ICICI Securities Limited Sterlite Technologies (STEOPT)

ICICI Securities Limited
ICICIdirect.com | Equity Research
A negative surprise for the quarter came in the form of dismal power
segment margins, which came in as low as 2.9% vs. our double digit
expectations. The correction in the stock price over the last couple of
months has more than factored in the negatives given the guidance of
the management for FY12E. However, at the same time, we expect the
stock to languish in the near to medium term.
Though the stock looks reasonably priced after the recent correction (it
is trading at 8x and 6.5x its FY12E and FY13E EPS), we believe that in
the medium-term, the stock price will be under pressure owing to the
dismal Q3FY11 performance, volatility in earnings QoQ and highly
volatile market conditions. Hence, we are tempering down our
expectations and advising investors to switch/sell on rallies. We feel
that there are better opportunities available given the broader
correction in the markets particularly large caps and quality midcaps.
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