Accumulate Sterlite Ind; target of Rs 140: PLilladher

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Accumulate Sterlite Ind; target of Rs 140: PLilladher

Prabhudas Lilladher is bullish on Sterlite Industries (India) and has recommended accumulate rating on the stock with a target of Rs 140 in its October 25, 2011 research report.

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Prabhudas Lilladher is bullish on Sterlite Industries (India) and has recommended accumulate rating on the stock with a target of Rs 140 in its October 25, 2011 research report.

"Sterlite Industries (STLT) reported results in line with our expectation, except for substantial loss in Vedanta Aluminium (VAL). Earnings quality continued to deteriorate due to lack of adequate fuel security and captive raw material resources."

"Strong earnings in Zinc biz offset weaker earnings in Aluminium biz: Thanks to better-than-expected EBITDA in Hindustan Zinc (Rs14.2bn v/s PLe: Rs13.7bn) and International zinc (Rs5.3bn v/s PL: Rs5bn) biz, STLT managed to make up for weaker-than-expected earnings in Aluminium biz (Rs550m v/s PLe: Rs1bn). Hence, EBITDA falls in line with expectation at Rs24.2bn (PLe: Rs23.9bn), down 11% QoQ. Power biz reported EBITDA below expectation at Rs1.3bn (PLe:1.4bn) due to lower-than-expected volumes in SEL. PAT (before forex translation loss of Rs4bn) declined by 14% QoQ to Rs20.4bn, below our expectation of Rs21.2bn, due to higher-than-expected tax rate (22.5% V/s PLe:20%). Marred by high energy cost, VAL reported loss of Rs8.2bn. This translated to loss of Rs2.4bn on STLT's level for its 29.5% share, way ahead of our expectation of Rs1.3bn loss."

"Stock's beaten down valuations remains the only rationale behind our positive outlook on the stock. At CMP, stock trades at EV/EBITDA of 3.4x FY13E and P/E of 6.4x FY13E on a very conservative earnings. We maintain 'Accumulate' rating, with TP of Rs140," says Prabhudas Lilladher research report. 

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To read the full report click on the attachment