ICICI Direct has placed a buy call on Sterlite Technologies Ltd. (STL) with a target price of Rs 220 per share in its recent report published on 23 November 2022. With respect to the stock's stated target price, the firm estimates a possible upside up to 25% from its current level. STL is a leading telecommunication infrastructure player with offerings in optical fiber and cables, hyper-scale network design, and deployment and network software.
Stock Outlook & Returns
The STL stock last traded on NSE at Rs 177.20/share, falling 1.72% as compared to its previous close of Rs 180.30/share. Its 52 week high level is Rs 317.40 and the 52 week low level is Rs 128.60, respectively. It has a market cap of Rs 7,049.53 crore.
The stock in the past 1 week has moved up by 3.02%. In 1 month it moved up by 7.52%, and in 3 months, it moved up by 6.81%, respectively. In the past 1 year, the stock has given 36.17% positive returns on investments. Over the past 3 years, it gave a maximum 42.39% positive return. Whereas, in the past 5 years, it gave 33.5% negative returns.
Recovery was led by operating profits improvement after 3 quarters of losses. Revenue came in at Rs 1768 crore in Q2FY23, up 12.3% QoQ, led by 15% QoQ growth in optical (product) business at Rs 1313 crore. Services revenues at Rs 463 crore was up 11% QoQ, driven by India execution. EBITDA came in at Rs 173 crore, up 51.8% QoQ, with margins at 9.8%, up 255 bps QoQ, led by improvement in products margins at 20% vs. 14.2% in Q1. Services margin at 2.6% (down 550 bps QoQ) was depressed owing to UK business losses. PAT was at Rs 44 crore, vs. Rs 20 crore loss in Q1, led by superior EBITDA.
Buy for a target price of Rs 220/share
STL share price has grown by ~22% over last 5 years. STL is uniquely positioned to benefit from 5G/ FTTH deployment cycle both domestically and globally. "We believe that with renewed focus on ramping down/exiting loss making segment and focussing on improving services segment profitability, STL will likely see improvement earnings momentum ahead. Thus, we upgrade to BUY from HOLD earlier. We value STL at Rs 220 (Rs 295, earlier), at 18x FY24 P/E," the brokerage has said.
Key triggers for future price performance
Transition into solution provider from product/services currently. Demand offtake from expanded and overall fiber/cable pricing trajectory. Improvement in leverage which has gone up due to expansion and stretched working capital in services business.
The stock has been picked from the brokerage report of ICICI Direct. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.