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Sterlite Technologies shares rise most in six weeks after ratings upgrade

Shares of Sterlite Technologies Ltd. rose the most in over six weeks on Monday after India Ratings and Research Pvt. upgraded the ratings for its subsidiary.

The long-term issuer rating for Sterlite Tech Cables Solutions Ltd. was upgraded to ‘AA-‘ from an earlier ‘A’, while the short term was raised to ‘A1+’ from ‘A1’ earlier.

The agency raised its ratings on the back:

  • Robust financial and credit performance in FY23. The company reported a revenue of Rs 1,160 crore and an earnings before interest, tax, depreciation and amortisation of Rs 320 crore, implying a margin of 27.6%, up from 10% in FY22.
  • Strategically-located manufacturing facility. Its plant in Waluj, Aurangabad, Maharashtra, is located adjacent to an existing optical fiber manufacturing facility in the city. It operates 9-million fibre kilometres of OFC and is likely to yield logistics cost savings for the company.
  • Favourable industry dynamics, backed by an implementation of 5G across the globe, growth of fiberisation and enterprise solutions in Europe, the US and India, and a greater number of Open Radio Access Network projects in the overall industry’s pipeline.

Sterlite Tech’s global market share, excluding China, in the optical-fibre-cable segment improved to 12% in financial year 2023 from an earlier 9% in fiscal 2022 and 5% in FY20, the ratings agency said.

The company’s orderbook at the end of FY23 stood at Rs 11,100 crore, out of which Rs 3,900 crore is to be executed in the current fiscal, according to India Ratings.

Shares of Sterlite Technologies are trading 4.34% higher at Rs 152.55 apiece, compared to a 0.52% gain in the NSE Nifty 50 as of 11.09 am. The stock rose 5.81% intra-day, the most in over six weeks since May 17.

The average traded volume so far in the day stood at 11.4 times its monthly average, while the relative strength index was at 51.6.

All of the four analysts tracking the company maintain a ‘buy’ rating on the stock, according to Bloomberg data. The average 12-month consensus price target implies a potential upside of 32.8%. Bloomberg

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