Sterlite Optical, the erstwhile telecom business of Sterlite Industries, is seeing new 52-week lows as technology continues to get routed in the global market place.
The recent 3-generation telephony auctions for circles in Western Europe and US attracted astronomical valuations from global majors. In the fear of losing out to competition these companies made huge bids for the circles. Consequently, the strength of their balance sheet was adversely affected as they raised debt to fund their shopping spree. This could be one of the reasons for markets punishing these stocks. Global Telcos too are seeing new 52-week lows.
The telco majors face a cash crunch, as balance sheets are highly leveraged and equity markets are giving a thumbs down to new capital raising. To fund the acquisitions the companies planned to list their cellular businesses. This plan however, has come a cropper with the recent listing of Orange. Firstly, France Telecom lowered the issue price of Orange (acknowledging lower valuations) to ensure a favourable response. Despite this, the stock opened even lower on listing. With markets not offering favourable valuations this plan is seeing a re-thinking.
With new money not available, the markets anticipate these majors to cut back on their telecom network expansion to pay for the 3-G licenses. The fear of a cut back on telecom infrastructure spend seems to have affected the valuations of telecom infrastructure companies.
Corning is one of the global majors in the telecom equipment business including optic fibre. It also has an information display (LCDs) and advanced materials division (ceramics). The share price has come off in the last six months and is at its 52-week low.
Mkt Cap / Turnover
The valuations are similar to its Indian peer, Sterlite Optical, on the basis of m-cap to sales. However, there is a wide disparity in the P/E ratios of the two companies. Despite the decline in share price, Corning is trading at a valuation of 5x that of Sterlite Optical on earnings multiple.
For FY01, Sterlite Optical Ltd is expected to come in with 100% growth in bottomline. The company also accrues a large percentage of its sales from the domestic market. This could act as a buffer in the case of international telecom spending slowing down.
Operating profits (EBITDA)
The company has broken its earlier lower support level (approx. Rs 725) and could head towards its next support level (approx. Rs 625). Breaking this could see the stock dip lower. At Rs 654 the company trades on an earnings multiple of 12.4x 1HFY01 annualised earnings.
More Views on News
Sorry! There are no related views on news for this company/sector.
LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India. Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: email@example.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407