Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Hindalco (HNDL)
Company update
Debt eating up earnings, Downgrade to SELL
Above‐expectation interest cost following a 25% rise in debt caused
HNDL’s FY11 profit to be 20% below our estimate. We cut our FY12F EPS
by 20% as interest cost will remain high, offsetting the gains from high
aluminum price and rising GM at Novelis. This makes the stock expensive
at PER of 10.9x FY12F (30% above peers). We downgrade to SELL from
BUY. Our new TP is Rs137/sh (‐30%) based on PER of 9x FY12F.
FY12 revenue of Rs746bn, +3%
Lack of revenue growth despite healthy sales price is due to absence of
capacity increase. Next round of capacity increase will come in March
2012 (2 aluminum plants in India with capacity of 411k ton) and in March
2013 (a recycling plant in South America with capacity of 300k ton).
Aluminum and copper prices assumed to rise 5%
In FY11, sales price increased 30% for copper and 25% for aluminum. For
FY12, we assume avg price increase of 5%; avg price during Apr‐Jun is 10%
above FY11 avg. Our sales price assumptions for FY12 are US$2.9k/ton for
aluminum and US$11k/ton for copper.
Internal CF and surplus cash insufficient to fund CAPEX
In FY11, HNDL borrowed Rs40n in new debt to fund CAPEX of Rs83bn. It
plans further investment of Rs160bn in new capacities through FY13 for
which it would borrow an additional Rs39bn.
FY12F earnings downgraded 20% due to high interest cost
Interest expense rose a hefty 70% to Rs18.5bn in FY11 and will rise further
in FY12 to Rs20.5bn (65% of debt is in foreign currency).
Downgrade to SELL on mild EPS growth and high PER
The HNDL stock is trading at PER of 10.9x FY12F, which is considerably
expensive, given ROE of 9.5% and EPS growth of just 6%. We cut our TP by
30% to Rs137/sh based on PER of 9x FY12F.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Hindalco (HNDL)
Company update
Debt eating up earnings, Downgrade to SELL
Above‐expectation interest cost following a 25% rise in debt caused
HNDL’s FY11 profit to be 20% below our estimate. We cut our FY12F EPS
by 20% as interest cost will remain high, offsetting the gains from high
aluminum price and rising GM at Novelis. This makes the stock expensive
at PER of 10.9x FY12F (30% above peers). We downgrade to SELL from
BUY. Our new TP is Rs137/sh (‐30%) based on PER of 9x FY12F.
FY12 revenue of Rs746bn, +3%
Lack of revenue growth despite healthy sales price is due to absence of
capacity increase. Next round of capacity increase will come in March
2012 (2 aluminum plants in India with capacity of 411k ton) and in March
2013 (a recycling plant in South America with capacity of 300k ton).
Aluminum and copper prices assumed to rise 5%
In FY11, sales price increased 30% for copper and 25% for aluminum. For
FY12, we assume avg price increase of 5%; avg price during Apr‐Jun is 10%
above FY11 avg. Our sales price assumptions for FY12 are US$2.9k/ton for
aluminum and US$11k/ton for copper.
Internal CF and surplus cash insufficient to fund CAPEX
In FY11, HNDL borrowed Rs40n in new debt to fund CAPEX of Rs83bn. It
plans further investment of Rs160bn in new capacities through FY13 for
which it would borrow an additional Rs39bn.
FY12F earnings downgraded 20% due to high interest cost
Interest expense rose a hefty 70% to Rs18.5bn in FY11 and will rise further
in FY12 to Rs20.5bn (65% of debt is in foreign currency).
Downgrade to SELL on mild EPS growth and high PER
The HNDL stock is trading at PER of 10.9x FY12F, which is considerably
expensive, given ROE of 9.5% and EPS growth of just 6%. We cut our TP by
30% to Rs137/sh based on PER of 9x FY12F.
No comments:
Post a Comment