Motilal Oswal puts 'buy' on Sterlite; target Rs 1,134
Motilal Oswal has revised the target price of Sterlite Industries to Rs 1,134 and reiterated ‘buy’ on the stock.
By ET Online |
MUMBAI: Motilal Oswal has revised the target price of Sterlite Industries to Rs 1,134 and reiterated ���buy��� on the stock. The company has signed a definitive agreement to acquire ASARCO for $2.6 billion on debt free and cash free basis. Also, Sterlite will assume operating liabilities but not legacy liabilities for asbestos and environmental claims ($11.4 billion) for ceased operations. The acquisition will be financed by existing surplus cash ($2 billion) and debt.
Cash cost of refined metal is $1.5/lb, which includes USc10/lb towards legal cost in 2007. Therefore, the cash cost are likely to fall to $1.4/lb post acquisition. The costs may fall further due to ramp up of production on account of investment in modernization of equipments, says Motilal.
Motilal has assumed that copper mine production will rise from 180,000 tonne per annum presently to 210,000tpa and tolling of Copper concentrate will increase from 50,000tpa to 70,000tpa in 2009-10. At copper prices of $7,000 per tonne average for 2009-10, the brokerage estimates EBITDA of $869 million and profit after tax of $522 million. This translates into an EPS of Rs 30, while loss of interest income on $1.3 billion at 10 per cent rate will be equivalent to EPS of Rs 5 thereby implying an EPS accretion of Rs 25 in 2009-10.
Sterlite is now diversified play on three base metal prices coupled with aggressive volume growth. Sterlite Energy projects too are running ahead of schedule, which is well positioned to capitalize on energy demand & supply mismatch in India.
On BSE the stock is trading down 3.73 per cent at Rs 197.30.
Cash cost of refined metal is $1.5/lb, which includes USc10/lb towards legal cost in 2007. Therefore, the cash cost are likely to fall to $1.4/lb post acquisition. The costs may fall further due to ramp up of production on account of investment in modernization of equipments, says Motilal.
Motilal has assumed that copper mine production will rise from 180,000 tonne per annum presently to 210,000tpa and tolling of Copper concentrate will increase from 50,000tpa to 70,000tpa in 2009-10. At copper prices of $7,000 per tonne average for 2009-10, the brokerage estimates EBITDA of $869 million and profit after tax of $522 million. This translates into an EPS of Rs 30, while loss of interest income on $1.3 billion at 10 per cent rate will be equivalent to EPS of Rs 5 thereby implying an EPS accretion of Rs 25 in 2009-10.
Sterlite is now diversified play on three base metal prices coupled with aggressive volume growth. Sterlite Energy projects too are running ahead of schedule, which is well positioned to capitalize on energy demand & supply mismatch in India.
On BSE the stock is trading down 3.73 per cent at Rs 197.30.
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