Edelweiss is bullish on Sterlite Technologies has recommended buy rating on the stock with a target price of Rs 425 in its research report dated April 26, 2018.
Edelweiss' research report on Sterlite Technologies
Sterlite Technologies (Sterlite) reported strong Q4FY18 numbers with 19.7% YoY revenue spurt (Street estimate 22.6%) and 190bps EBITDA margin expansion to 26.0% (Street estimate 22.9%). This led to PAT jumping 76.6% to INR1.2bn. Key highlights: 1) EBITDA margin surge was led by higher contribution from product business; 2) the company is evaluating OFC capacity expansion as utilisation has jumped to ~90% from 70% QoQ, while OF capacity utilisation remains ~100%; 3) order book at highest level ever—INR52.3bn, up ~71% YoY—excluding INR35bn naval order, which is in final stages of approval.
Outlook
We believe, capacity expansion will equip Sterlite to cater to the burgeoning demand for fibre optic cables. Moreover, its superior cost structure led by integrated operations will sustain high return ratios (32.9% RoCE in FY20E). We expect premium valuations (22.5x FY20E EPS) to sustain on strong earnings growth (45.8% CAGR over FY17-20E) and high return ratios. We maintain ‘BUY/SO’ with INR425 target price.For all recommendations report, click here
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