Sterlite Technologies – 'Electrifying prospects' – BUY
CMP Rs100, Target Rs130, Upside 30%
Sterlite Technologies Ltd (STL), a major supplier of power conductors and optical fiber cables, is well poised to leverage strong demand traction in power and telecom sectors. With Government of India laying substantial impetus to its "Power for all by 2020" scheme, demand for transmission equipment such as power conductors is set to witness a quantum leap over the medium term. Demand for optical fiber cables is correlated to telephony and internet penetration in an economy. Both these factors are expected to improve considerably in India and other emerging countries.
STL is currently trading at 10.4x its FY12E EPS. Assuming full dilution of equity due to conversion of warrants in FY12E we expect an EPS of Rs9.3. STL's leadership status and demonstrated ability to leverage on industry growth drivers justifies a P/E of 14x based on which we arrive at a target price of Rs130.
http://content.indiainfoline.com/wc/research/researchreports/Sterlite_Technologies_230910.pdf
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