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Going ahead with aluminium expansion
Aluminium: In line with earlier communication, the company is going ahead with aluminium expansions, will complete
the BALCO smelting pots, which is in the last stage, and partially execute the project at subsidiary, VAL (maybe two pots
out of four).
Expects VAL’s cash cost of aluminium production at USD1700-1750 after third party bauxite; will decide to eventually
produce based on LME price.
Zinc: Expects cash costs of Anglo American zinc assets at USD1000-1080/t, which is higher than Indian cash costs, but
much lower than ruling LME prices of zinc.
Arbitration ruling: Not clearly decided yet; may appeal or look for an outside settlement.
Valuation and risks
We value STLT’s domestic Aluminium, Zinc and Copper businesses at 6.5x FY12e EV/EBITDA, Sterlite Energy at
average of DCF-to-firm, DCF-to-Equity and Justified P/BV (D/E 1:1, cost of equity 15%) and Copper mines of Tasmania
on a DCF basis. We derive a TP of INR210 and rate the stock Overweight.
Key risks include base metal price movements, Copper TC/RCs, timely project execution and merchant power rates.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Going ahead with aluminium expansion
Aluminium: In line with earlier communication, the company is going ahead with aluminium expansions, will complete
the BALCO smelting pots, which is in the last stage, and partially execute the project at subsidiary, VAL (maybe two pots
out of four).
Expects VAL’s cash cost of aluminium production at USD1700-1750 after third party bauxite; will decide to eventually
produce based on LME price.
Zinc: Expects cash costs of Anglo American zinc assets at USD1000-1080/t, which is higher than Indian cash costs, but
much lower than ruling LME prices of zinc.
Arbitration ruling: Not clearly decided yet; may appeal or look for an outside settlement.
Valuation and risks
We value STLT’s domestic Aluminium, Zinc and Copper businesses at 6.5x FY12e EV/EBITDA, Sterlite Energy at
average of DCF-to-firm, DCF-to-Equity and Justified P/BV (D/E 1:1, cost of equity 15%) and Copper mines of Tasmania
on a DCF basis. We derive a TP of INR210 and rate the stock Overweight.
Key risks include base metal price movements, Copper TC/RCs, timely project execution and merchant power rates.
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