Sterlite Technologies Ltd. share price target

Sterlite Technologies (STLs) 1QFY16 results were below estimates due to sluggish optic fiber cable (OFC) sales. This seems to be a one-off, which management is attributing to seasonal weakness in government orders.

The traction seen in Q3 FY15 results have strengthened further in Q4 FY15. This has been led by increasing operating leverage in products business and increased pace of completion in projects business. Board of Directors of the company has approved the demerger of Power Products & Solutions business and Power Transmission Business into another company called Sterlite Power Transmission Limited (SPTL). Our initial view is redemption of preference shares.

Sterlite Technologies (STLs) 4QFY15 results were in-line with estimates as the company?s telecom business continues to be driven by product-mix improvements. The key highlight was a corporate restructuring which demerges STL?s telecom and power businesses into two separate entities.

Sterlite Technologies (STL) is a leading manufacturer of optical fibre, optical fibre cables and power conductors. The company has also forayed into power transmission asset ownership through its subsidiary Sterlite Grid (Grid).

Karvy maintains a BUY on Sterlite Technologies on the back of improving traction in products business (optic fibre & cable and power conductors) and commissioning of capital intensive Transmission Projects.

Karvy initiates coverage of Sterlite Technologies with a Buy Rating. Sterlite Technologies is a leading player in Telecom (Optic Fibre and Cables) and Power Conductors with domestic market share of 35% and 25% respectively. It also has a portfolio of 6 Power Transmission projects on build, own, operate and maintain (BOOM) basis.