YES Securities' research report on Sterlite Technologies
Sterlite Technologies (SOTL) reported inline operating performance for the quarter. Both, the sequential revenue growth and EBITDA margin were as per expectation. It reported revenue growth of 11.8% QoQ, led by 12% QoQ increase in Global networking segment; the Global Services segment declined by 8% QoQ as it continues to realign its Services segment with higher focus on profitability. There was sequential decline in EBITDA margin(down 81 bps QoQ) on higher cost. Order book grew 4.5% QoQ to Rs 121bn. SOTL is expected to benefit from multi‐year digital creation cycle led by 5G, FTTx and fibre demand from hyperscalars. Also, optical fibre cable prices are on the rise globally and should benefit Sterlite Technologies. It has been gaining market share in global OFC market. The rise in revenue mix from international clients is in right direction. It plans to increase attach rate to 40% by Q4FY25. We expect EBITDA margin to improve going ahead led by easing off certain cost pressure related to raw material and logistics. It has been able to pass some increase in cost to customers. The moderation in capex intensity will help to keep debt under control.
We estimate revenue CAGR of 25.4% over FY22‐24E with average EBITDA margin of 14.8%. We maintain our BUY rating on the stock with target price of Rs 217/share based on EV/EBITDA of 8x on FY24E. The stock trades at EV/EBITDA of 10.2x/6.8x on FY23E/FY24E.
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