Sterlite Industries Q3 PAT seen down 9% at Rs 1001 cr

Sterlite Industries' profit after tax is expected to go down 9% to Rs 1,001 crore in the third quarter of FY12 as against Rs 1,101.06 crore in the corresponding quarter of last fiscal.

Revenue is seen going up 15% to Rs 9,540.60 crore from Rs 8,294.32 crore year-on-year.

EBITDA is likely to go up by 19% to Rs 2,303.25 crore in the quarter ended December FY12 versus Rs 1,940.57 crore in a year ago quarter. EBITDA is expected to be at 24.1% versus 23.4% YoY and 23.9% QoQ.

On quarter-on-quarter basis, revenue is expected to go down 5.9% while profit after tax is seen flat.

Highlights

-Sterlite holds 65% stake in Hindustan Zinc (Strong volume growth in HZL will drive its revenues):

-Hindustan Zinc delivered their topline at Rs 2,746 crore and PAT at Rs 1,273.6 crore 

-Out of this, the entire topline will reflect whereas the 65% of the bottomline of Hindustan Zinc will reflect (approximately Rs 827 crore)

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

Recent: Reports suggest Sterlite is pushing the government to sell its 29.5 % stake in HZL

Factors:

-Topline is expected to increase by primarily on the back of contribution from Anglo American Assets (international) & SEL

-Aluminum and copper business to report marginally positive volumes
>BALCO aluminum production is likely to decline 5% YoY
>Copper cathode production will increase 2% YoY
>On a QoQ basis, copper's profits are expected to be flat while power's profits are expected to be higher due to higher volumes (up 13% QoQ)

-Revenue will be boasted by higher merchant power sales from Sterlite Energy and Balco 

-Due to full accounting of zinc overseas operations and a multi-fold jump in power generation

-Will gain from the rupee depreciation, as all charges are settled in dollars

-Aluminum business continues to be under pressure but Sterlite's share of losses at VAL is expected to decrease substantially

-Correction in base metals' LME prices will be partly waved off by the depreciating rupee during the quarter will be beneficial

EBITDA margins will continue to be under pressure due to:

-(a) commissioning delays and (b) Higher raw material costs (coal and bauxite)

PAT

- PAT is set to jump 30% as the company had reported foreign exchange loss of Rs 4,660 million in 2QFY12

Positives going ahead: Treatment and refining charges (TcRc) up 12.4% for CY2012:

-Higher copper fees and a weakening rupee will cushion Sterlite from waning demand due to the economic slowdown as they are in anticipation of a resurrection in demand

-Leading companies like Jiangxi Copper and Freeport-McMorgan Copper Gold have reached an agreement to raise TcRc by 12.4% yoy to USD 63/tonne and 6.35c/lb, respectively, for CY2012