Sterlite Technologies - Q1FY22 First Cut - ICICI Direct

(CMP - Rs. 311, Market Cap - Rs. 12345 crore)

Sterlite Tech's performance for Q1FY22 was a mixed bag with a slight topline miss but better than expected margins. The bottomline beat was also aided by net exceptional gain of Rs. 16.2 crore.

Q1FY22 Earnings Summary

- Revenue came in at Rs. 1309 crore, up 49% YoY but down 11% QoQ, slightly lower expectations of Rs. 1348 crore (~53% YoY growth). We note that growth is on a benign base as Q1FY21 had ~39% YoY revenues decline. We await revenue breakup such as product/services. The order inflows traction, however, has been encouraging with key order wins in Q1 such as a) Multi-million dollar deal with a large European telco for the Opticonn solution, b) Incremental order for Lead360 from a large Indian Telco and c) Strategic Partnership with a leading Telecom solution provider in UK to connect homes to broadband by deploying FTTx Mantra

- EBITDA came in at Rs. 231.9 crore (I-direct estimate: Rs. 229.2 crore), up 90.6% YoY but down ~10% QoQ. Reported EBITDA margins came in higher at 17.7% (vs. our estimate of 17%), up 380 bps YoY, given the operating leverage

- PAT came at Rs. 115.8 crore, vs. Rs. 6 crore in base quarter but down 7% QoQ. The PAT was also aided by net exceptional gain of Rs. 16.2 crore

- The company also announced a small acquisition of Clearcomm Group Ltd, a UK based network integration company which has annual revenues of GBP 20 million. The transaction is structured to acquire 100% of the share capital in two tranches. Tranche 1 entails acquisition of 80% of the share capital which will happen immediately, and is based on an Enterprise Value of GBP 15.5 million. The balance 20% shareholding will be acquired in 2023

- The company is also looking to raise funds through equity, convertibles or combination thereof, of ~Rs. 1000 crore, which we believe is to fund the acquisition and capex plans ahead

The company has also maintained that going ahead growth should be driven by growing OFC volumes, optical interconnect business, scaling up SI business and building access solution business. Therefore, traction, going ahead will be a key monitorable. We remain cautious on leverage (net debt/equity at 1.2x and net debt/EBITDA at 3x as on FY21) and believe cash generation will also be key to re-rating. We will come out with an update soon post the conference call.

Shares of STERLITE TECHNOLOGIES LTD. was last trading in BSE at Rs. 303.05 as compared to the previous close of Rs. 295.9. The total number of shares traded during the day was 386447 in over 9576 trades.

The stock hit an intraday high of Rs. 318 and intraday low of 298. The net turnover during the day was Rs. 119923577.

Source : Equity Bulls

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