Buy Sterlite Ind; target of Rs 151: Motilal Oswal

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Buy Sterlite Ind; target of Rs 151: Motilal Oswal

Motilal Oswal is bullish on Sterlite Industries and has recommended buy rating on the stock with a target of Rs 151 in its January 24, 2012 research report.

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Motilal Oswal is bullish on Sterlite Industries and has recommended buy rating on the stock with a target of Rs 151 in its January 24, 2012 research report.

"Sterlite Industries (STLT) posted 31% YoY growth in adjusted PAT for 3QFY12 to INR14.5b (v/s our estimate of INR13b). Reported consolidated PAT was INR9.14b, including forex loss of INR4.25b in STLT standalone and subsidiaries, and 29.5% of INR3.4b in associate, Vedanta Aluminium (VAL). The operating performance of zinc, lead, silver and copper TcRc was robust and along expected lines. Zinc and lead mine production was down 6% due to temporary deterioration of ore grade at Rampura-Agucha. This has been reported for the second time in the last couple of years."

"Sterlite Energy's 2x600MW generated 1,559mkwh at a PLF of 59%, with 428mu generation under trial production. Cost of production (CoP) of aluminum for Balco and VAL reduced 12% to USD1,880/ton and 22% to USD2,004/ ton, respectively, due to strengthening of USD against INR and improvement in operating efficiencies due to better availability of coal and absence of 1HFY12 breakdown losses. Balco's new smelter and CPP are further delayed by six months to 2Q and 1QFY13, respectively due to delays in starting the coal mines. ICD to VAL from STLT has increased by INR6.7b to INR96.12b. With complete erosion of equity, the restructuring of VAL's capital structure is overdue. STLT bought out Vedanta Plc investment in Lakomasko BV for USD37.7m, which holds 8.5% investment in Hudbay Minerals, to align all zinc businesses under the umbrella of STLT."

"STLT has initiated action to dissolve SPVs for efficiencies in dividend distribution. STLT has merged with SOVL (which holds its 64.5% in Hindustan Zinc and THL Zinc Holding BV, which holds 8.5% investment in Hudbay). STLT is in discussions with the Government of India for buying call options in Hindustan Zinc and Balco. The stock is trading at 6.7x FY13E EPS and 0.7x FY13E BV. Maintain Buy," says Motilal Oswal research report.  

Institutional holding more than 40% in Indian cos

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To read the full report click on the attachment