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Analyst Research Report Snapshot


Sterlite Inds. (STLT) - Qtr. Update - Dtd. - January 29, 2013




Axis Capital Limited


30 Jan 2013





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Sterlite’s Q3 EBITDA at Rs 23.3 bn (flat YoY and down 8% QoQ) was marginally below our expectation of Rs 24.7 bn due to lower by-product realizations in copper business and lower power volumes. Copper EBITDA declined 35% QoQ to Rs 2.3 bn due to lower sulphuric acid and phosphoric acid realizations. The company expects realizations to remain low in Q4 led by poor demand. Power EBITDA declined 50% QoQ to Rs 1.5 bn due to evacuation limitations during the quarter at Sterlite Energy (volumes down 19% QoQ). The evacuation capacity has improved in January and the company expects the power plants to run at PLF of 50% in Q4 from 31% in Q3. Increase in funding to Vedanta Aluminium: Sterlite’s funding to VAL has increased by Rs 10 bn QoQ to Rs 117bn. Correspondingly, Vedanta’s funding has reduced by Rs 14bn QoQ to Rs 22bn. Valuations  Sesa Sterlite: We raise our FY13 EPS estimate to Rs 34 (vs Rs 31 earlier) led by revision in earnings estimates for Cairn by our Oil & gas team. For FY14, we lower our EPS estimate to Rs 36 (Rs 40 earlier) as higher estimates for Cairn has been more than offset by lower iron ore volume assumptions for Sesa Goa due to delay in restart of operations. (5 mnt vs 13 mnt earlier). We roll forward our valuation to FY15 with revised SOTP based target price of Rs 199 (Rs 189 earlier), 9% upside from CMP of Rs 183. Maintain HOLD.  Sterlite: TP for Sterlite is Rs 120 (in the ratio of 0.6 to fair value of Sesa Sterlite), upside of 6% from CMP of Rs 113. Maintain HOLD.  Hindustan Zinc: We roll forward our valuation to FY15 valuation, maintain HOLD with a target price of Rs 136 (4x FY15 EV/EBITDA), 7% upside from CMP of Rs 127. Regards, Jagdishwar Toppo (Executive Director – Materials) Institutional Equity Research Axis Capital Ltd. Tel: +91 22 4325 1103 Nitesh Jain Senior VP – Materials Institutional Equity Research Axis Capital Ltd. Direct: +91 22 4325 1145 Sujan Sanisetty AVP – Materials Institutional Equity Research Axis Capital Ltd. Direct: +91 22 4325 1122

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