Sterlite Industries (STRL.BO): Buy We are forecasting an EPS CAGR of 20% over FY12E-14E:: Goldman Sachs,

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Sterlite Industries (STRL.BO): Buy
We are forecasting an EPS CAGR of 20% over FY12E-14E, driven by:
 Consolidation of the recently acquired Anglo Zinc assets (Zinc International).
 Strong growth in lead and silver volumes from expansion projects.
 Gradual commissioning of Sterlite Energy’s 2,400 MW commercial energy project
in Orissa state.
The company is trading at FY12E P/B of 0.9X, which is a 31% discount to global peers at
1.2X and a 44% discount to its mid-cycle multiple of 1.6X. In our view, the market is
ascribing no value to the power business; and is valuing the base business, comprising
existing productive assets, at a discount.
The company has net cash of US$2.5bn at the end of FY11, which is about 30% of its
current market cap, which, in our view, gives it the flexibility to pursue growth projects.
We cut our FY12E/13E/14E EPS estimates by 19%/23%/22% on lower commodity prices. We
lower our 12-m SOTP-based TP to Rs164 from Rs205 and retain our Buy rating.
Key Catalysts
(1) Reduction in costs through improving operating efficiencies from the consolidation of
the Zinc international business.
(2) Commissioning of the 2,400 MW Orissa energy project by Sterlite Energy

Key Risks
Commodity price weakness; delays in execution on growth projects; overhang of
regulatory issues/environment litigation.