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Sterlite Industries (India) Limited
Zinc Division Results in F4Q11: Boosted by Silver
Quick comment: We remain OW on Sterlite on a oneyear
perspective due to our view that the stock’s
valuation, at 3.6x EV/EBITDA based on our F2012
estimates, seem attractive – especially given the 50%
EBITDA CAGR that we forecast over F2011-13.
However, near-term movement in the stock also
depends on progress on commissioning of power
projects and coal mining and on volume progression of
silver output.
What's new: Sterlite’s Zinc division reported EBITDA of
Rs19.3bn (up 30% QoQ and 28% YoY), 11% ahead of
our forecast mainly due to higher lead concentrate
(containing higher silver content than what we expected)
sales.
What we liked in the result: 1) Mined metal production
rose to 231kt, up 4.0% QoQ and 19.4% YoY, implying
healthy capacity utilization of about 87% assuming a
peak plant capacity of 1.06 mtpa. 2) Refined zinc
production was 194kt (up 8.5% QoQ and 28.7% YoY).
The new zinc smelter has stabilized and pushed up the
total zinc capacity utilization to 91% in F4Q11. 3) Net
zinc metal cost without royalty increased 5% YoY to
~US$784/ton mainly due to raw material price inflation
and higher stripping costs. However, this represented a
fall of 2% sequentially. 4) Silver production stood at
50,000 kg, up 19% QoQ although down 3% YoY. We
estimate that an additional 27,000 kg of silver was sold
as part of lead concentrate, which bolstered profits.
What we did not like: 1) Lead production was down
about 12.5.% YoY, although it was up 22.3% QoQ.
Other highlights: 1) 0.56 mt of contained metal (about
2% of total at end-F2011) was added to the total reserve
and resource base, on a net basis in F2011. 2) Net cash
and equivalents at end-F2011 stood at US$3.3bn, up
14% QoQ.
Status on projects: 1) Addition of 150MW of wind power
capacity to be commissioned in two phases. 48MW of the
150MW was commissioned in F4Q11 and the remaining
102MW is expected to be commissioned in F2012. 2) The new
1.50 mtpa silver mill is expected to be commissioned by
end-F2012, boosting total silver capacity to 500 tpa.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Sterlite Industries (India) Limited
Zinc Division Results in F4Q11: Boosted by Silver
Quick comment: We remain OW on Sterlite on a oneyear
perspective due to our view that the stock’s
valuation, at 3.6x EV/EBITDA based on our F2012
estimates, seem attractive – especially given the 50%
EBITDA CAGR that we forecast over F2011-13.
However, near-term movement in the stock also
depends on progress on commissioning of power
projects and coal mining and on volume progression of
silver output.
What's new: Sterlite’s Zinc division reported EBITDA of
Rs19.3bn (up 30% QoQ and 28% YoY), 11% ahead of
our forecast mainly due to higher lead concentrate
(containing higher silver content than what we expected)
sales.
What we liked in the result: 1) Mined metal production
rose to 231kt, up 4.0% QoQ and 19.4% YoY, implying
healthy capacity utilization of about 87% assuming a
peak plant capacity of 1.06 mtpa. 2) Refined zinc
production was 194kt (up 8.5% QoQ and 28.7% YoY).
The new zinc smelter has stabilized and pushed up the
total zinc capacity utilization to 91% in F4Q11. 3) Net
zinc metal cost without royalty increased 5% YoY to
~US$784/ton mainly due to raw material price inflation
and higher stripping costs. However, this represented a
fall of 2% sequentially. 4) Silver production stood at
50,000 kg, up 19% QoQ although down 3% YoY. We
estimate that an additional 27,000 kg of silver was sold
as part of lead concentrate, which bolstered profits.
What we did not like: 1) Lead production was down
about 12.5.% YoY, although it was up 22.3% QoQ.
Other highlights: 1) 0.56 mt of contained metal (about
2% of total at end-F2011) was added to the total reserve
and resource base, on a net basis in F2011. 2) Net cash
and equivalents at end-F2011 stood at US$3.3bn, up
14% QoQ.
Status on projects: 1) Addition of 150MW of wind power
capacity to be commissioned in two phases. 48MW of the
150MW was commissioned in F4Q11 and the remaining
102MW is expected to be commissioned in F2012. 2) The new
1.50 mtpa silver mill is expected to be commissioned by
end-F2012, boosting total silver capacity to 500 tpa.
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