The copper major, Sterlite Industries, is making it to the headlines daily having won the bidding for the now famous Bharat Aluminium (Balco). The company is attempting to position itself as a major player in the non-ferrous metals business.
In recent weeks, if markets have got a pounding, the Sterlite Industries scrip has been pulverised. The stock has declined 47.3% since the beginning of February. During this same period the BSE Sensex has fallen by 17.4%. Therefore, the Sterlite scrip has underperformed the markets by 2.7x.
The key earnings driver for the company is the copper refining charges, which are linked to international copper prices. Although copper prices have declined over the concerned period (15.5%) the drop in the stock price cannot be entirely justified on these grounds. Nevertheless, the aggregate effect of the slide in the market and the drop in copper prices could have taken a toll on the scrip.
In addition to these factors has been the stalling of the Balco deal. With the Judiciary now involved, markets maybe skeptical on the timeframe for resolving the issue given the history of litigation time in the country. These seem to be the factors that have pulled down the scrip in the last month and a half.
At Rs 87 the company is trading on a P/E multiple of 3.3x 1HFY01 annualised earnings.
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