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Sterlite Industries
Z i n c a d d s t h e z i n g …
Sterlite Industries continued its strong performance in Q1FY12 with
results broadly in with our estimates. The topline registered an
impressive growth (up ~64.5% YoY whereas sequentially it declined
marginally by ~2.3%) at | 9824 crore against the expected | 9628.5 crore.
The strong topline growth was led by volume expansion in HZL, higher
by-product realisation and improved metal recovery in the copper
segment and overall improvement in LME prices. EBITDA margins
improved to ~28% as compared to ~25% in Q1FY11. However, margins
have declined 234 bps QoQ. The cost of production in the zinc and
aluminium segment increased ~4% and ~9%, respectively. The
consolidated PAT for Q1FY12 came at | 1640 crore against our estimate
of | 1545 crore registering a rise of ~62.6% YoY and decline of ~14.8%
QoQ. The QoQ decline in PAT was mainly due to higher depreciation (up
~19.3% QoQ and ~94% YoY), higher interest outgo (up 67% QoQ and
23.5% YoY) and higher tax rate of ~20.4% as against ~17.2% in Q4FY11
(on a YoY comparison, the tax rate is stable).
ƒ Higher cost of raw material impacts performance at SEL, VAL
Vedanta Aluminium (VAL) lacks backward integration on bauxite.
Hence, it sources partial bauxite from Balco and partly from thirdparty sources. This has led to cost of production (COP) at VAL
increasing from $1895/t (in Q1FY11) to $2344/t in Q1FY12. This was
mainly attributable to higher alumina cost and increased coal cost.
Similarly, at Sterlite Energy (SEL), COP shot up to | 2.6/ unit (I-direct
expectation: | 2/unit) as against | 1.6/unit in Q1FY11. This was due
to higher use of imported coal and e-auction coal as availability of
linkage coal was lower.
V a l u a t i o n
At the CMP of | 168, the stock is trading at FY13E PE of 9.0x and FY13E
EV/EBITDA of 2.2x on a consolidated basis. We have valued the stock on
an SOTP basis and reduced our target price to | 193. However, we
continue to maintain our BUY recommendation on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Sterlite Industries
Z i n c a d d s t h e z i n g …
Sterlite Industries continued its strong performance in Q1FY12 with
results broadly in with our estimates. The topline registered an
impressive growth (up ~64.5% YoY whereas sequentially it declined
marginally by ~2.3%) at | 9824 crore against the expected | 9628.5 crore.
The strong topline growth was led by volume expansion in HZL, higher
by-product realisation and improved metal recovery in the copper
segment and overall improvement in LME prices. EBITDA margins
improved to ~28% as compared to ~25% in Q1FY11. However, margins
have declined 234 bps QoQ. The cost of production in the zinc and
aluminium segment increased ~4% and ~9%, respectively. The
consolidated PAT for Q1FY12 came at | 1640 crore against our estimate
of | 1545 crore registering a rise of ~62.6% YoY and decline of ~14.8%
QoQ. The QoQ decline in PAT was mainly due to higher depreciation (up
~19.3% QoQ and ~94% YoY), higher interest outgo (up 67% QoQ and
23.5% YoY) and higher tax rate of ~20.4% as against ~17.2% in Q4FY11
(on a YoY comparison, the tax rate is stable).
ƒ Higher cost of raw material impacts performance at SEL, VAL
Vedanta Aluminium (VAL) lacks backward integration on bauxite.
Hence, it sources partial bauxite from Balco and partly from thirdparty sources. This has led to cost of production (COP) at VAL
increasing from $1895/t (in Q1FY11) to $2344/t in Q1FY12. This was
mainly attributable to higher alumina cost and increased coal cost.
Similarly, at Sterlite Energy (SEL), COP shot up to | 2.6/ unit (I-direct
expectation: | 2/unit) as against | 1.6/unit in Q1FY11. This was due
to higher use of imported coal and e-auction coal as availability of
linkage coal was lower.
V a l u a t i o n
At the CMP of | 168, the stock is trading at FY13E PE of 9.0x and FY13E
EV/EBITDA of 2.2x on a consolidated basis. We have valued the stock on
an SOTP basis and reduced our target price to | 193. However, we
continue to maintain our BUY recommendation on the stock.
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