Sterlite Technologies (Q2FY21) - Conference call takeaways - YES Securities

Sterlite Technologies Q2 FY21 summary

Sterlite technologies delivered revenues of Rs11.6 bn (-15% yoy) during Q2 FY21. It was higher than our estimates of Rs.10.2 bn topline. Operating Margins during Q2 FY21 came in at 17.5% (-376 bps yoy) vs our estimates of 17%. The Order book at end of quarter stood almost flat at Rs. 107 bn (Rs.103 bn at end of Q1 FY21). The Company is reinitiating Capex expansion plans of Optic Cables to 33 Mn. Fkm (18 Mn. Fkm currently).

Sterlite Technologies Q2 FY21 - Conference call takeaways

During the quarter, share of revenues from Products stood at ~65% with balance revenues coming from the Services segment. The Company saw capacity utilization of 60% in Fiber and 90% in Cables. Realization in Cables stood at $15 per fiber kms (fkm) whereas in fiber it stood at $5-6 per fkm. Sterlite Technologies is witnessing decent traction in Europe (~30% of the total revenue during H1FY21). It expects it to grow further with large scale network rollouts planned in the region. During H1 FY21, Sterlite incurred capex of ~Rs.2.8 bn. FY21 capex target stands at Rs. 5.5 bn including maintenance capex of Rs.500 mn. Net debt as on September end stood at Rs 21.6 bn vs Rs 19.7 bn at FY20 end. The Company is seeing decent traction in execution and expects to see topline growth on qoq basis during Q3 and Q4 FY21. Operating margins are likely to be at current levels of 17-18% levels going forward. The Company has seen a growth in Order book during Q2 FY21 to Rs. 107 bn as against Q1 FY21(at Rs.103 bn). With the current order book, the Company is confident of clocking revenues of Rs.45 bn during FY21. Cable Capacity will increase from 18 to 33mn fkm which will drive ~$150-160 mn incremental revenues. Our view - We believe while the revenue momentum continue for STL based on current order book, the margins would be under pressure. The lower prices of fiber would significantly hurt the product segment profitability. The increasing share of low margin services segment would also impact the overall profitability. We largely retain our estimates and maintain our negative view on the stock for target price of Rs97.

Shares of STERLITE TECHNOLOGIES LTD. was last trading in BSE at Rs.158.55 as compared to the previous close of Rs. 151.75. The total number of shares traded during the day was 238698 in over 4670 trades.

The stock hit an intraday high of Rs. 159.75 and intraday low of 151.05. The net turnover during the day was Rs. 37437785.

Source : Equity Bulls

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