IIFL Institutional Equities, a part of theIIFL Group, one of the leading players in the Indian financial services space, recommends “Reduce’’ Sterlite Industries
According to IIFL report, Sterlite’s underlying Ebitda at Rs 27bn was a tad ahead of our estimates. The aluminium and power businesses recorded marginal sequential improvement in production cost on improved coal supply and operational efficiency.
However, medium-term issues of alumina and coal availability are far from being resolved, leading to elevated production cost and sub-optimal asset utilisation.
In the near term, the zinc business would suffer due to an expected drop in production at Hindustan Zinc (HZL) as well as Zinc International. HZL’s costs are set to increase as it starts underground production. The ongoing Group restructuring would translate into a simpler holding structure. But challenges remain with respect to the aluminium business and fungibility of cash flow. REDUCE, brokerage added.
The report was published by IIFL’s Institutional Equities Research desk.