For Private Circulation only

Sterlite Technologies ltd- Sequential revenue decline along expected lines, Margin improvement a positive surprise
For Private Circulation only

CMP 103 Key Takeaways from the Conference Call

Recommendation BUY on dips
• Sequential revenue decline in expected line due to BSNL’s
Date 23rd April’10 network integration project completion last quarter .(83% of the
total project value realized last quarter).
Target Rs 113 (Upside ~10%)

Company Information • Margin improvement in Telecom business by 1390 bps YoY

due to change in business mix from low margin copper to high
BSE Code 532374
margin fiber. Lower raw material requirement in fiber products
NSE Code STERTECH also helps in bringing down the RM cost as a % of sales.
Bloomberg Code SOTL.IN
• Power business is also seeing high value orders coming up in
Market Cap (Rs. Cr) 2694.3 the 400KV & 765 KV power transmission segment. However
the margin may not be sustainable at the current level of 12%
Free Float 56.41%
due to increased RM cost.
52-wk Hi/Lo (Rs) 106/8

Avg. daily volume (1 year) 276345

In Crs Q4'10 Q3'10 QoQ% Q4'09 YoY%
Face Value 2
Revenue 662 867.3 - 23.67 577.5 14.63
Latest Shareholding Pattern (%)
Promoters 43.54
EBITDA 115 117 - 1.71 78.2 47.06
Institutional Investors 18.7
EBITDA Margin% 17.4 13.5 390 bps 13.54 386 bps
-MF/UTI 9.2

-FIs/Banks 6.67 PAT 72 73.72 - 2.33 43.82 64.31

-FIIs 2.84 PAT Margin% 10.88 8.5 238 bps 7.59 329 bps
Non Institution 37.4
EPS (Re) 2.23 2.28 1.35
700 1600
100
600 1400
1200 90 Previous Recommendations
500
1000 80
400
800 70
300 60
600
200 400 50
100 200 40 Black Dot – BUY
0 0 30 Orange Dot – BUY on dips
Apr-09 Jun-09 Aug-09 Oct-09 Dec-09 Feb-10 20
10
Relative Sterlite Tech Relative Sensex Volume ('000)
Apr-09 Jun-09 Aug-09 Oct-09 Dec-09 Feb-10 Apr-10
Abhisek Sasmal
Ph:(033) 40042712/13/14
abhisek.sasmal@vckgroup.org VCK Research reports are available on Bloomberg VCKR <Go>

VCK Share & Stock Broking Services Limited Kolkata : (91) (033) 4009-9999 Mumbai : (91) (022) 6632-5727
E-mail : research@vckgroup.org
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Key Takeaways from the Concall continued…..

•.The management is quite bullish on OPGW (Optical Ground wire). These cables combine the functions of
grounding and communications. However the demand visibility is not very clear in the near term. We expect OPGW
to contribute meaningfully mainly from FY12 onwards.

• Management is very bullish on their Telecom business (which contributes around 27% of the total revenue). With
faster capacity expansion, we are expect this segment to clock a volume growth of around 20-25% in FY11. The
management is expecting fiber consumption to increase significantly in H2’FY11 due to 3G roll out plans by Telcos.

• 2400 Crs of order book gives a good revenue visibility. The management has given a EBITDA guidance of around
540 Crs in FY11 which is 35% higher than what STL has achieved in FY10.

• STL is increasing the manufacturing capacity at its Optical Fiber facility from 6 mn to 20 mn fkm by FY12. While
that of power conductors is being augmented to 200,000 Tonnes by FY11. STL has 250 Crs of capex plan for FY11
& FY12. The capacity expansion is on track and will boost the overall blended volume in 1-2 years.

REVENUE in Crs Q1'FY09 Q2'FY09 Q3'FY09 Q4'FY09 Q1'FY10 Q2'FY10 Q3FY10 Q4'FY10

Power Transmission Business 257.11 387.94 427.04 400.71 296.04 329 419 480.5

Telecom products and solutions 147.08 277.62 214.95 176.8 140.14 137 449 181.8

EBITDA in Crs Q1'FY09 Q2'FY09 Q3'FY09 Q4'FY09 Q1'FY10 Q2'FY10 Q3FY10 Q4'FY10

Power Transmission Business 14.88 15.21 43.52 46.97 44.34 49 55.3 57.64

Telecom products and solutions 14.46 33.74 27.31 31.22 35.92 42 62 57.5

EBITDA % Q1'FY09 Q2'FY09 Q3'FY09 Q4'FY09 Q1'FY10 Q2'FY10 Q3FY10 Q4'FY10

Power Transmission Business 6% 4% 10% 12% 15% 15% 13% 12%

Telecom products and solutions 10% 12% 13% 18% 26% 31% 14% 32%

Source: Company, VCK Research

VCK Share & Stock Broking Services Limited Kolkata : (91) (033) 4009-9999 Mumbai : (91) (022) 6632-5727
E-mail : research@vckgroup.org
 For Private Circulation only

For Private Circulation only

In Rs cr FY09 FY10 FY11E FY12E

Income from ops 2289 2432 3064 3738

Growth % 36.0% 6.2% 26.0% 22.0%

Operating expenses 2055 2051 2611 3189

EBITDA 234 381 453 549

EBITDA mar% 10.2% 15.7% 14.8% 14.7%

Other income 4 23 21 21

Depreciation 43 48 55 60

EBIT 192 333 398 489

Growth % 20.0% 73.7% 19.8% 22.8%

Interest 56 38 40 40

PBT 139 318 379 470

Growth % 6.9% 128.2% 19.5% 24.0%

Cash Taxes 19 71 83 104

As a % of PBT 13.6% 22.4% 22.0% 22.0%

PAT 120 247 296 367

NPM% 5.3% 10.1% 9.7% 9.8%

Growth % 105.2% 20.0% 24.0%

EPS (Rs) 3.7 6.9 8.3 10.3

Source: Company, VCK Research

Valuation & Recommendation:

We believe that most of the near term positives are already factored in the stock price. However for a long term
perspective STL is a good buy on every dip going forward. Currently the stock is trading at a PEx of 12.41 & 10
discounting its FY11 & FY12 expected earnings respectively. We are upgrading our price target from Rs 92.6 to Rs
113 which is 11x FY12 earnings.

Disclaimer - The information in this report has been obtained from sources, which VCK Research believes to be reliable, but we
do not hold ourselves responsible for its completeness in accuracy. All estimates and opinions in this report constitute our
judgment as of this date and are subject to change without notice. VCK Research will not responsible for the consequence of
reliance upon our opinion or statement contained herein or for any omission.
Source: Company,VCK Research
VCK Share andShare
VCK Stock&Broking Services Limited
Stock Broking Kolkata
Services Limited Kolkata : (91) (033) Office - Ph:(033)
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Email: research@vckgroup.org