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M a r g i n s m i s s i n t e l e c o m s e g m e n t …
Sterlite Technologies reported a mixed set of results as revenues came in
above our expectations at | 707 crore (I-direct estimate: | 571 crore). The
revenue beat was led by the power segment wherein volumes for the
power conductor grew 35% YoY. However, overall margins at 7.1% (Idirect estimate: 8.3%) were below our expectations as both the power
and telecom segment disappointed in terms of margin delivery. Coupled
with this, PAT was also impacted due to higher interest costs and
recorded a decline of 78% YoY vs. our expectations of 66% decline.
Going ahead, although margins and profitability will look up in H1FY12 as
lower margin power orders will get executed by then and telecom
segment will get back on track, it will still call for earnings downgrade as
the management has finally revised down their guidance for the FY12
performance.
ƒ Highlights of the quarter
The current order backlog stands at | 2400 crore out of which the power
sector accounts for | 2100 crore of orders. We believe the pain in the
power segment in terms of execution of low margins orders will get over
by Q3FY12. Hence, we will witness an uptick in segmental margins. The
other key negative surprise was the contraction of margins in the telecom
segment to 15.6% due to higher input costs and stabilisation issues with
the expanded capacity. In terms of volume, the power segment sold
36,000 MT of power conductor and telecom segment volume for optic
fibre and fibre optic cable stood at 2.8 million km and 0.8 million km,
respectively.
V a l u a t i o n
At the CMP of | 38, the stock is trading at 14x and 8x on FY12E and FY13E
EPS. Though we believe that FY13 will look better for the company, we
would be buyers into the stock once the company starts delivering from
H2FY12. We have valued the stock at 9x its FY13E EPS and arrived at a
price target of | 43 (earlier | 53).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
M a r g i n s m i s s i n t e l e c o m s e g m e n t …
Sterlite Technologies reported a mixed set of results as revenues came in
above our expectations at | 707 crore (I-direct estimate: | 571 crore). The
revenue beat was led by the power segment wherein volumes for the
power conductor grew 35% YoY. However, overall margins at 7.1% (Idirect estimate: 8.3%) were below our expectations as both the power
and telecom segment disappointed in terms of margin delivery. Coupled
with this, PAT was also impacted due to higher interest costs and
recorded a decline of 78% YoY vs. our expectations of 66% decline.
Going ahead, although margins and profitability will look up in H1FY12 as
lower margin power orders will get executed by then and telecom
segment will get back on track, it will still call for earnings downgrade as
the management has finally revised down their guidance for the FY12
performance.
ƒ Highlights of the quarter
The current order backlog stands at | 2400 crore out of which the power
sector accounts for | 2100 crore of orders. We believe the pain in the
power segment in terms of execution of low margins orders will get over
by Q3FY12. Hence, we will witness an uptick in segmental margins. The
other key negative surprise was the contraction of margins in the telecom
segment to 15.6% due to higher input costs and stabilisation issues with
the expanded capacity. In terms of volume, the power segment sold
36,000 MT of power conductor and telecom segment volume for optic
fibre and fibre optic cable stood at 2.8 million km and 0.8 million km,
respectively.
V a l u a t i o n
At the CMP of | 38, the stock is trading at 14x and 8x on FY12E and FY13E
EPS. Though we believe that FY13 will look better for the company, we
would be buyers into the stock once the company starts delivering from
H2FY12. We have valued the stock at 9x its FY13E EPS and arrived at a
price target of | 43 (earlier | 53).
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