Hold Sterlite Technologies; target of Rs 95: ICICI Direct
ICICI Direct recommended hold rating on Sterlite Technologies with a target price of Rs 95 in its research report dated May 13, 2020.
May 13, 2020 / 04:22 PM IST
ICICI Direct's research report on Sterlite Technologies
Sterlite Tech’s (STL) Q4FY20 performance was weak on the operating front on account of fibre demand slowdown and some impact of Covid-19 led disruption. Revenues came in at Rs 1,160 crore, down ~35% YoY with Covid-19 led disruption impacting revenues by ~Rs 170 crore and OF pricing/demand accounting for remaining decline. EBITDA was at Rs 216 crore, down ~31% YoY, impacted by revenue decline with margins at 18.6%, up 103 bps YoY. Reported PAT came in lower at Rs 80.3 crore, down 51.4% YoY, on account of a weak operating performance and higher depreciation and interest costs from new OF capacity.
We highlight that Covid-19 led disruption coupled with demand challenge are expected to result in a washout FY21. Meaningful earnings growth is expected to be seen from FY22. The continued traction in network services is, however, heartening and remains a partial hedge in a volatile product demand scenario. We await a meaningful demand recovery before turning constructive. We maintain HOLD rating on the stock, valuing it at Rs 95/share (implying 5x FY22E EV/EBITDA and 8.5x FY22E P/E).
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