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Sterlite Opt: Volumes spurts growth - Views on News from Equitymaster
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  • Aug 1, 2001

    Sterlite Opt: Volumes spurts growth

    Sterlite Optical Technologies Ltd. (SOTL) has changes its accounting year from June to March. Consequently, annual result for FY01 consists of nine months from July '00 to March '01. Along with the audited annual result the company has announced 1QFY02 results.

    International telecom equipment market has been facing tumultuous times, as global telco majors shelve / postpone plans to expand networks having spread themselves thin in bidding for 3-G networks. Consequently, telco majors and telecom equipment vendors have taken it hard on the chin from global stock markets. The treatment on the domestic bourses has not been any different. Valuations (P/E Ratio) of SOTL have fallen from 24x at the end of the September '00 quarter to 3.9x at the end of the June '01 quarter.

            Full Year
    (Rs m) 1QFY01 1QFY02 Change 9m FY00 9m FY01 Change
    Net Sales 487 1,728 254.9% 5,074 7,479 47.4%
    Other Income 11 11 6.5% 51 162 215.6%
    Expenditure 203 945 365.4% 3,653 4,819 31.9%
    Operating Profit (EBDIT) 284 783 175.9% 1,421 2,660 87.2%
    Operating Profit Margin (%) 58.3% 45.3%   28.0% 35.6%  
    Interest 31 18 -42.8% 180 243 34.8%
    Depreciation 42 50 18.8% 145 143 -1.9%
    Profit before Tax 222 727 227.7% 1,147 2,436 112.5%
    Tax - 50   - 180  
    Profit after Tax/(Loss) 222 677 205.1% 1,147 2,256 96.8%
    Net profit margin (%) 45.6% 39.2%   22.6% 30.2%  
    No. of Shares (eoy) (m) 56 56   56 56  
    Diluted earnings per share* 15.9 48.4   27.3 53.7  
    P/E Ratio   3.9     6.3  

      QoQ Trailing 12 months
    (Rs m) 3QFY01 1QFY02* Change June'00 June'01 Change
    Net Sales 2,275 1,728 -24.1% 5,561 9,206 65.6%
    Other Income 83 11 -86.3% 62 173 179.5%
    Expenditure 1,144 945 -17.4% 3,856 5,763 49.5%
    Operating Profit (EBDIT) 1,131 783 -30.8% 1,705 3,443 102.0%
    Operating Profit Margin (%) 49.7% 45.3%   30.7% 37.4%  
    Interest 63 18 -72.4% 211 260 23.5%
    Depreciation 49 50 2.9% 187 193 2.8%
    Profit before Tax 1,103 727 -34.1% 1,368 3,163 131.2%
    Tax 100 50 -50.0% - 230  
    Profit after Tax/(Loss) 1,003 677 -32.5% 1,368 2,933 114.4%
    Net profit margin (%) 44.1% 39.2%   24.6% 31.9%  
    No. of Shares (eoy) (m) 56 56   56 56  
    Diluted earnings per share* 71.7 48.4   24.5 52.5  
    P/E Ratio 4.7 3.9     3.6  
    * 1QFY02 - 4QFY01            

    Aksh Optifibre, a competitor, has reported contracts of $170 m (Rs 8 bn) held in abeyance due to the slowdown in U.S. In the domestic market, Bharat Sanchar Nigam Ltd. (BSNL) has retendered contracts estimated at Rs 800 m. The revision in the tender could be to attain procurement price benefits from a slide in optic fibre (OF) prices. The tender is for 60,000 kilometers (Kms) of 12 fibre and 12,000 kms of 24 fibre. Sales from this order are likely to be reflected in the second and third quarter results. Both companies, Aksh and SOTL, continue to report a challenging operating environment going forward due to a sharp slowdown in the U.S. China, however, is emerging as a silver lining and SOTL is attempting to penetrate this market to protect its financials.

    At the end of March '01, SOTL had reported 9m FY01 top and bottomline YoY growth of 48.6% and 115.3% with operating margins at 38.3%. The nine months audited results show a bottomline growth of 96.8% and OPM of 35.6%. Trailing 12 month performance has been boosted by the strong growth in 1QFY02.

    The growth in turnover for 1QFY02 could be due to the company penetrating the global OF and OFC market. The company has augmented its OF capacity at Aurangabad from 1.5 m fibre kms (Fkm) to 3 mFkm and plans to expand capacity further to 5 mFkm by end of calendar year 2001 under phase -II. The growth in operating profits has been lifted by the surge in revenues. However, for 1QFY02 the OPM has declined by 13 percentage points YoY.

    An indication of the slowdown could be gauged from the QoQ performance. Sales have declining over the past two consecutive quarters. Over this period, the OPM has declined by 440 basis points as OF and OFC prices come under pressure. The interest expense of the company is volatile, which could be due to fluctuations in cash flows. Consequently, impacting working capital requirements.

    At Rs 191 the company trades on a multiple of 3.9x 1QFY02 annualised earnings and 3.6x earnings of the trailing twelve months.



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