Sterlite Technologies Limited · NSE:STLTECH
Sterlite Technologies — Q1 FY23 Earnings Presentation
33 slides from Sterlite Technologies's earnings presentation, Jul 25, 2022
Slide 1: Earnings Presentation Q1 FY23
stl.tech Earnings Presentation Earnings Call Q1 FY23 25th July 2022
Slide 2: Safe Harbour
Safe Harbour Certain words and statements in this communication concerning Sterlite Technologies Limited (“the Company”) and its prospects, and other statements relating to the Company’s expected financial position, business strategy, the future development of the Company’s operations and the genera
Slide 3: Industry Updates
Industry Updates 1 2 3 4 Industry Future STL Q&A updates growth levers financials session © 2022-2023 Sterlite Technologies Limited 3
Slide 4: The digital infrastructure industry is growing at a rapid pace
The digital infrastructure industry is growing at a rapid pace 01 02 03 Massive Tech Optical demand investments in becoming on a growth network build mainstream trajectory Network creators investing 5G, FTTx technologies and Sustainable demand for heavily in digital edge datacentres growing Optical
Slide 5: Strong Tailwinds of Massive Investment Cycle
01 Strong Tailwinds of Massive Investment Cycle Network creators and Governments plan to invest heavily in digital infrastructure ENHANCED SPENDING & DEPLOYMENT BY NETWORK CREATORS USA Europe India Data Centers • Openreach plans to reach 25 Mn. homes AT&T Capex set to US to pass 9M by 2026 • Bharti
Slide 6: Tech becoming Mainstream
02 Tech becoming Mainstream Investments powering 5G, FTTH and Datacentre deployments Datacentres 5G becoming the FTTx growing Increasing CAPEX fastest growing massively in by data centers technology Europe, US, India • 5G Investments : • $125 Bn. earmarked for • Data center CAPEX to expected to be $
Slide 7: Leading to sustainable growth in global OFC volumes
03 Leading to sustainable growth in global OFC volumes OFC Demand region wise ( Mn Fkm) 7% 610 581 -4% 541 512 116 502 105 478 469 92 Region CAGR 2021-24 65 68 82 79 73 75 59 69 27 North America 12% 30 66 66 24 58 20 52 42 21 17 48 50 Europe 6% 17 45 38 43 42 53 56 45 49 41 42 India 16% APAC (Ex. Ch
Slide 8: OFC prices have rebounded since 2020
03 OFC prices have rebounded since 2020 All values in US$ per FKM -40% -29% -27% 22.7 +28% 21.9 +13% 20.6 +16% Growth 18.9 18.9 18.3 Region 18.5 18.5 18.0 17.4 2020-24 17.1 17.8 17.5 17.3 17.7 17.5 17.0 15.1 15.5 North America 16% 14.8 13.6 Western Europe 28% APAC (Ex. China) 13% North America Weste
Slide 9: Resulting in sustainable growth in overall market size of optical fibre cables
03 Resulting in sustainable growth in overall market size of optical fibre cables Global OFC Demand ( $ Bn.) +10% 12.1 11.6 10.4 10.7 9.2 8.1 Global OFC Demand ( CAGR 2021-24 : 10%) 2019 2020 2021 2022(P) 2023(P) 2024(P) © 2022-2023 Sterlite Technologies Limited All years correspond to Calendar Year
Slide 10: Chinese market is stable in medium term
03 Chinese market is stable in medium term Demand Supply • China Carriers combined loose tube tender volumes in • As per CRU, most major fibre and cable suppliers are running at 2021-22 reached 235 mn.fkm, which is 17% increase than high utilizations for operational capacity in both fibre and cables
Slide 11: We are in a decade long investment cycle
We are in a decade long investment cycle Multi-year network build cycle 1 2 3 FTTx 5G Increase in FTTx penetration & Hyperscalers Increased demand of fibre due to network modernisation by Increased demand of fibre due to cell densification governments leading to increase capex increase, particularly
Slide 12: Future Growth Levers
Future Growth Levers 1 2 3 4 Industry Future STL Q&A updates growth levers financials session 12
Slide 13: Two Focussed Growth Levers
Two Focussed Growth Levers 1 2 Scale Globalise Optical Business Services Business • Scale global OFC market share • Focus on strategic segments in India • Increase market share in the US • Globalise services with UK as the base by leveraging existing capability & • Increase OI attach rate customer r
Slide 14: Increase Global OFC Market Share in all focus markets
1 Grow Optical Business Increase Global OFC Market Share in all focus markets Global ex-China OFC Europe OFC Market North America Market share share OFC Market share 11% 21% 14% 19% 9% 17% 8% 5% 11% 6% 1% 0% FY20 FY21 FY22 Q1 FY23 FY20 FY21 FY22 Q1 FY23 FY20 FY21 FY22 Q1 FY23 Gaining market share in
Slide 15: Established foothold in the US
1 Grow Optical Business Established foothold in the US Partnering top tier telcos FY20 Entry in US Market FY21-22 Added new Customers FY23 onwards 2020 & 45 customers till Q1 FY23 Local manufacturing Secured Optical Fibre Cable multi - million dollar, Facility, USA multi - year contract with North A
Slide 16: Increase Optical interconnect attach rate
1 Grow Optical Business Increase Optical interconnect attach rate % Optical Interconnect attach rate Optical Interconnect Product Portfolio Opto - Connector 100% Ruggedized System Multi-port terminal 11% 11% Theoretical attach rate % Opto- Bolt Enclosures Terminal 3% FY21 FY22 Q1 FY23 Focus on growi
Slide 17: Globalise Services Business
2 Globalise Services Business SCALE GLOBAL MARKETS CORE INDIA MARKET • Integrated Clearcomm to complement • Expand opportunity pipeline arising from 5G network deployment capability and expand deployment. Increase wallet share of Telco UK market access CAPEX spend • Robust global resourcing model (t
Slide 18: Providing end to end solution to Netomnia
2 Globalise Services Business Providing end to end solution to Netomnia + + + Backward Compatible Bend World’s slimmest 432 F Drop Cable & Opto-bolt Terminal FTTH Insensitive Fibre Next Gen Micro cable Optical Interconnect Kits Network Design & Deployment 2x faster deployment 35% cost saving 10x sca
Slide 19: Consistent investment in R&D
Consistent investment in R&D R&D Spent ( Rs. Cr.) 241 120 123 7421 Patents As on end of Q1 FY23 FY20 FY21 FY22 R&D spent at Rs. 53 Cr. in Q1 FY23 © 2022-2023 Sterlite Technologies Limited 1 – Includes granted and applied for patents 19
Slide 20: Developing next gen world class products for the last mile access solutions
Developing next gen world class products for the last mile access solutions STL at R&D driven Traction with global MWC 2022 Products Customers Telcos & SHOWCASED Radio Hardware pFTTx RIC Alternative Network Private Enterprises 5G Solutions Providers 8* 5#+ Product SKU’s / versions launched Orders, P
Slide 21: Focus on strategic growth opportunities through a prudent capital allocation framework
Focus on strategic growth opportunities through a prudent capital allocation framework Cash flow in Investments in optical Cash flow from operations OFC capacity expansion 1 Total Funds China JV stake buy out to secure OF supply available Cash flow from sale of non core Investments Continue to sell
Slide 22: STL Financials
STL Financials 1 2 3 4 Industry Future STL Q&A updates growth levers financials session
Slide 23: Our order book is stable
Our order book is stable Open Order Book (Rs. Cr.) Order Book Spread (Rs. Cr.) 11,639 11,207 7,022 4,185 Q4FY22 Q1FY23 9M FY23 FY24 and Beyond Open Order Book Customer wise Open Order Book BU wise Open Order Book Capex vs Opex Rest Enterprises 5% O&M 15% 23% 45% Optical Citizen networks 22% 63% 50%
Slide 24: Revenue mix is moving to segments and geographies of choice
Revenue mix is moving to segments and geographies of choice Customer Segments Geographical Distribution Key Order Wins Revenues (Rs. Cr.) Revenues (Rs. Cr.) Q1 FY23 5,154 4,825 5,754 1,575 5,154 4,825 5,754 1,575 5% 3% 11% 8% 10% 10% • Multi million dollar, multi year contract 11% 7% with a North Am
Slide 25: Project Execution is on track
Project Execution is on track India - Public India - Private Global, UK Transformative Gigabit Networks Modern Optical Network Rural digital inclusion Bharatnet Project in Fibre roll out Telangana 54% (Large Indian telco) Completed Phase - 1 100% Completed Phase - 2 5% Completed Phase - 3 0% Complet
Slide 26: Q1 FY23 saw inflation headwinds continue in major raw materials
Q1 FY23 saw inflation headwinds continue in major raw materials, However logistics cost has started to ease; Crude Oil Natural Gas Freightos Index USD per container 120 110 300 110 255 China/ East Asia to North American East coast 100 97 250 221 222 25000 90 78 80 72 200 20000 67 70 60 150 140 15000
Slide 27: Revenue grows 20% y-o-y in Q1 FY23; Operating margins improve QoQ
Revenue grows 20 % y-o-y in Q1 FY23; Operating margins improve QoQ Revenue X% Denotes EBITDA % EBITDA 1,309 Q1 FY22 238 18.1% Growth Drivers < 20% YoY> • OFC volume growth 1,582 +20% Q4 FY22 • Realization increase due to mix change 96 6.0% • Increase in UK services revenue 1,575 Margin improvement d
Slide 28: Consolidated Financials: Abridged Version
Consolidated Financials: Abridged Version P&L (Rs. Cr.) FY20 FY21 FY22 Q1 FY23 Balance Sheet (Rs. Cr.) FY20 FY21 FY22 Revenue 5,154 4,825 5,754 1,575 Net Worth 2,023 2,085 2,042 (including minority interest) EBITDA 1,104 854 594 119 EBITDA % 21% 18% 10% 8% Net Debt2 1,970 2,410 2,782 Depreciation 29
Slide 29: Environmentally, Socially, Governed
Driven by our purpose to transform lives Committed to Net-Zero Emissions by 2030 ENVIRONMENTALLY SSOCIALLY OCIALLY GOVERNED SUSTAINABLE RESPONSIBLE WITH CARE Zero Waste to Landfill Certified1 Committed to the UN SDGs2 Strong Internal Governance 175,000+ MT 15 Aligned with 15 of the 17 SDGs Two of th
Slide 30: Summary
Summary Strong demand and pricing outlook for Optical Fibre Cable : Multi-year network build cycle in full swing. The global OFC volume & pricing expected to grow in 2022 Aiming for global leadership in Optical Business: Look to achieve strong market share gains in North America and Europe, increase
Slide 31: Lets answer your questions
Lets answer your questions 1 2 3 4 Industry Future STL Q&A updates growth levers financials session © 2022-2023 Sterlite Technologies Limited
Slide 32: beyond tomorrow
beyond tomorrow © 2019-2020 Sterlite Technologies Limited 32
Slide 33: Annexure: Key Business risks
Annexure : Key Business risks S.No. Risk Risk Definition Comment Uncertainty in economic (Inflation, increase in interest rate, etc), political 1 Geo Political & Economic Risk Focus on cash generation conditions may lead to adverse effects. Focus on selling end to end optical solutions, 2 Customer &
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