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Sterlite Optical: Cent percent results - Views on News from Equitymaster
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  • Jan 8, 2001

    Sterlite Optical: Cent percent results

    The continuing strong demand for optic fibre and cable has enabled Sterlite Optical Technologies Ltd. (SOTL) to report a topline growth of 40%. Optic fibre and cables grew by 192% and contributed 62% to the turnover as compared to 30% in the corrseponding quarter of the previous year.

    Consequently, jelly filled telecom cables (JFTC) contributed 38% to the turnonver. With overall growth at 40%, JFTC is expected to have reported a sizeable negative growth in sales estimated at 200%. For the half year ended December '00 the company has reported an even stronger growth rate of 46%.

    Export sales of the company have registered meteoric growth rates increasing from Rs 18.2 m to Rs 1,230.5 m in the current quarter. However, its domestic sales have fallen by 12.5%. This could be due to the continuing trend of DoT and MTNL reducing their purchase of JFTC. Nevertheless, growth in the optic fibre (OF) and cable (OFC) space continues to remain robust. Globally, the OF business is estimated to grow at a compounded rate (CAGR) of 27% till 2004. Meanwhile, OFC sales are anticipated to double over this period.

    (Rs m) 2QFY00 2QFY01 Change
    Net Sales 2,294 3,222 40.5%
    Other Income 12 39 237.9%
    Expenditure 1,738 2,233 28.5%
    Operating Profit (EBDIT) 556 989 78.0%
    Operating Profit Margin (%) 24.2% 30.7%  
    Interest 75 35 -52.7%
    Depreciation 47 46 -3.2%
    Profit before Tax 445 947 112.7%
    Tax - 53  
    Profit after Tax/(Loss) 445 895 100.9%
    Net profit margin (%) 19.4% 27.8%  
    No. of Shares (eoy) (m) 55.9 55.9  
    Diluted earnings per share* 31.9 64.0  
    P / E ratio   13.7  

    Due to the strong demand in OF and OFC and the consequent firming up of prices (approximately $65 / fibre Km) the company has been able to report a significant rise in operating profits. With realisations improving the OPM of the company has also increased impressively by 650 basis points.

    The interest cost of the company has declined substantially. This could be due to the strong cash flows enjoyed by the company, which have been utilised to repay debt. Consequently, pre-tax profits have risen by 113% but the incidence of tax in the current year has pulled down post-tax profit growth to 101%.

    At Rs 879 the company is trading at an attractive valuation of 13.7x 2QFY01 annualised earnings while it enjoys a bottomline growth of 100%. Consequently, its PEG ratio is quite favourable.



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