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Sterlite Technologies - Q2FY22 First Cut - YES Securities

Posted On: 2021-10-23 09:19:57 (Time Zone: IST)

Both revenue and EBITDA margin inline

  • Reported revenue of Rs 15.1 bn (up 15.1% QoQ) as the operations returned to normalcy after the impact from 2nd Covid wave.
  • Utlization level was 70% for optical fibre on 50 mn fkm capacity and 85% for optical cable on 33 mn fkm capacity.
  • Working to increase cable capacity to 42 mn fkm by Q1FY23
  • EBITDA margin was17.4% for the quarter (down 28 bps QoQ), broadly in line with average EBITDA margin of last 4 quarters.
  • Pricing remains stable for the company due to long term contracts though there has been some increase in spot prices recently.
  • Capex of Rs 5bn for FY22 (Rs 3 bn has been spent and Rs 2 bn would be spent in H2FY22. Has guided for capex of Rs 3bn for FY23.
  • Net debt has increased by Rs 4bn over H1FY22 to Rs 28.1 bn. As per management, it has peaked and should decrease going ahead.
  • Orderbook grew by 7.4% YoY to Rs 115bn.

Other highlights from concall
  • Working proactively to achieve revenue run rate of Rs 100bn by Q4FY23 and achieving Net Debt/ Equity of 0.5x by this period.
  • Digital Upcycle led by 5G and FTTX would continue for next 7-8 years.
  • Steady investment by the company over last 6 years had led to 5x increase in total addressable market to $40bn. The strategy is to gain market share in this space.
  • Its market share in global ex China OFC market has increased from 4.7% in 2016 to 10% in 2021.
  • Optical interconnect business is going to be a big driver of revenue growth as they increase attach ratio from current 8% to target 1:1 ratio.
  • It has been focusing on R&D ss R&D as percent of revenue has grown from 0.5% in FY16 to 3.2% in H1FY22.
  • Its PLI application has been approved by the government for the manufacturing of telecom equipments.
  • Overall, strong execution on both revenue and margin front. it is expected to be a major beneficiary of digital upcycle trend over the next decade. We currently have BUY Rating on the stock.

Shares of Sterlite Technologies Limited was last trading in BSE at Rs. 300.75 as compared to the previous close of Rs. 275.90. The total number of shares traded during the day was 264668 in over 9559 trades.

The stock hit an intraday high of Rs. 303.25 and intraday low of 277.95. The net turnover during the day was Rs. 77690599.00.

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