INSUBCONTINENT EXCLUSIVE:
Authors: JordanSterlite Technologies, which deals in fibre optic cables, has several tailwinds going for it: government initiatives such as
Digital India and Smart Cities, expectation of exponential data growth and 5G deployment the world over.
It boasts of an all-time high order
book, which also ensures strong revenue visibility and has a strategic plan in place to achieve $100 million net income by FY20.
The
2013.
Analysts project Sterlite to ride strong global demand for optical fibre cable, as the telecom players build on their 4G networks
Brokerage ICICIdirect.com believes other growth catalysts such as 5G, internet of things (IoT) and domestic government-led initiatives such
as Digital India, Bharat Net (Phase II) should ensure strong growth visibility in the medium to long term.
The company estimates fibre
demand for 5G at 2.5-5 times compared with that for 4G from CY20 onwards
It augurs well for an integrated player like Sterlite
for Sterlite, both on product (global 4G network expansion and 5G foray) and services, looks strong
Optical fibre capacity expansion announcement would bring in additional revenue opportunity worth Rs 1,000 crore at full capacity (from FY20
Revenue contribution of European and Chinese markets stood at 27 per cent and 13 per cent in FY18 compared with 11 per cent and 19 per cent,
The company kicked off FY19 with an all-time high order book of Rs 5,223 crore, up 73 per cent year-on-year
Sterlite posted a record quarterly profit of Rs 112 crore for March quarter of FY18 over Rs 64 crore in the year-ago quarter.
It has
Its patent count has been growing, and reached 189 as of FY18, which give it a strategic competitive advantage for market access and higher
cent in FY18 from 23 per cent and 20 per cent in FY17 and FY16, respectively
The debt-to-equity ratio has improved to 0.7 times last financial year from 1 time and 1.3 times in FY17 and FY16, respectively
Return on capital employed (RoCE) grew significantly to 30 per cent in FY18 from 21 per cent and 20 per cent in FY17 and FY16,
clout.
Emkay Global Financial Services says the company has lined up Rs 1,060 crore capital expenditure for next two years
This capex will be funded through a mix of internal cash flows and new debt.
The brokerage expects net debt to sustain at 0.8 times by FY20
Edelweiss Securities is also positive on it with a target price of Rs 425
opportunities from network for spectrum (NFS) Bharat Net (phase II) (expected to witness bidding in traction in FY19) and Smart Cities are
likely to drive revenue visibility in the services and solutions businesses
economy, alternate connectivity technology and a dip in telecom capex are some of the key risks for the stock.
Forex sensitivity to earnings
owing to increasing dependence on exports is yet another key risk for the company.
