Sterlite Industries Q2 PAT seen up 43% at Rs 1,445 cr

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Vedanta Group company Sterlite Industries is expected to report a profit after tax of Rs 1,445 crore for the second quarter of FY12, a growth of 43.3% as compared to Rs 1,008 crore in the corresponding quarter of last fiscal.

Net sales are seen going up by 61.2% to Rs 9,716 crore from Rs 6,029 crore year-on-year.

Earnings before interest, tax, depreciation and amortisation (EBITDA) are likely to go up by 77.8% to Rs 2,620 crore in July-September quarter of FY12 as against Rs 1,473.5 crore in same quarter the previous year.

EBITDA margin is seen improving at 27% versus 24.4% during the same period.
 
On quarter-on-quarter basis, net sales are expected to go down 1.1% and PAT is likely to go down 11.9%.

Copper business contributes nearly 45-48% of its revenues but their margins are mainly aided by their zinc, lead and silver business

Sterlite holds 65% stake in Hindustan Zinc:

* Hindustan Zinc delivered decent set of numbers as their topline came in at Rs 2594 crore and PAT at Rs 1344 crore

* Hindustan Zinc benefits on the back of improvement in by-product realisation viz. silver, etc.

* Hindustan Zinc contributes nearly 58-60% to the PAT of Sterlite Industries.

Factors to watch out for:

On a YoY basis, it is expected to report strong performance on the back of strong LME prices due to healthy contribution from the domestic and international zinc business

Also inclusion of its overseas unit's Anglo Zinc's assets was completed in February 2011 resulting in Sterlite gaining from a low base and propping up YoY growth which will continue till Q4FY12.

On a QoQ numbers will be lower owing to lower LME prices, higher coal costs and lower production of zinc by its overseas unit

Also the Tc/Rc margins are expected to stay stable on a q-o-q basis

Volumes:

Negatives likely to be partially offset by higher copper and zinc volumes

•         Copper cathode production has increased 28% YoY to 87K tons

((Production in the prior year period was lower on account of a planned bi-annual maintenance shut-down))

•         Hind zinc had delivered very strong set of refined production numbers

((Also the international zinc business will boost the numbers))

•         Aluminum production has taken a 8% hit on a YoY basis

•         Sterlite Energy to produce has produced approximately 1.3 billion units during 2QFY12

EBITDA expected to grow on a YoY but likely to stay flat QoQ basis:

Due to strong performance from the zinc and lead businesses

Power business likely to boost better production numbers with the commissioning of 2nd unit of power plant

Ramp up in power business will result in better EBIT margins from the power segment as power volumes at SEL have improved but realizations have remain flat

Commissioning delays and higher raw material costs (coal and bauxite) will hamper their aluminum business

PAT likely to be hit by rupee fluctuation:

Other income to take a hit though they normally gain due to currency fluctuations

Sharp depreciation of rupee against USD will result in forex loses. In 1QFY12, Sterlite included MTM derivative gain of approximately Rs 1.3 billion