Moneycontrol
Dec 09, 2016 04:25 PM IST | Source: Moneycontrol.com

Buy Sterlite Tech; target of Rs 127: KR Choksey

KR Choksey is bullish on Sterlite Technologies has recommended buy rating on the stock with a target price of Rs 127 in its research report dated December 09, 2016.

 
 
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KR Choksey's research report on Sterlite Technologies


Sterlite Tech (SOTL) is among the global leaders in Optical Communication Products such as optical fibres, fibre optic cables and data cables through its operations in India, China, Brazil and sales network across 5 continents. Sterlite Tech products have enabled top telecom operators with smarter networks in more than 75 countries across the world. Under the Telecom Services offerings, with expertise in designing, engineering, building & managing broadband networks, Sterlite Tech is developing several network projects, such as secure network for the Armed Forces under Network for Spectrum, enabling rural broadband through BharatNet, developing systems and networks for Smart Cities, and establishing high-speed Fibre-to-the-Home (FTTH). Additionally, industry drivers such as domestic rollout of 4G services, expansion of 3G services and pan-India provision of Wi-Fi hotspots serve as key triggers for SOTL.


Valuation
We expect the company to deliver EBIDTA growth of 29% CAGR between FY16-18E. We estimate a pre-tax RoCE of 24% and RoE of 25% by FY18E on the back of reduced interest burden and higher realizations per unit of OF and OFC. We expect company to do an EPS of INR 6.7 for FY18E, a CAGR of 32% between FY16-18E. At CMP, the stock is trading at 14.2x FY18E EPS. We give a ‘BUY’ rating on the stock, assigning a P/E multiple of 19x FY18E EPS to arrive at a price target of INR 127.

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