Sterlite Industries (India) Limited - Strong quarter led by zinc outperformance - Antique

Sterlite Industries reported 4QFY13 EBITDA/PAT ahead of estimates led largely by outperformance of the copper and zinc business. Strong growth in zinc and copper volumes, higher metal premiums and lower costs more than offset the decline in metal prices resulting in EBITDA beating estimates. 4QFY13 EBITDA at Rs33.1 bn (+22% YoY, +48% QoQ) was ahead of our estimates while PAT at Rs19.2 bn grew 15% YoY / 57% QoQ. Overall, Sterlite reported an all-round improvement in operating performance led by higher metal volumes, increased power sales and lower cost of production across various segments led by lower input costs. In our view, Sterlite's underperformance in the near-term is largely a reflection of the regulatory hurdles it is facing. At CMP of Rs96, it offers deep value led by low cost metal operations especially zinc, earnings growth led by increased capacities across business and attractive valuations. However, it will require some patience as the value will likely be realized as regulatory hurdles ease out. Maintain BUY with target of Rs129/share.

Valuation and outlook

We reiterate a BUY rating with a target price of INR129/share. At CMP of Rs96, it offers deep value led by low cost metal operations especially zinc, earnings growth led by increased capacities across business and attractive valuation.

Source : Equity Bulls

Keywords