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Hindalco reported its standalone 4Q and FY11 results. EBITDA was at Rs9.14bn (+9% yoy and
+24% qoq) in-line with our estimate. Annual Tc/Rc contracts have been set at 20% higher for
CY11, which should aid Hindalco's FY12F earnings. Maintain Buy with target price of Rs315.
4QFY11 EBITDA in-line with expectations
Aluminium production was 138.7kt (+1% yoy and +2% qoq) while copper cathode production
rebounded to 84.9kt (+14% yoy and +6% qoq) after the shutdown of the Dahej cooling tower
in 3QFY11. Net revenues were at Rs68.4bn (+27% yoy and +15% qoq). EBITDA was at
Rs9.1bn (+9% yoy and +24% qoq) in-line with our estimate. While aluminium EBIT was
Rs5.6bn (-8% yoy and +21% qoq), copper EBIT was Rs2.0bn (+62% yoy and +44% qoq).
Employee costs were at Rs2.8bn (+26% yoy and +12% qoq). Employee costs were impacted
by one-time costs arising on actuarial provisioning of retiral funds and long-term wage
settlement at some plant locations. Other income increased 73% qoq to Rs1.1bn thanks to a
surge in cash balance due to the return of capital from Novelis. A lower-than-expected tax
rate of 10% drove net profit to Rs7.1bn (+7% yoy and +54% qoq), well over our estimate of
Rs5.8bn.
FY11 results summary
Aluminium metal production was 537.9kt (-3% yoy) while copper cathode production was
335.6kt (+1% yoy). Aluminium production during the year was impacted by the outage at the
Hirakud smelter in 2QFY11 which impacted 27kt of volumes for FY11. Shutdown of the Dahej
cooling tower in 3QFY11 also impacted copper production by 10kt. Higher LME prices drove
net revenues to Rs238.6bn (+22% yoy). Better product-mix, higher LME prices and better byproduct
realizations compensated for lower Tc/Rc, higher carbon costs and other one-time
costs related to disruptions. This drove EBITDA to Rs31.8bn (+8% yoy). Net profit was
Rs21.4bn (+12% yoy).
Financial closure for 359kt Mahan smelter achieved
The financial closure for the 359kt Mahan smelter (with 900MW CPP) coming up in Madhya
Pradesh was achieved in March 2011 by signing a loan of Rs78.75bn. The facility has a door
to door tenor of 12.75 years. The project is expected to be commissioned in October 2011.
The financial closure for the 359kt Aditya smelter (with 900MW CPP) is expected next.
Financial closure of the 1.5mt Utkal Alumina project, which will feed the above 2 smelters, has
already been achieved. Greenfield project spend during FY11 was Rs65bn.
Annual Tc/Rc 20% higher for CY11
The annual benchmark for Tc/Rc for 2011 has been settled at ~20% higher yoy in the
negotiations between major global miners and smelters. Spot Tc/Rc terms have improved
recently due to smelter shutdowns in Japan after the tragic earthquake. The higher Tc/Rc
should impact the company positively in FY12F.
We estimate Novelis to report adj. EBITDA of US$249mn for 4QFY11
Novelis, Hindalco's wholly owned subsidiary, is yet to announce its 4QFY11 results. We
estimate another solid quarter from Novelis with volumes of 734kt and adj. EBITDA of
US$249mn.
We have a Buy rating on Hindalco with target price of Rs315.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Hindalco reported its standalone 4Q and FY11 results. EBITDA was at Rs9.14bn (+9% yoy and
+24% qoq) in-line with our estimate. Annual Tc/Rc contracts have been set at 20% higher for
CY11, which should aid Hindalco's FY12F earnings. Maintain Buy with target price of Rs315.
4QFY11 EBITDA in-line with expectations
Aluminium production was 138.7kt (+1% yoy and +2% qoq) while copper cathode production
rebounded to 84.9kt (+14% yoy and +6% qoq) after the shutdown of the Dahej cooling tower
in 3QFY11. Net revenues were at Rs68.4bn (+27% yoy and +15% qoq). EBITDA was at
Rs9.1bn (+9% yoy and +24% qoq) in-line with our estimate. While aluminium EBIT was
Rs5.6bn (-8% yoy and +21% qoq), copper EBIT was Rs2.0bn (+62% yoy and +44% qoq).
Employee costs were at Rs2.8bn (+26% yoy and +12% qoq). Employee costs were impacted
by one-time costs arising on actuarial provisioning of retiral funds and long-term wage
settlement at some plant locations. Other income increased 73% qoq to Rs1.1bn thanks to a
surge in cash balance due to the return of capital from Novelis. A lower-than-expected tax
rate of 10% drove net profit to Rs7.1bn (+7% yoy and +54% qoq), well over our estimate of
Rs5.8bn.
FY11 results summary
Aluminium metal production was 537.9kt (-3% yoy) while copper cathode production was
335.6kt (+1% yoy). Aluminium production during the year was impacted by the outage at the
Hirakud smelter in 2QFY11 which impacted 27kt of volumes for FY11. Shutdown of the Dahej
cooling tower in 3QFY11 also impacted copper production by 10kt. Higher LME prices drove
net revenues to Rs238.6bn (+22% yoy). Better product-mix, higher LME prices and better byproduct
realizations compensated for lower Tc/Rc, higher carbon costs and other one-time
costs related to disruptions. This drove EBITDA to Rs31.8bn (+8% yoy). Net profit was
Rs21.4bn (+12% yoy).
Financial closure for 359kt Mahan smelter achieved
The financial closure for the 359kt Mahan smelter (with 900MW CPP) coming up in Madhya
Pradesh was achieved in March 2011 by signing a loan of Rs78.75bn. The facility has a door
to door tenor of 12.75 years. The project is expected to be commissioned in October 2011.
The financial closure for the 359kt Aditya smelter (with 900MW CPP) is expected next.
Financial closure of the 1.5mt Utkal Alumina project, which will feed the above 2 smelters, has
already been achieved. Greenfield project spend during FY11 was Rs65bn.
Annual Tc/Rc 20% higher for CY11
The annual benchmark for Tc/Rc for 2011 has been settled at ~20% higher yoy in the
negotiations between major global miners and smelters. Spot Tc/Rc terms have improved
recently due to smelter shutdowns in Japan after the tragic earthquake. The higher Tc/Rc
should impact the company positively in FY12F.
We estimate Novelis to report adj. EBITDA of US$249mn for 4QFY11
Novelis, Hindalco's wholly owned subsidiary, is yet to announce its 4QFY11 results. We
estimate another solid quarter from Novelis with volumes of 734kt and adj. EBITDA of
US$249mn.
We have a Buy rating on Hindalco with target price of Rs315.
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