This Monday I’ve got a long-term buy recommendation on Sterlite Industries India (SLT) traded on the NYSE as an ADR. Sterlite is an Indian industrial giant involved in the basic materials space, specifically copper, zinc, aluminum, lead production for India and the world. With China now becoming a larger importer of basic materials the prospects for Sterlite become potentially even better.
I suggest caution right now as I see a very possible broad market sell-off coming this week or in the coming weeks in stocks. This not only pertains to the India market, but also, USA and global. I may be completely wrong. In any event, I think paying close attention right now is the prudent thing to do.
India Stock Market Ups and Downs
India’s benchmark Bombay Stock Exchange Sensitive Index, or Sensex was sitting at 18,211.52 as of Friday February 18, 2011, and has been under selling pressure since November 05, 2010. Is the selling over with or will it continue? If it continues, next major supports for the Sensex are 17,000 and 16,000. I do see more selling pressure near term, but selective India stocks that are very oversold now are starting to look more attractive again. Back starting in May 2003 at about 3,000 the Sensex went on a supernova uptrend peaking out at 20,000 at the end of 2008. Will this long-term uptrend continue? I say yes it will, but when I won’t say. What I can say is chance favors the prepared mind, so buying in now on weakness for some long-term gains could be extremely profitable at this point with some of these Indian stocks.
International Monetary Fund India Forecast
The IMF forecasts India’s gross domestic product expansion will slow down to 8.4% for 2011, compared with 9.7% in 2010. That’s still a major wow factor with growth rates forecasts in the more developed countries at 3% or below. With India stock prices under pressure, now could be a good time to buy in to some large growth potential long-term. At least there seems to be less risk now with the lower prices than trying to buy the stock when the prices are flying high with strong momentum.
India’s Current Inflation Issues
India’s inflation pressures have caused the Indian Central Bank to raise interest rates last year, with food inflation still holding above 10% currently. The inflation issue is a cause for concern right now for Indian company’s forward earnings, and foreign investment fund inflows to help provide more liquidity.
Sensex Current Earnings Estimates Multiple
Companies on India’s Sensex are currently trading at about 17 times estimated earnings which is down from about 21 times a year ago. I suggest now might be a good time to buy into the current weakness into select India industrial and financial stocks for a possible recovery later in the year.
Sterlite India Basic Fundamental Valuation
Sterlite Industries 3rd quarter 2010 net revenue increased about 25%, and net income increased about 60% from the previous year. Sterlite is well positioned to capitalize on the strong forward global demand for basic materials. Sterlite is currently trading at about 8 times estimated 2011 earnings making it a very attractive buy candidate right now for the long-term.
Sterlite India Basic Technical Analysis
The 52 week high of 19, and low of 13 makes Sterlite a very compelling low-risk high-reward buy in many ways right now. Long-term this trade investment has the potential for multi-bagger returns. We shall see if Sterlite and India can keep their strong growth going forward. Just in case they don’t in the near-term implement stop-loss and re-analyze later on. If your a long-term investor, Sterlite could be a good holding for your portfolio.
Buy Long Sterlite Industries India – Ticker SLT
- Buy Entry: 13.26 to 14.21
- Stop-Loss: 12.18
- Take Profit Areas: 17.13 to 17.76, 18.20 to 18.71, 20.93 to 21.54, 26.26 to 26.95, 29.95 to 30.86
Sterlite Industries India Company Profile
Sterlite Industries (India) Limited operates as a non-ferrous metals and mining company in India and internationally. The company engages in mining, smelting, and processing of copper, and production of copper byproducts. It offers copper cathodes for use as starting material for copper rods, as well as used in making alloys like brass, bronze, and alloy steel with applications in defense and construction; copper continuous cast rods used primarily for power and communication cables, transformers, and magnet wires; sulphuric acid and phosphoric acid for fertilizer manufacturers and other industries; and other by-products of copper smelting operations, such as hydrofluoro silicic acid, ferro sand, gypsum, anode slimes, and DORE. The company also produces and sells zinc ingots to steel producers for galvanizing steel, as well as to alloy, dry cell battery, die casting, and chemical manufacturers; lead ingots primarily to battery and chemical manufacturers; and silver ingots primarily to industrial users of silver. In addition, Sterlite Industries produces primary aluminum in the form of ingots and wire rods that are used for aluminum castings and the fabrication in the construction and transportation industries, as well as in various electrical applications; rolled products, including coils and sheets for the aluminum foil manufacturing, printing, transportation, consumer durables, building and architecture, electrical and communications, packaging, and general engineering industries; and Vanadium sludge, a by-product of the alumina refining process and is primarily used in the manufacture of vanadium-based ferro alloys. Further, the company, through its subsidiaries, engages in the generation of wind power. It operates wind power plants with 123.2 MW generation capacity. The company was founded in 1975 and is based in Mumbai, India. Sterlite Industries (India) Limited is a subsidiary of Vedanta Resources plc.