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EARNINGS REVIEW
Hindalco Industries (HALC.BO)
Neutral Equity Research
In line with expectations: Progress on growth projects is key
What surprised us
Hindalco reported 1QFY12 stand-alone net income of Rs6.4 bn (+21% yoy and
-9% qoq), which was in line with our and consensus expectations. EBITDA
came in at Rs8.6 bn, which is 5% below our estimates – on lower sales volume
in both aluminium and copper and continued cost pressures. Key highlights:
Aluminium (35% of Sales, 75% of EBIT): Despite lower volumes in alumina
(constrained bauxite availability at Renukoot) and unfavourable product mix
(lower volumes in downstream aluminium due to sluggish demand and
continued lock-out at Alupuram extrusion plant), aluminium revenues grew
12% yoy due to higher realisations. EBIT margins were maintained qoq at 25%
(down 460bps yoy) despite higher energy costs. Copper: Copper volumes
were impacted by a bi-annual maintenance shutdown at one of the smelters,
and CCR volumes were down due to weak demand. EBIT margins were
maintained (+30bps yoy) on the back of better by-product realizations and
higher Tc/Rc rates. The company reported higher-than-expected other income,
mainly due to dividend of Rs690mn from its Australian subsidiary, Aditya
Birla Minerals. The Mahan smelter is expected to be commissioned by Dec
2011 and Utkal Alumina is now expected by 2HCY12. Mahan coal block is now
awaiting the decision of a GoM meeting for forest clearance.
What to do with the stock
We fine-tune our FY12E-14E EPS estimates by 1%/-9%/1%: the cut in FY13E is
being driven by expected delays in commissioning of the Utkal project. We
maintain our Neutral rating and 12-m P/B based TP of Rs190. At current
valuations – FY12E P/B of 0.9X with 10.4% ROE – the risk/reward looks
balanced. Risks: higher LME prices, delayed project execution
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
EARNINGS REVIEW
Hindalco Industries (HALC.BO)
Neutral Equity Research
In line with expectations: Progress on growth projects is key
What surprised us
Hindalco reported 1QFY12 stand-alone net income of Rs6.4 bn (+21% yoy and
-9% qoq), which was in line with our and consensus expectations. EBITDA
came in at Rs8.6 bn, which is 5% below our estimates – on lower sales volume
in both aluminium and copper and continued cost pressures. Key highlights:
Aluminium (35% of Sales, 75% of EBIT): Despite lower volumes in alumina
(constrained bauxite availability at Renukoot) and unfavourable product mix
(lower volumes in downstream aluminium due to sluggish demand and
continued lock-out at Alupuram extrusion plant), aluminium revenues grew
12% yoy due to higher realisations. EBIT margins were maintained qoq at 25%
(down 460bps yoy) despite higher energy costs. Copper: Copper volumes
were impacted by a bi-annual maintenance shutdown at one of the smelters,
and CCR volumes were down due to weak demand. EBIT margins were
maintained (+30bps yoy) on the back of better by-product realizations and
higher Tc/Rc rates. The company reported higher-than-expected other income,
mainly due to dividend of Rs690mn from its Australian subsidiary, Aditya
Birla Minerals. The Mahan smelter is expected to be commissioned by Dec
2011 and Utkal Alumina is now expected by 2HCY12. Mahan coal block is now
awaiting the decision of a GoM meeting for forest clearance.
What to do with the stock
We fine-tune our FY12E-14E EPS estimates by 1%/-9%/1%: the cut in FY13E is
being driven by expected delays in commissioning of the Utkal project. We
maintain our Neutral rating and 12-m P/B based TP of Rs190. At current
valuations – FY12E P/B of 0.9X with 10.4% ROE – the risk/reward looks
balanced. Risks: higher LME prices, delayed project execution
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