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Hindalco (HALC.BO; Rs183.10; 1M)
Takeaways from Mumbai — Hindalco presented at the Citi India Investor
Conference in Mumbai. Below are the key takeaways.
Update on greenfield expansions — Hindalco’s 1.5mtpa Utkal alumina project
is likely to be commissioned by 2H 2012 (delayed, leading to an increase in
capex). The delay has been on account of execution issues and Hindalco has
had to change its contractors (all approvals are in place). Hindalco’s 359kt
Mahan smelter is likely to be commissioned by end-2011 and the ramp-up period
is likely to be 12-14 months. They are likely to operate at 50% utilization in FY13
(170kt). With the delay in Utkal’s commissioning, Hindalco would need to import
alumina (about 80kt-100kt) to meet part of Mahan's requirements. The Aditya
Aluminium smelter (359kt) has been delayed to early 2013 on account of delays
in obtaining clearances.
Other updates — Hindalco's smelting capacity is set to go up from the current
550ktpa to 610ktpa in FY12 and later to 1.3mtpa in FY14. Hindalco is expecting
capex of ~$6bn till FY14. Of this, $1.8bn is likely to be for power and the rest for
alumina and aluminium.
Coal uncertainty — Hindalco’s Mahan Coal Block is in a ‘No Go’ forest area.
However, Hindalco feels that the coal block approval will come through as its
projects are in advanced stages of implementation. Meanwhile, it has applied for
tapering linkage.
Novelis' strategy — (1) Enhancing volumes - despite shutting down more than
500ktpa of capacity, the company has managed to maintain a 3mtpa rate. (2)
Lowering costs - closing inefficient operations, transfer of assets (3) Focus on
product portfolio - (a) auto demand will improve with the stress on emission
norms, (b) demand for cans is fairly inelastic, (c) improving demand for industrial
electronics led by consumption in China and some other growing economies.
Novelis' performance — Novelis is a pure converter and earned an EBITDA of
$1.1bn in FY11 (EBITDA/t of $360). Novelis believes that the EBITDA/t can
improve from these levels supported by strong performance of the emerging
economies.
Novelis balance sheet restructuring — Novelis has completed refinancing
transactions to recapitalize its balance sheet and give both Hindalco and Novelis
greater flexibility in financing capex and growth plans. Novelis has raised $4.8bn
of debt and returned $1.7bn to its parent, a wholly owned subsidiary of Hindalco.
The funds will be used to reduce overall group debt and fund Hindalco’s
expansion plans.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Hindalco (HALC.BO; Rs183.10; 1M)
Takeaways from Mumbai — Hindalco presented at the Citi India Investor
Conference in Mumbai. Below are the key takeaways.
Update on greenfield expansions — Hindalco’s 1.5mtpa Utkal alumina project
is likely to be commissioned by 2H 2012 (delayed, leading to an increase in
capex). The delay has been on account of execution issues and Hindalco has
had to change its contractors (all approvals are in place). Hindalco’s 359kt
Mahan smelter is likely to be commissioned by end-2011 and the ramp-up period
is likely to be 12-14 months. They are likely to operate at 50% utilization in FY13
(170kt). With the delay in Utkal’s commissioning, Hindalco would need to import
alumina (about 80kt-100kt) to meet part of Mahan's requirements. The Aditya
Aluminium smelter (359kt) has been delayed to early 2013 on account of delays
in obtaining clearances.
Other updates — Hindalco's smelting capacity is set to go up from the current
550ktpa to 610ktpa in FY12 and later to 1.3mtpa in FY14. Hindalco is expecting
capex of ~$6bn till FY14. Of this, $1.8bn is likely to be for power and the rest for
alumina and aluminium.
Coal uncertainty — Hindalco’s Mahan Coal Block is in a ‘No Go’ forest area.
However, Hindalco feels that the coal block approval will come through as its
projects are in advanced stages of implementation. Meanwhile, it has applied for
tapering linkage.
Novelis' strategy — (1) Enhancing volumes - despite shutting down more than
500ktpa of capacity, the company has managed to maintain a 3mtpa rate. (2)
Lowering costs - closing inefficient operations, transfer of assets (3) Focus on
product portfolio - (a) auto demand will improve with the stress on emission
norms, (b) demand for cans is fairly inelastic, (c) improving demand for industrial
electronics led by consumption in China and some other growing economies.
Novelis' performance — Novelis is a pure converter and earned an EBITDA of
$1.1bn in FY11 (EBITDA/t of $360). Novelis believes that the EBITDA/t can
improve from these levels supported by strong performance of the emerging
economies.
Novelis balance sheet restructuring — Novelis has completed refinancing
transactions to recapitalize its balance sheet and give both Hindalco and Novelis
greater flexibility in financing capex and growth plans. Novelis has raised $4.8bn
of debt and returned $1.7bn to its parent, a wholly owned subsidiary of Hindalco.
The funds will be used to reduce overall group debt and fund Hindalco’s
expansion plans.
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