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Aluminium capacity to increase by three folds in the next four
years: Hindalco is increasing its aluminium capacity by almost
three folds in the next four years with Mahan and Utkal projects
expected to come on stream by 2011-end and 2HCY2012,
respectively. The company has already committed ~90% of capex
requirements for Mahan and Utkal projects. Further, these new
capacities are coming at the lower end of the cost curve and will
further benefit the company in terms of cost reduction. Thus, we
expect EBITDA to register a 22.0% CAGR in FY2011-13E.
Capacity expansion at Novelis: With end user demand expected
to remain strong, Novelis is expanding its capacity by 1,000kt
with capex of US$1.5bn in the next five years; in Brazil by 220kt,
Asia by 350kt and North America by 200kt and the balance
through debottlenecking.
Return ratios to improve: We expect RoE to improve from 10.9%
in FY2011 to 16.9% in FY2013 as the benefits of capacity
expansion flow through to the bottom line.
Outlook and valuation: We believe Hindalco is well placed to
benefit from a) its aluminium expansion plans (capacity increasing
by nearly two-three folds in the next two-four years), b) low
production cost at its new capacities and c) steady capacity
expansion at Novelis. At the CMP, the stock is trading at 7.1x
FY2012E and 5.6x FY2013E EV/EBITDA. Given the recent decline
in the stock price, we maintain our Buy recommendation on the
stock with an SOTP target price of `242.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Aluminium capacity to increase by three folds in the next four
years: Hindalco is increasing its aluminium capacity by almost
three folds in the next four years with Mahan and Utkal projects
expected to come on stream by 2011-end and 2HCY2012,
respectively. The company has already committed ~90% of capex
requirements for Mahan and Utkal projects. Further, these new
capacities are coming at the lower end of the cost curve and will
further benefit the company in terms of cost reduction. Thus, we
expect EBITDA to register a 22.0% CAGR in FY2011-13E.
Capacity expansion at Novelis: With end user demand expected
to remain strong, Novelis is expanding its capacity by 1,000kt
with capex of US$1.5bn in the next five years; in Brazil by 220kt,
Asia by 350kt and North America by 200kt and the balance
through debottlenecking.
Return ratios to improve: We expect RoE to improve from 10.9%
in FY2011 to 16.9% in FY2013 as the benefits of capacity
expansion flow through to the bottom line.
Outlook and valuation: We believe Hindalco is well placed to
benefit from a) its aluminium expansion plans (capacity increasing
by nearly two-three folds in the next two-four years), b) low
production cost at its new capacities and c) steady capacity
expansion at Novelis. At the CMP, the stock is trading at 7.1x
FY2012E and 5.6x FY2013E EV/EBITDA. Given the recent decline
in the stock price, we maintain our Buy recommendation on the
stock with an SOTP target price of `242.
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