Sterlite Tech soars 9% on entering into strategic partnership with Lumos

Sharea of Sterlite Technologies zoomed 9.2 per cent to Rs 147 per share on the BSE in WEdnesday's intraday trade after the company entered into a strategic partnership with Lumos for its fiber optic internet programme in the mid-Atlantic region.

At 1:00 PM, the stock of the optical and digital solutions company was trading 8 per cent higher at Rs 145.3 per share. By comparison, the benchmark index was up 0.13 per cent in a volatile session.

In an exchange filing, Sterlite Technologies said that it has been strategically engaged in co-creating fiber and optical connectivity solutions suited for Lumos’ mega ambition to build transformative 100 per cent fiber optic internet in the mid-Atlantic region.

Lumos' rapidly growing network across North Carolina, South Carolina, and Virginia, it said, provides 100 per cent fiber-optic internet, whole-home Wi-Fi, voice, and streaming services to more than 275,000 homes and businesses and plans to reach over one million passings.

"STL will support Lumos in a significant part of this critical rollout. In this long-term engagement, STL will offer advanced, purpose-engineered optical fiber cable designs to meet Lumos' network requirements. STL has end-to-end optical capabilities and will also supply its signature Opto-bolt product, a pre-connectorised drop cable designed to significantly reduce installation time by de-skilling field installation while bringing modularity into the network design," it said in a statement.

STL is a leading global optical and digital solutions company providing advanced offerings to build 5G, Rural, FTTx, Enterprise, and Data Centre networks.

In the October-December quarter, Sterlite Technologies reported a consolidated net loss of Rs 57 crore, hit by the ongoing optical demand headwinds, especially in the US and parts of Europe.

The company had posted a net profit of Rs 51 crore in the year-ago period.

Revenue from operations was Rs 1,322 crore in Q3FY24 as against revenue of Rs 1,883 crore in the year-ago period. Ebitda declined sequentially to Rs 109 crore from Rs 216 crore.

There was sequential decrease in Ebitda margin (down 745 bps Q-o-Q) led by higher inventory. Order book was down 6.3 per cent Y-o-Y to Rs 9,850 crore.

"SOTL is expected to benefit from multi‐year digital creation cycle led by 5G, FTTx, and fibre demand from hyperscalars. Also, optical cable prices are broadly steady globally and provides revenue visibility. It has been gaining market share in global OFC market. However, we expect that revenue from the US market would continue to be muted over next 2-3 quarter and that would have an impact on overall revenue for FY24," analysts at YES Securities said in a post-result update.

The brokerage expects Ebitda margin to improve going ahead led by continued focus on cost optimisation and easing off certain cost pressure related to raw material. The moderation in capex intensity, ti added, will help to keep debt under control. 

"We estimate revenue CAGR of 12.3 per cent over FY23‐26E with average Ebitda margin of 14.8 per cent," it said. While the brokerage has a 'Neutral' rating on the stock, the stock's current market price is near the brokerage's target price of Rs 144.