Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Sterlite Ind: Targeting the top - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Jul 4, 2002

    Sterlite Ind: Targeting the top

    After a slide in topline growth in the latter half of the previous fiscal, which dipped into negative territory in 1QFY02, Sterlite Industries (India) Ltd. (SIIL) has been prompt in reviving sales performance. Over the past two quarters, turnover has registered impressive growth, especially considering the economic environment. The performance is in line with industry peer, Indo Gulf. SIIL has changed its financial year end to March from June. Therefore, results for the first nine months of FY02, are reflective of full year performance.

    (Rs m) 3QFY01 3QFY02 Change FY01 FY02 Change
    Sales 6,662 9,236 38.6% 21,665 24,848 14.7%
    Other Income 51 64 25.9% 193 134 -30.7%
    Expenditure 5,869 8,173 39.3% 19,158 21,900 14.3%
    Operating Profit (EBDIT) 793 1,063 34.1% 2,507 2,949 17.6%
    Operating Profit Margin (%) 11.9% 11.5%   11.6% 11.9%  
    Interest 265 438 65.1% 884 1,148 29.9%
    Depreciation 221 268 21.1% 661 718 8.6%
    Profit before Tax 358 422 17.9% 1,155 1,217 5.3%
    Tax 37 114 212.1% 103 306 198.5%
    Profit after Tax/(Loss) 321 308 -4.1% 1,052 911 -13.5%
    Net profit margin (%) 4.8% 3.3%   4.9% 3.7%  
    No. of Shares (eoy) 53.9 55.6   53.9 55.6  
    Diluted Earnings per share* 23.1 22.2   25.3 21.9  
    P/E Ratio         6.5  

    Having said that, commodity prices including copper, YoY, over the concerned periods has declined, which is primarily a reflection of weaker demand. Industrial activity, both in global and domestic markets, experienced a downturn over Jan '01 to March '02. Although, London Metal Exchange (LME) copper prices improved in the first three months of calendar year 2002, average price for the concerned periods was lower by 13.2% and 18.9% YoY. Average copper price for nine months to March '02 was $1,483/ tonne.

    This suggests that growth in sales is likely to have been driven by volumes. The key copper consuming industries are telecom and housing. Jelly filled telecom cables (JFTC) -- copper cables -- are the highest users of the commodity, accounting for an estimated 30% of total copper consumption. Globally, telecom industry is on a downturn and global majors are unlikely to be using copper cables. JFTC is in threat in domestic markets as well due to newer technologies; namely optic fibre cable (OFC). Sterlite Optical Technologies Ltd., offspring of SIIL, reported a 6% decline in JFTC volumes for FY02. Bharat Sanchar Nigam Ltd. (BSNL) and Mahanagar Telephone Nigam Ltd. (MTNL) are the largest and likely the only consumers of JFTC. These companies are also increasingly shifting to OFC. The housing market is registering robust growth, which is offering some reprieve.

    In FY01, SIIL and Indo Gulf had undertaken debottlenecking exercise to augment copper smelting capacity by 50,000 TPA each. In two phases, SIIL had scheduled to complete debottlenecking in January '01. However, much of the augmented capacity is likely to have become operational in the latter half of calendar year 2001. Consequently, the higher capacity could have facilitated volume growth in the last two quarters. The domestic majors are likely to have eaten into market share of imports. Also, we reckon, China could have improved regional dynamics, as the country pushes ahead on infrastructure (telecom & housing). Sale volumes increased 24% to 110,902 tonnes with domestic & export sales growing 27% and 13% respectively. This suggests, surprisingly, that realisations improved in export markets. Domestic realisations were down an estimated 12.3% YoY.

    SIIL is in an organic & inorganic expansion drive for the past half a decade. Sterlite took over Madras Aluminium (Malco) in 1995 for a footing in the aluminum business. It integrated forward by acquiring India Foils in FY00 for Rs 550 m. In February '01, the company acquired 51% Government stake in Balco for Rs 5.5 bn. And followed this with acquisition of 26% Government stake in Hindustan Zinc Ltd. (HZL) for Rs 4.5 bn in March '02. As part of rationalisation plans, the company had indicated to exit from India Foils and hive off the aluminium conductor business to a 100% subsidiary. There is no development on this front. Large investments in the past two years and debottlenecking is likely to have put pressure on cash flows. The lower other income and higher interest could be due to liquidation of investments and increased borrowing respectively.

    As mentioned earlier demand from JFTC segment is likely to decline going forward. The company is expecting lower offtake of JFTC by BSNL and MTNL in the current fiscal. Consequently, new segments and export markets would need to be identified. Also, existing consuming sectors would need to take up the slack from JFTC. Housing and auto sectors are performing well in FY03. After the initial rise in calendar year 2002, copper prices are trading at $1,600/ tonne. 15-month LME futures are indicating a price of $1,725/ tonne. Much of the optimism is based on revival in the U.S economy beginning 2003.

    At Rs 142 the scrip is trading on a multiple of 6.5x FY02 earnings. The scrip has been trading in a band of 4.5x-6.5x.The company is expanding aggressively but the group was the first private sector copper refiner and enjoys expertise in non-ferrous metals. Having said that, recent acquisitions could make bidding for Nalco challenging. The current scheme of arrangement has run into troubled waters with regulators and is pending adjudicature from the Mumbai High Court.



    Equitymaster requests your view! Post a comment on "Sterlite Ind: Targeting the top". Click here!


    More Views on News

    Sorry! There are no related views on news for this company/sector.

    Most Popular

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    The Most Profitable Investment in the History of the World(Vivek Kaul's Diary)

    Aug 8, 2017

    'Yes, it looks like a bubble. And, yes, it's like buying a lottery ticket. But there's something happening that has never happened before. It's an evolutionary leap in money itself.'

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    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: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 26, 2013 (Close)


    • Track your investment in STERLITE IND. with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks


    Detailed Quarterly Results With Charts