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Sterlite Technologies - Power segment EBITDA margins tank…
Sterlite Technologies (STL) reported a disappointing set of numbers for
Q3FY11, which were below Street consensus and our estimates.
Though the revenues were in line at | 580 crore (I-direct estimate: | 595
crore), the huge negative came in from operating margins at 8%, down
1000 bps QoQ and 460 bps YoY. This was mainly driven by the stiff fall
in EBITDA margins in the power segment, which came in at 2.9% for
Q3FY11 as some of the low value jobs were executed during the
quarter. Overall margins came in at 7.4% in Q3FY11. As a result, PAT
came in at | 17 crore vs. our expectations of | 60 crore, implying degrowth of 77% YoY and 70% QoQ.
ƒ Weak power segment performance
Though power segment revenues registered a sequential growth, EBITDA
margins of the same disappointed as they came in at a dismal 2.9% for
Q3FY11. This, we believe, was the key culprit for the pathetic
performance for the quarter as overall EBITDA margins came in at 7.4%
vs. 12% in Q3FY10 and 18% in Q2FY11. On the other hand, telecom
segment revenues came in at | 157 crore, a decline of 12% QoQ mainly
due to the fall in realisation of optic fibre and no sales registered in the
broadband access network segment. The power segment order book
stood at | 1400 crore while the overall order book stood at | 1700 crore.
ƒ FY12 guidance optimistic but we remain conservative
Base EBITDA of | 400-500 crore in FY12E (implying a jump of 38% YoY)
and strong volume growth in all business verticals in FY12E (power
conductor volume of 160,000 MT, optic fibre sales of 12 million km) does
render confidence amid the disappointing results over the last couple of
quarters. However, we have built in conservative estimates for the same
in our FY12E and FY13E estimates to build in cushions against any further
disappointments, going ahead.
Outlook & Valuation
Though the stock looks reasonably priced after recent correction (it is
trading at 8x and 6.5x its FY12E and FY13E EPS), we believe that in
medium-term, the stock price will be under pressure.
A negative surprise for the quarter came in the form of dismal power
segment margins, which came in as low as 2.9% vs. our double digit
expectations. The correction in the stock price over the last couple of
months has more than factored in the negatives given the guidance of
the management for FY12E. However, at the same time, we expect the
stock to languish in the near to medium term.
Though the stock looks reasonably priced after the recent correction (it
is trading at 8x and 6.5x its FY12E and FY13E EPS), we believe that in
the medium-term, the stock price will be under pressure owing to the
dismal Q3FY11 performance, volatility in earnings QoQ and highly
volatile market conditions. Hence, we are tempering down our
expectations and advising investors to switch/sell on rallies. We feel
that there are better opportunities available given the broader
correction in the markets particularly large caps and quality midcaps
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Sterlite Technologies - Power segment EBITDA margins tank…
Sterlite Technologies (STL) reported a disappointing set of numbers for
Q3FY11, which were below Street consensus and our estimates.
Though the revenues were in line at | 580 crore (I-direct estimate: | 595
crore), the huge negative came in from operating margins at 8%, down
1000 bps QoQ and 460 bps YoY. This was mainly driven by the stiff fall
in EBITDA margins in the power segment, which came in at 2.9% for
Q3FY11 as some of the low value jobs were executed during the
quarter. Overall margins came in at 7.4% in Q3FY11. As a result, PAT
came in at | 17 crore vs. our expectations of | 60 crore, implying degrowth of 77% YoY and 70% QoQ.
ƒ Weak power segment performance
Though power segment revenues registered a sequential growth, EBITDA
margins of the same disappointed as they came in at a dismal 2.9% for
Q3FY11. This, we believe, was the key culprit for the pathetic
performance for the quarter as overall EBITDA margins came in at 7.4%
vs. 12% in Q3FY10 and 18% in Q2FY11. On the other hand, telecom
segment revenues came in at | 157 crore, a decline of 12% QoQ mainly
due to the fall in realisation of optic fibre and no sales registered in the
broadband access network segment. The power segment order book
stood at | 1400 crore while the overall order book stood at | 1700 crore.
ƒ FY12 guidance optimistic but we remain conservative
Base EBITDA of | 400-500 crore in FY12E (implying a jump of 38% YoY)
and strong volume growth in all business verticals in FY12E (power
conductor volume of 160,000 MT, optic fibre sales of 12 million km) does
render confidence amid the disappointing results over the last couple of
quarters. However, we have built in conservative estimates for the same
in our FY12E and FY13E estimates to build in cushions against any further
disappointments, going ahead.
Outlook & Valuation
Though the stock looks reasonably priced after recent correction (it is
trading at 8x and 6.5x its FY12E and FY13E EPS), we believe that in
medium-term, the stock price will be under pressure.
A negative surprise for the quarter came in the form of dismal power
segment margins, which came in as low as 2.9% vs. our double digit
expectations. The correction in the stock price over the last couple of
months has more than factored in the negatives given the guidance of
the management for FY12E. However, at the same time, we expect the
stock to languish in the near to medium term.
Though the stock looks reasonably priced after the recent correction (it
is trading at 8x and 6.5x its FY12E and FY13E EPS), we believe that in
the medium-term, the stock price will be under pressure owing to the
dismal Q3FY11 performance, volatility in earnings QoQ and highly
volatile market conditions. Hence, we are tempering down our
expectations and advising investors to switch/sell on rallies. We feel
that there are better opportunities available given the broader
correction in the markets particularly large caps and quality midcaps
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