Buy Sterlite Technologies; target of Rs 191: KRChoksey

KRChoksey's research report on Sterlite Technologies

Overall performance improved on sequential basis. For Q2FY21, Sterlite Technologies reported total revenue from operations of INR 11595 Mn, degrowth of 14.72% YoY and (+32% QoQ). Gross profit margin declined by 181bps YoY to 50.21%, For Q2FY21, EBITDA declined by 29.84% YoY to INR 2024 Mn while EBITDA margin declined by 376bps YoY and (+357bps QoQ) to 17.46%. Net profit after tax for the quarter declined by 65% to INR 552 Mn. Profit declined was on account of lower revenue, increase in deprecation cost and decline in operating margins. Order Book remains robust at INR 107050 Mn. The order book consists of 43.9% Telecos, 36.9% Citizen Networks and Enterprises 18.8%. Cloud segment is less than 1% of overall order book. For H1FY21, Revenue from India 51% followed by Europe 30%, China 4% and ROW 15%. EPS for the quarter stood at INR 1.46 (as against INR 3.96 in Q2FY20).

Outlook

We expect revenue to grow at 10% CAGR over FY20-22E. AT CMP of INR 156 the stock is trading at PE of 12.3x on FY22E EPS. We maintain an “BUY” rating on the stock and value the stock at 15x FY22E EPS of INR 12.75 with a target price of INR 191 (earlier 186).

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