Sterlite Industries - 4QFY2013 Result Update - Angel Broking

Sterlite Industries (Sterlite) reported better-than-expected 4QFY2013 results. Both, the top-line as well as the net profit were above our expectations, mainly due to better-than-expected performance from the Copper and Zinc segments. We recommend Accumulate rating on the stock.

Top-line growth driven by all the segments: The company's net sales grew 17.2% yoy to Rs. 12,609cr. The growth was driven by increase in all the segments' revenues. Aluminium, Copper and Zinc segment revenues grew 9.8%, 16.9 and 21.6% yoy to Rs. 954cr, Rs. 5,783cr and Rs. 4,950cr, respectively.

Copper segment profitability surprises: On the operating front, Sterlite's EBITDA grew 22.2% yoy to Rs. 3,307cr and EBITDA margin improved by 109bp yoy to 26.2% (above our estimate of 23.1%) because of improved profitability across all segments. Copper segment's profitability was above our estimate as its EBIT improved by 22.5% yoy due to higher volumes and power sales from the 80MW captive power plant, although partially offset by higher costs of production).

Lower interest costs and higher other income boost PAT: Interest costs declined by 15.9% yoy to Rs. 276cr and other income grew by 13.5% yoy to Rs. 798cr. Tax rate was also lower at 12.1% compared to 16.8% in 4QFY2012; hence, adjusted net profit increased by 42.6% yoy to Rs. 1,964cr, which was above our estimate of Rs. 1,522cr.

Outlook and valuation: We expect Sterlite to benefit from the expansion of Zinc-Lead smelting capacity during FY2014-15 although its Aluminium segment's profitability is expected to remain under pressure. Considering the ongoing process of group restructuring by the promoter, Vedanta Resources, the valuation of Sterlite will mirror the valuation of the consolidated company - Sesa Sterlite. We recommend Accumulate rating on the stock.

Source : Equity Bulls

Keywords