Sterlite reported a strong 4Q operating performance, with EBIDTA at Rs8.4bn (up 48% q-o-q), significantly beating our estimate.
The positive surprise came from copper and zinc businesses, while aluminium slipped into losses.
In the near term, Sterlite’s earnings may remain under pressure, due to weak LME prices. In the medium term, however, expansion projects in power, zinc, lead and aluminium will add significant value.
The company’s production cost is expected to fall to $500/tonne for zinc and $900/tonne for aluminium, which will put it in lowest decile globally. Commissioning of the power plant will lend stability to reported earnings.
Commissioning of the bauxite mining project at Niyamgiri hills and allocation of coal linkages for the power plant are key triggers. We retain ADD.