yoy) during the quarter, but power tariff declined by 15.1% yoy to `3.0/unit. On account of strong top-line growth and higher sulphuric acid prices, EBITDA margin expanded by 92bp yoy to 30.6%, despite cost increases witnessed in a) the aluminium segment on account of higher alumina and power costs,
b) the zinc segment due to higher stripping ratio and salary cost and c) lower TC/RC margins (down 12.9% to USc11.3/lb). As a result, EBITDA increased by 44.3% yoy to `3,059cr. Other income grew by 30.9% yoy to `725cr as interest rate on group lending resetted upwards and tax rate came in lower at 17.2%. Thus, net profit grew by 35.1% yoy to `1,925cr.
b) the zinc segment due to higher stripping ratio and salary cost and c) lower TC/RC margins (down 12.9% to USc11.3/lb). As a result, EBITDA increased by 44.3% yoy to `3,059cr. Other income grew by 30.9% yoy to `725cr as interest rate on group lending resetted upwards and tax rate came in lower at 17.2%. Thus, net profit grew by 35.1% yoy to `1,925cr.
Outlook and valuation: Sterlite is currently trading at 8.0x and 5.1x FY2012E and FY2013E EV/EBITDA, respectively. We have revised some of our metal price estimates for FY2012E and FY2013E to factor in higher prices at LME. We have also lowered our profitability estimates for Vedanta Aluminium (VAL).
We maintain our Buy rating on the stock with an SOTP target price of `216.
We maintain our Buy rating on the stock with an SOTP target price of `216.
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