Buy Sterlite Industries - Q4 FY 2011 Result Update - Motilal Oswal

STERLITE INDS 4QFY11: Above est.; Strong operating performance; Other income positively surprises; Buy

Sterlite Inds 4QFY11 adjusted PAT increased 36% YoY to Rs18.7b due to better than expected operating performance of all segments and higher other income.

Net Sales increased 21% QoQ to Rs100.6b largely due to growth in zinc business in India and consolidation of international zinc business.

International zinc business reported EBITDA of 4.4b, more than twice of our expectation due to correspondingly higher volumes.

Copper smelter too performed significantly better with EBITDA of Rs2.4b (+Rs1b QoQ).

Balco's segment EBIT too increased sharply by 64% QoQ to Rs1.95b. CoP declined marginally by US$14/ton QoQ to US$1781/ton.

We expect consolidated EPS to grow 46% in FY12 to 21.1 due to consolidation of zinc international business for full year, higher production of lead and silver from Indian zinc business, and significant ramp in power generation for SEL. Balco too is expected to post earnings growth on account of higher power generation from new captive power plant of 1200MW getting commissioned in phases. Stock trades at a FY10 PE of 8.8x and FY13 PE of 8x. We remain positive on the stock with a SOTP-based target price of Rs236/share. Maintain Buy

Source : Equity Bulls

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