Sterlite Industries Limited (SIL) is undergoing a major expansion programme by increasing its rich non-ferrous based asset portfolio, both organically and inorganically.
The company is also increasing its fully backward integrated zinc capacity (reserves to meet ~19 years requirement) to 1.06mtpa, an increase of 41% to the current capacity by June 2010.
In aluminium, SIL 29.5%-owned subsidiary Vedanta Alumina is doubling its alumina capacity to 1.4mtpa and is building a 0.5mtpa aluminium smelter. SIL has one of the lowest quartile for production cost in each of its businesses.
It has already increased its zinc capacity by 3 times (to 670ktpa) and aluminium capacity by 2.4 times (345ktpa) since it took over Hindustan zinc and Balco. It has also doubled its copper smelting capacity to 400ktpa over the last five years.
Sterlite also plans to add 9.6GW of power generation capacity over FY08-12 through its fully-owned subsidiary Sterlite Energy Ltd (SEL). We recommend BUY with a price target of Rs760.