Buy Sterlite Technologies, target Rs 450: ICICI Direct

ICICI Direct has a buy call on Sterlite Technologies Ltd. with a target price of Rs 450.0 . The current market price of Sterlite Technologies Ltd. is Rs 301.15 Time period given by the brokerage is a year when Sterlite Technologies Ltd. price can reach defined target. Sterlite Technologies Ltd., incorporated in the year 2000, is a midcap company with a market cap of Rs 12600.51 crore.

Investment rationale by ICICI Direct

We reiterate that demand funnel for Sterlite, both on Product (global 4G network expansion and 5G foray) and services (SI/NI opportunities from NFS/ Bharat Net etc), looks strong. We also highlight that new OF capacity expansion would bring in additional revenue opportunity of ~ Rs 1000 crore at the full capacity (from FY20 onwards) which would in turn be margin accretive. The ramp up in OFC capacity and services revenues from Navy order, current acquisition would further boost the growth trajectory. The recent acquisition also seems to be “steal deal” and is likely to boost the management overall vision of achieving ~US$ 100 mn PAT by FY20. Given the robust growth potential (topline and earnings CAGR of 35.4% and 34.1%, respectively, in FY18-20E), we maintain our BUY recommendation on the stock. We value the company at 30x FY20E P/E to arrive at target price of Rs 450.