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Sterlite Industries (India) (STRL.BO)
1QFY12: Strong Pricing & Zinc Volumes Drive Growth
1QFY12 surges; still has value — Sterlite’s cons. adj PAT at Rs16.4bn rose 63% yoy
(20% above estimates largely due to zinc outperformance). Excluding international zinc
PAT of Rs3.2bn, growth is 31%. Maintain Buy as: (1) the outlook for aluminium/copper
appears positive and zinc stable (HZL has low costs: $1,063/t); (2) Sterlite has risen 9%
in the past month but fallen 4% in the past year, underperforming the Sensex by 8%;
(3) the stock offers value trading at a discount to replacement cost.
HZL PAT up 68% yoy; but zinc outlook muted — HZL’s PAT was Rs15bn on higher
zinc volumes and concentrate sales (high silver content). EBITDA margin (excl. other
income) was 56% vs 51% in 1QFY11. Zinc+lead volumes grew 16%, zinc-lead LME
was up 11-31%. Lead-silver output should rise due to new capacity. We expect a zinc
surplus in 2011 & 2012 and prices to remain range bound over 6-12 months. The draft
Mining Bill in its current form has a negative impact on HZL’s FY13 PAT (14%).
International zinc EBITDA up 18% qoq — EBITDA margin was 49% (vs. 52% in 4Q
FY11); Mined metal output grew 49% qoq to 119kt; COP $1,189/t ($1,200/t in 4Q).
Aluminium: rising COP — Balco’s aluminium operations gained from a 24% increase
in LME prices to $2,600/t, offset by 3% volume falls to 61kt and 9% higher COP
($1,981/t). The first 300MW unit of the 1,200MW power plant (capex Rs49bn) should
start by 2QFY12 and 325kt smelter (Rs32bn) is to be fully commissioned by 2H FY13.
Power business — Power sales from Balco and Sterlite’s 100% subsidiaries surged
3.4x with commissioning of 600MW. Volume growth should be robust but COP (+53%
to Rs2.6/unit) remains at risk (only 40% linkage). Realisation/unit fell 29% to Rs3.6/unit.
Cash rich — Net cash as at 30 June stood at Rs96bn ($2.1bn). Loans/quasi equity to
associate companies rose from Rs80.4bn in Mar11 to Rs89bn (69% share) in Jun11.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Sterlite Industries (India) (STRL.BO)
1QFY12: Strong Pricing & Zinc Volumes Drive Growth
1QFY12 surges; still has value — Sterlite’s cons. adj PAT at Rs16.4bn rose 63% yoy
(20% above estimates largely due to zinc outperformance). Excluding international zinc
PAT of Rs3.2bn, growth is 31%. Maintain Buy as: (1) the outlook for aluminium/copper
appears positive and zinc stable (HZL has low costs: $1,063/t); (2) Sterlite has risen 9%
in the past month but fallen 4% in the past year, underperforming the Sensex by 8%;
(3) the stock offers value trading at a discount to replacement cost.
HZL PAT up 68% yoy; but zinc outlook muted — HZL’s PAT was Rs15bn on higher
zinc volumes and concentrate sales (high silver content). EBITDA margin (excl. other
income) was 56% vs 51% in 1QFY11. Zinc+lead volumes grew 16%, zinc-lead LME
was up 11-31%. Lead-silver output should rise due to new capacity. We expect a zinc
surplus in 2011 & 2012 and prices to remain range bound over 6-12 months. The draft
Mining Bill in its current form has a negative impact on HZL’s FY13 PAT (14%).
International zinc EBITDA up 18% qoq — EBITDA margin was 49% (vs. 52% in 4Q
FY11); Mined metal output grew 49% qoq to 119kt; COP $1,189/t ($1,200/t in 4Q).
Aluminium: rising COP — Balco’s aluminium operations gained from a 24% increase
in LME prices to $2,600/t, offset by 3% volume falls to 61kt and 9% higher COP
($1,981/t). The first 300MW unit of the 1,200MW power plant (capex Rs49bn) should
start by 2QFY12 and 325kt smelter (Rs32bn) is to be fully commissioned by 2H FY13.
Power business — Power sales from Balco and Sterlite’s 100% subsidiaries surged
3.4x with commissioning of 600MW. Volume growth should be robust but COP (+53%
to Rs2.6/unit) remains at risk (only 40% linkage). Realisation/unit fell 29% to Rs3.6/unit.
Cash rich — Net cash as at 30 June stood at Rs96bn ($2.1bn). Loans/quasi equity to
associate companies rose from Rs80.4bn in Mar11 to Rs89bn (69% share) in Jun11.
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