Accmulate Sterlite Industries; tgt of Rs 106: Dolat Capital

Dolat Capital is bullish on Sterlite Industries (India) and has recommended accumulate rating on the stock with a target of Rs 106 in its October 25, 2012 research report.

“Sterlite Industries (STLT) delivered results ahead of our estimate due to strong operating performance of Zinc International and Copper business, with PAT boosted by higher other income, forex gain and lower losses at VAL. STLT (Sesa Sterlite post merger) continues to face headwinds in terms of regulatory overhangs namely 1) Bauixte issues at VAL, sunk cost of USD 2.5bn in setting up 1.25mtpa smelter, leading to high debt and low return profile 2) Suspension of iron ore operations in Karnataka and Goa 3) Delay in obtaining approvals for coal block at Balco and coal sourcing at SEL leading to lower PLF leading to lumpiness in earnings. The key driver for the stock in the near term would be the acquisition of balance shareholding of Govt of India in HZL and BALCO stakes. We maintain our Accumulate rating on the stock with a target price of Rs 106 per share (based on SOTP) given the reasonable valuations.”

“STLT cons EBITDA at Rs 25.27bn (+1.8%YoY,9.5%QoQ) was higher than our est of Rs 24.8bn. Zinc India EBITDA at Rs 14.08bn were inline and was boosted by higher premium on Lead, and Zinc despite higher cost. Copper EBITDA at Rs 3.42bn was aided by Rs 450mn gain on currency and had been impacted by lower Tc/Rc and higher cost. However EBITDA of Zn international at Rs 3.9bn (DCe: Rs 3.6bn) was a major surprise whereas Energy business EBITDA at Rs 3bn (DCe:Rs 3.5bn) was impacted by lower PLF of 50% at SEL and higher cost of power at Rs 2.3 per unit (DCe: Rs 2.1 per unit). Aluminum business EBITDA at Rs 950mn (DCe: Rs 670mn) was better than expectation due to high realisations (+150$ premium QoQ) despite higher cost of production of USD1970 per tonne.VAL reported a loss of Rs 2.06bn (DCe: Rs 5.7bn) due to forex gain of Rs 2.8bn whereas EBITDA at Rs 2.25bn declined by 14.4%QoQ due to 3.3% increase in cost of production of Aluminum,” says Dolat Capital research reports.   

FIIs holding more than 30% in Indian cos

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