Sterlite Technologies | Digital India play

(Abhishek Basumallick) #129

It is helpful to be much more conservative in judging the quality of businesses, valuations or managements, especially for companies which have a history of poor corporate governance.

Last few years we are in a bull market, which has a tendency of raising the PE for all stocks irrespective of quality. As and when a bear market comes, PE can contract drastically.

(Balusu Aditya) #133

Guys, can we stop with the cat fight? @maverickroger: This paragraph above from your post is not substantiated with numbers or evidence. It feels a bit speculative. Will you be able to provide more information as to why you think the Metallurgica acquisiton is brilliant and on what basis are you feeling very confident that the 100m USD profit will be reached by March 2019? Hope you understand that opinions must always be valued but are of no intrinsic value if not backed by data.

(ramanhp) #134

Further Sterlite Technologies believes this acquisition will help expedite its strategic plan of achieving $100 million net profit by fiscal 2020.

(learning) #135

I think for me I would be cautious to assume such high growth, my reasons

  1. Essentially its a demand and supply thing if someone decides to invest in capacity addition of fiber cable, then the equation may change quickly within a year or two
  2. Although the opportunity size do look big, assuming for a moment Indian context, which contributed 50% of revenue share, I dont see it a easy thing for any of the existing player to invest in fiber cable for 5G, reasons being from availability of capital to right of way. Remember telcos also have to invest in acquiring specturme. Also In one of the reports it was mentioned that FTTH might cost 100$ in india. So although opportunity size is huge it may not materialize any time soon.
  3. Delay in commercialisation of 5G.

So i would be cautious in expecting such linear growth.

Disc: invested.

(learning) #136

Are there any direct corp gov issue with Sterlite tech per se? I could not find since its demerger. What happened in the demerger is a separate deal altogether and speaks about the promoter corp standard.

But would the same promoter group try to kill the golden goose at current stage? What are the chance in current context?

Given that the management execution for ST has been very good.

(rvetri) #137

It would not be appropriate to equate Ster Techs growth to only 5G. Without demand from 5G, Ster Tech is growing revenues at 20% and profits at a much higher rate due to Op leverage. The near term demand shall come from fiberisation of the existing and new towers. Currently , it is 20% and it has to go to atleast 60% in next 3 yrs. That in itself will be a big demand driver.

5G, iOT, autonomous driving, FTTH etc etc - are all going to multiply the demand several folds. And it will be very difficult for supply to catch up to demand once these usecases come in…And its export demand for 5G will start from H1 FY20

(insanemaverick) #138

Sure Sir. I appreciate the way you have articulated your query. Will get back to you with the detailed calculations shortly but these are not my figures. These are publicly stated figured by the CFO of the company. I will try to find the video and post it shortly here. Also, largely it’s very simple calculation. Sterlite organically would have done around Rs. 550 crores in FY19, considering the capacity coming on stream and the current realisations. The rest will be contributed by this accquisition. I am not even accounting for the new accounts that Sterlite may crack in Europe this year through this entity. Let’s not forget, the acquisition is earning accretive from Day 1.

(Abhishek Basumallick) #139

Multiple issues in the past which should make investors cautious. Does not mean Sterlite is a poor business or does not have a tailwind at this time. The business has a good chance of doing well in the near future with the focus on optical fibre now.

The following links are from a few years back.

(learning) #140

yes i have read about promoter corporate governance standard. I understand its a risk that i have decided to partner with a chequered promoter. But the near term opportunity and tailwind is very strong also to ignore the company.Lets see might turn out to be a obvious risk in the hindsight.

(nil_71) #141

As I see the multiple argument and counter-arguments, we need to understand, Vedanta as a group was never considered for its Corp governance. It is same as another metal giant based in India. But people still buy their stocks and that cos is doing acquisition after acquisition

So what demands is You keep a Margin of Safety while investing

(Abhishek Basumallick) #142

@learning As long as you are aware and are taking a conscious decision and weighed the pros and cons, its absolutely fine.

(phreak) #143

Paying high P/E for commodity type business could be very dangerous near peak earnings. While I believe earnings might grow in current year, the same is not certain in the next year and the year after that, 5G or otherwise, due to increase in capacities coming online next year (listen to concalls from the past).

A good example of P/E deflation in commodity type business is Avanti Feeds which has posted 56% profit growth CAGR in the last 3 years, doubled its profits last FY and is yet trading at 13 P/E (Was trading near 40 P/E in Oct last year). So earnings continued to improve but market started getting cautious well ahead of the peak.

Current 32 P/E is not cheap for this kind of business (For Str Tech) and is factoring in phenomenal growth in current year already. Talking of 1 lakh Cr market cap for this type of business based on current trends (7x market cap) is a little premature am afraid.

Disc: This was a long-term holding last 2 years. Exited few months back, based on the above rationale.

(vikas sinha) #144

Fiber has the TINA factor. Nothing comes close to the bandwidth, coax, traditional cable comes a distant second. Sterlite has presence in all top markets, with all top players.
JioFiber can be a game changer just like Jio 4G. Globally it is accepted to bundle offerings, TV+Internet+Calling (sometimes including mobile). If JioFiber can replace your TV Dish/Cable, your Broadband Internet and perhaps more, then it can create tremendous demand. Just like Jio and Jamnagar, Reliance will perhaps jump start the game and leap frog India to to much beyond World’s first Exabyte network. They have been rolling out fiber across India for more than a decade now.
It is not easy to get fiber in Europe, they are fully wired with copper (coax, ADSL). Somehow we skipped copper and went wireless, quite efficiently :stuck_out_tongue_winking_eye:. 1100 cities will perhaps get free(?) fiber for a year, if they follow the Jio model for roll-out.
Was fortunate enough to be connected to a 2 Gbps, unlimited FTTH (some 10 years ago). Real download speeds of 200Mbps+, 10 seconds to (legal :wink:) download FullHD movie. People are watching more content Online and traditional media is following that. As Whatsapp says, Indians forward the maximum media content :blush:
Devices are programmed to suck data, Youtube will stream in 4K if it detects your net is fast enough. Google will download Maps data in realtime, where as Nokia in the days long ago always kept cached map data. Perhaps a reason for cheap android? You pay in installments, with carrier data charges. I have thousands of mp3 tracks, and FM radio, but I still use Spotify.

(learning) #145

how is it relevant in ST’s context - that is more important. All these thing require significant capex. Wont be as rosy as it sounds,imho.

(vikas sinha) #146

Money is just a number, for some people! Jio is already reporting increasing profits, for past 2 Quarters! Why would they not scale further?
Think along the lines of Google, Amazon etc. Why does everybody get free email (with 15 Gb of storage), free Wifi at railway stations and High quality Photo free unlimited storage.
If that were Sarkari, it would be impossible, because the file would be marked with the notation - “significant Capex”.

(rvetri) #147

The best thing about ster tech is the humility and the conservative guidance of the CEO Dr Anand Agarwal…

  • about 18 - 24 months back, in concalls of prev Q results, he will guide a profit growth of 20 - 25%…but in that Q as he was speaking it was growing at 35 % plus

  • about 9 - 12 months back in concalls he used to guide 35% plus, while in that Q it was growing at 45% plus…

  • from now till about 9 months back, he was guiding profits tripling in 3 yrs (nearly 40% cage), but he actually ended up 70% plus profit growth.

  • in latest concall - he says for first time - “data is the latest consumption item for people in the world”. Just put his conservative back drop to this statement and work out yourself - how big is the opportunity

And goes on to say - supply is coming up but demand is growing equally faster… And we are just in the doorstep of real demand guzzling apps like autonomous driving, iOT, multi-player mobile gaming, 5G… God knows whether supply can ever catch up with demand for next 3 yrs at least… :thinking:

(Vivek) #148

(Balusu Aditya) #149

(rvetri) #153

Ster Tech CEO interview with BQ

(Tarak) #154

Sterlite Technologies is showing good traction by Mutual Funds.