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Sterlite Opt: Pounded by slowdown

Nov 6, 2001

Sterlite Optical Technologies Ltd. (SOTL) is facing the heat of a slowdown in the telecom sector. The company has reported its third consecutive QoQ decline in turnover. In fact, for the quarter ended September '01, the has company posted a sharp YoY decline in top and bottomline.

(Rs m) 1QFY02 2QFY02 Change 2QFY01 2QFY02 Change
Net Sales 1,728 893 -48.3% 2,046 893 -56.4%
Other Income 11 17 46.5% 14 17 21.0%
Expenditure 945 588 -37.8% 1,274 588 -53.9%
Operating Profit (EBDIT) 783 305 -61.1% 771 305 -60.5%
Operating Profit Margin (%) 45.3% 34.1%   37.7% 34.1%  
Interest 18 56 217.1% 116 56 -52.0%
Depreciation 50 53 5.2% 48 53 9.6%
Profit before Tax 727 213 -70.7% 622 213 -65.7%
Tax 50 90   50 90  
Profit after Tax/(Loss) 677 123 -81.8% 572 123 -78.5%
Net profit margin (%) 39.2% 13.8%   27.9% 13.8%  
No. of Shares (eoy) (m) 56.0 56.0   55.9 56.0  
Diluted earnings per share* 48.3 8.8   40.8 8.8  
P / E ratio   13.5     13.5  
* annualised            

The turnover has taken a pounding from all quarters. Internationally, optic fibre prices have crashed with demand evaporating. Telecom majors, which spread their balance sheet thin in bidding for 3-G licenses, have postponed their plans for network expansion. In the domestic market, the largest consumer, Bharat Sanchar, has delayed orders to exploit the weakening optic fibre prices. All these events is likely to have led to the dismal quarterly performance.

(Rs m) 1HFY01 1HFY02 Change
Net Sales 2,532 2,620 3.5%
Other Income 25 28 14.7%
Expenditure 1,477 1,533 3.8%
Operating Profit (EBDIT) 1,055 1,087 3.1%
Operating Profit Margin (%) 41.7% 41.5%  
Interest 146 73 -50.1%
Depreciation 90 103 13.9%
Profit before Tax 843 940 11.5%
Tax 50 140  
Profit after Tax/(Loss) 793 800 0.8%
Net profit margin (%) 31.3% 30.5%  
No. of Shares (eoy) (m) 55.9 56.0  
Diluted earnings per share* 28.3 28.6  
P / E ratio   4.2  
* annualised      

As per reports, Bharat Sanchar (BSNL) re-issued the tender for 60,000 Ckms of 12-F (optic fibre specs) and 12,000 Ckms of 24-F. The allotment of orders is expected to have been completed by the end of September. The company was a successful bidder for both the tenders. Operating margins have fallen due to the sharp erosion in revenues. Surprisingly, raw material costs for 2QFY02 have jumped by almost 2x. Exports, which constituted 35% of sales, seem to have dried up.

At Rs 118 the scrip is trading on a multiple of 13.5x and 4.2x 2QFY02 and 1HFY02 annualised earnings respectively. At the end of 1QFY02, the scrip was trading on a multiple of 3.9x annualised earnings.

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