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EARNINGS REVIEW
Sterlite Industries (India) (STRL.BO)
Not Rated
Below expectations; loss from VAL offsets strong operating profits
What surprised us
Sterlite reported 3QFY11 net income of Rs11.0bn, up 51% yoy, which is 13%
below GSe and 10% below Reuters consensus estimate due to higher-thanexpected losses at its associate Vedanta Aluminum (29.5% stake). The
company reported a healthy operating performance with EBITDA of Rs19.8bn
(+12% yoy) in line with our estimate, and 6% above consensus. Key highlights:
1) The performance was driven by Zinc business with revenue of Rs25.8bn
(+18% yoy) and EBITDA of Rs14.9bn (+9% yoy); EBITDA margin came in at
57% (down 400 bps yoy) as the positive impact of higher volumes and LME
prices was offset by higher coal and stripping costs. 2) Copper business was in
line, with EBITDA at Rs2.2bn, up 21% yoy, as higher acid realizations offset
lower TC/RC rates– TC/RC rate stood at 11.18 cents/lb (11.7 c/lb in 2QFY11).
3) Aluminum business reported EBITDA of Rs1.6 bn (up 41% yoy), led by higher
realizations, BALCO volumes were flat yoy 4) Power business’ EBITDA at Rs
0.4bn was disappointing, primarily due to lower average tariff realization
(Rs2.72/kwh) and slower-than-expected stabilization of the first unit of 2,400
MW plant. 5) Growth projects remain on track. Consolidated net cash as at
3QFY11 was about Rs208.2 bn (34% of market cap).
What to do with the stock
We revise down our FY11E-FY13E EPS estimates by 6% to 12% to account
for higher overall costs in VAL and slower-than-expected stabilization of
power units. The stock is trading at 1.4X FY12E P/B vs. 16% ROE, which
compares with 2.0X P/B vs. 17% ROE for the global base metal average.
We are Not Rated on the stock.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
EARNINGS REVIEW
Sterlite Industries (India) (STRL.BO)
Not Rated
Below expectations; loss from VAL offsets strong operating profits
What surprised us
Sterlite reported 3QFY11 net income of Rs11.0bn, up 51% yoy, which is 13%
below GSe and 10% below Reuters consensus estimate due to higher-thanexpected losses at its associate Vedanta Aluminum (29.5% stake). The
company reported a healthy operating performance with EBITDA of Rs19.8bn
(+12% yoy) in line with our estimate, and 6% above consensus. Key highlights:
1) The performance was driven by Zinc business with revenue of Rs25.8bn
(+18% yoy) and EBITDA of Rs14.9bn (+9% yoy); EBITDA margin came in at
57% (down 400 bps yoy) as the positive impact of higher volumes and LME
prices was offset by higher coal and stripping costs. 2) Copper business was in
line, with EBITDA at Rs2.2bn, up 21% yoy, as higher acid realizations offset
lower TC/RC rates– TC/RC rate stood at 11.18 cents/lb (11.7 c/lb in 2QFY11).
3) Aluminum business reported EBITDA of Rs1.6 bn (up 41% yoy), led by higher
realizations, BALCO volumes were flat yoy 4) Power business’ EBITDA at Rs
0.4bn was disappointing, primarily due to lower average tariff realization
(Rs2.72/kwh) and slower-than-expected stabilization of the first unit of 2,400
MW plant. 5) Growth projects remain on track. Consolidated net cash as at
3QFY11 was about Rs208.2 bn (34% of market cap).
What to do with the stock
We revise down our FY11E-FY13E EPS estimates by 6% to 12% to account
for higher overall costs in VAL and slower-than-expected stabilization of
power units. The stock is trading at 1.4X FY12E P/B vs. 16% ROE, which
compares with 2.0X P/B vs. 17% ROE for the global base metal average.
We are Not Rated on the stock.
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