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Financial closure improves project visibility
Hindalco Industries (Hindalco) today announced the successful completion of
financial closure for its upcoming Mahan aluminium project with a capacity of
359 ktpa and associated power plant of 900 MW. The project cost is INR 105 bn
and, as per management, is likely to be completed by October 2011. However,
we are assuming delays and completion by March 2012.
Debt:equity of 3:1 higher than earlier expectation of 2.33:1
The company has successfully raised ~INR 78.8 bn rupee loan with a tenor of ~13
years from a consortium of banks with average interest cost of 11%. The balance
~INR 26.3 bn will be funded through internal accruals/existing cash of parent. The
D:E of 3:1 is significantly higher than earlier expectation of 2.33:1. Hindalco has
spent ~INR 23 bn as on September 2010 with expected spending in FY11, FY12,
and FY13 of INR 40 bn, INR 29 bn, and INR 5 bn, respectively (excluding financing
cost). The company has committed 90% of the total project cost.
Project execution gaining pace; coal block remains a concern
All project approvals obtained; execution gaining pace with 17,000 people at
project site. However, coal block is classified under “no-go” area which
management is confident of being favourably resolved. We have assumed no
captive coal in our estimates with 50% utilization in FY13.
Novelis: Price of rolled products in Europe hiked by USD 170/t
Novelis has announced price hikes of ~USD 170/t on all orders booked now or
shipped after July 2011 for it European customers. This is on account of
increased demand, cost push and constrained supply. In January 2011,
European aluminium shipments increased ~10% Y-o-Y and 5.5% M-o-M.
Outlook and valuations: A step in the right direction; maintain ‘BUY’
The Mahan aluminium project would increase aluminium capacity by ~60% by
FY12 end. In spite of no captive coal, captive bauxite, power and modern plant
would enable competitive cash cost. Aluminium prices are currently ~USD
2,600/t, higher than our FY12 estimate of USD 2,550/t thereby posing upside
risks to the same. We maintain our ‘BUY/Sector Outperformer’
recommendation/rating on the stock with a fair valuation of INR 291.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Financial closure improves project visibility
Hindalco Industries (Hindalco) today announced the successful completion of
financial closure for its upcoming Mahan aluminium project with a capacity of
359 ktpa and associated power plant of 900 MW. The project cost is INR 105 bn
and, as per management, is likely to be completed by October 2011. However,
we are assuming delays and completion by March 2012.
Debt:equity of 3:1 higher than earlier expectation of 2.33:1
The company has successfully raised ~INR 78.8 bn rupee loan with a tenor of ~13
years from a consortium of banks with average interest cost of 11%. The balance
~INR 26.3 bn will be funded through internal accruals/existing cash of parent. The
D:E of 3:1 is significantly higher than earlier expectation of 2.33:1. Hindalco has
spent ~INR 23 bn as on September 2010 with expected spending in FY11, FY12,
and FY13 of INR 40 bn, INR 29 bn, and INR 5 bn, respectively (excluding financing
cost). The company has committed 90% of the total project cost.
Project execution gaining pace; coal block remains a concern
All project approvals obtained; execution gaining pace with 17,000 people at
project site. However, coal block is classified under “no-go” area which
management is confident of being favourably resolved. We have assumed no
captive coal in our estimates with 50% utilization in FY13.
Novelis: Price of rolled products in Europe hiked by USD 170/t
Novelis has announced price hikes of ~USD 170/t on all orders booked now or
shipped after July 2011 for it European customers. This is on account of
increased demand, cost push and constrained supply. In January 2011,
European aluminium shipments increased ~10% Y-o-Y and 5.5% M-o-M.
Outlook and valuations: A step in the right direction; maintain ‘BUY’
The Mahan aluminium project would increase aluminium capacity by ~60% by
FY12 end. In spite of no captive coal, captive bauxite, power and modern plant
would enable competitive cash cost. Aluminium prices are currently ~USD
2,600/t, higher than our FY12 estimate of USD 2,550/t thereby posing upside
risks to the same. We maintain our ‘BUY/Sector Outperformer’
recommendation/rating on the stock with a fair valuation of INR 291.
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