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Another dull quarter…
Sterlite Technologies reported another set of dull numbers, mainly led by
the disappointment in the power segment (execution of low margin
orders dented overall EBITDA accompanied by a sequential decline in
telecom segment margins). Revenues grew 3% YoY ahead of our
expectations. EBITDA margins continued to disappoint at 7.2% (I-direct
estimate of 12.9%) mainly led by low margin orders executed in the
power segment and a sequential decline in telecom segment margins.
The same impacted the PAT adversely as it de-grew 86% YoY and 40%
QoQ. Going ahead, we believe that recent orders wins will pull back the
revenue growth and margins of the company in FY12E.
Highlights of the quarter
The order backlog as of Q4FY11 stood at | 2200 crore. Out of this, the
power segment backlog stood at | 1800 crore. Order inflow for Q4FY11
stood at | 1150 crore (| 650 crore order from PowerGrid). The robust
inflow thus enjoyed will lead to high execution in FY12E and will lead to
21% revenue CAGR over FY11-FY13E. The main disappointment in
Q4FY11 was the execution of low margin power orders, which we believe
will get corrected from H2FY11 onwards. This severely impacted the
EBITDA and profitability growth of the company. Going ahead, the
management expects to see a return to its normative business margins
and up-tick in volume growth in power (guidance of 1,60,000 MT in
FY12E) and telecom segment.
Valuation
At the CMP of | 59, the stock is trading at P/E of 10.5x and 9.4x its FY12E
and FY13E EPS, respectively. We believe that though the worst seems to
be over for the company things will start looking up from H2FY12
onwards. However, at the same time, we would wait for a better
performance to come through for at least a couple of quarter to turn
buyers in the stock. We rate the stock as HOLD and have put a target
price of | 63 per share (10x FY13E EPS).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Another dull quarter…
Sterlite Technologies reported another set of dull numbers, mainly led by
the disappointment in the power segment (execution of low margin
orders dented overall EBITDA accompanied by a sequential decline in
telecom segment margins). Revenues grew 3% YoY ahead of our
expectations. EBITDA margins continued to disappoint at 7.2% (I-direct
estimate of 12.9%) mainly led by low margin orders executed in the
power segment and a sequential decline in telecom segment margins.
The same impacted the PAT adversely as it de-grew 86% YoY and 40%
QoQ. Going ahead, we believe that recent orders wins will pull back the
revenue growth and margins of the company in FY12E.
Highlights of the quarter
The order backlog as of Q4FY11 stood at | 2200 crore. Out of this, the
power segment backlog stood at | 1800 crore. Order inflow for Q4FY11
stood at | 1150 crore (| 650 crore order from PowerGrid). The robust
inflow thus enjoyed will lead to high execution in FY12E and will lead to
21% revenue CAGR over FY11-FY13E. The main disappointment in
Q4FY11 was the execution of low margin power orders, which we believe
will get corrected from H2FY11 onwards. This severely impacted the
EBITDA and profitability growth of the company. Going ahead, the
management expects to see a return to its normative business margins
and up-tick in volume growth in power (guidance of 1,60,000 MT in
FY12E) and telecom segment.
Valuation
At the CMP of | 59, the stock is trading at P/E of 10.5x and 9.4x its FY12E
and FY13E EPS, respectively. We believe that though the worst seems to
be over for the company things will start looking up from H2FY12
onwards. However, at the same time, we would wait for a better
performance to come through for at least a couple of quarter to turn
buyers in the stock. We rate the stock as HOLD and have put a target
price of | 63 per share (10x FY13E EPS).
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