GuruFocus -
- Consolidated Revenue: INR 1,261 crore for Q3 FY25.
- EBITDA: INR 133 crore with a margin of 10.5% for Q3 FY25.
- Profit After Tax: Loss of INR 23 crore for Q3 FY25.
- Optical Networking Revenue: INR 924 crore for Q3 FY25.
- Optical Networking EBITDA: INR 119 crore with a margin of 12.9% for Q3 FY25.
- Global Services Revenue: INR 289 crore for Q3 FY25.
- Global Services EBITDA: INR 20 crore with a margin of 6.8% for Q3 FY25.
- STL Digital Revenue: INR 77 crore for Q3 FY25.
- STL Digital EBITDA: INR 4 crore for Q3 FY25.
- Net Debt: INR 2,195 crore as of Q3 FY25.
- Order Book: INR 950 crore as of Q3 FY25.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sterlite Technologies (NS:STTE) Ltd (BOM:532374) reported a significant portion of its revenue, 22%, coming from data center and enterprise suite products, indicating strong growth in this segment.
- The company has achieved self-certification for its Build America Buy America compliant optical products, positioning it well for federally funded broadband infrastructure projects under the BEAD program.
- Sterlite Technologies Ltd (BOM:532374) has made substantial progress in sustainability, with initiatives like installing solar panels and achieving zero liquid discharge and zero waste to landfill certifications.
- The company has a robust order book and has secured significant projects, such as the 2,600 crore BharatNet Phase III project in Jammu Kashmir, which aligns with its commitment to nation-building.
- Sterlite Technologies Ltd (BOM:532374) has been focusing on cost optimization and has seen improvements in EBITDA margins across its business segments, indicating effective cost management strategies.
- The company reported a quarter-on-quarter revenue decline, attributed to lower optical fiber cable volumes and reduced revenue in the global services business.
- Despite narrowing losses, Sterlite Technologies Ltd (BOM:532374) still reported a profit after tax loss of INR23 crore for Q3 FY25.
- The global optical fiber cable demand has contracted, particularly due to reduced demand in China, impacting overall market conditions.
- There is a delay in the BEAD program's execution, with significant demand expected only from calendar year 2026, affecting short-term growth prospects.
- The company's working capital improvement in the services business has been slower than expected, impacting cash flow and financial flexibility.
A: Ankit Agarwal, Managing Director, explained that the global data center spend is expected to grow, especially with the shift from CPU to GPU-based systems, which require more fiber optics. Sterlite Technologies is focusing on building a comprehensive product portfolio to cater to this market. Currently, 22% of the quarter's revenue comes from data center and enterprise products, but specific breakdowns are not disclosed for competitive reasons.
Q: What is the outlook for the optical industry in CY25, and any updates on the BEAD program?
A: Ankit Agarwal noted that while there have been delays, states like Louisiana are expected to start BEAD-funded projects soon. The significant demand from BEAD is anticipated to begin in calendar year 2026, with some benefits expected in Sterlite's financial year Q3 and Q4. The company is well-positioned to meet these demands, especially in North America.
Q: How did Sterlite Technologies maintain margins in the optical and digital businesses despite lower revenues?
A: Tushar Shroff, Group CFO, highlighted that cost optimization efforts have been crucial in maintaining margins. In the digital business, new orders are being executed at better margins, contributing to profitability. The company is focused on sustaining these margins through ongoing cost control measures.
Q: Regarding the BEAD program in the US, will it be the sole driver for demand, or will there be additional demand from telcos?
A: Ankit Agarwal stated that demand will come from three sources: ongoing telco and ISP investments, BEAD program projects, and the shift to GPU-based data centers. This combination is expected to increase North American demand significantly, from 70-80 million fiber kilometers to over 120 million annually.
Q: What are the current capacity and utilization rates for Sterlite Technologies' optical fiber and cable production?
A: Ankit Agarwal mentioned that the company is operating at around 50% utilization. They have completed their capacity expansions, with over 50 million in glass and fiber and over 42 million in cable capacity. Utilization is expected to improve as market demand increases, particularly in North America and India.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.