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UBS Investment Research
Hindalco Industries
N ovelis Q1 FY12 numbers strong
Event: Q1 adjusted EBITDA in line with guidance
Novelis reported strong Q1 FY12 adjusted EBITDA of US$306m (+.9%QoQ, 16%
YoY, in line with our estimate of US$300m) despite a marginal 3% YoY increase
in shipments at 797kt, led by: 1) better pricing due to strong market conditions; and
2) a better sales mix. Net income was US$62m (+24% QoQ, +24% YoY). Net
sales were US$3,113m (+5% QoQ, +23% YoY). Total shipments were 797kt
(767kt/30kt rolled/ingot). Shipments in Asia/Europe/North America grew
4%/2%/4% YoY.
Impact: on track to achieve FY12 adjusted EBITDA guidance
The company had guided for an adjusted EBITDA of US$1.15-1.2bn (UBS
estimate is US$1.2 bn) for FY12. The strong performance in Q1 indicates Novelis
is on track to achieve FY12 guidance. Management is optimistic about the outlook
for the business, particularly the can and auto segments, for the rest of FY12. The
mill expansions in South Korea (c350 kt), North America (c220 kt) and Brazil
(c220kt) are on track to be completed on budget by end-2013, end-2012, and mid
2013, respectively.
Action: Novelis continues to cushion operating earnings for Hindalco
Novelis has a stable business model, and provides a cushion to Hindalco
Industries’ (Hindalco’s) consolidated EBITDA on the downside. We estimate
Novelis will contribute approximately 55% of consolidated EBITDA for FY13.
Hindalco is currently trading at 4.5x FY13E EV/EBITDA.
Valuation: maintain Buy rating, with price target of Rs240.00
We base our price target of Rs240.00 on a sum-of-the-parts valuation. We value
Hindalco’s Indian business at 5.5x FY13E EBITDA, Novelis at 6.5x FY13E
EBITDA, and listed subsidiaries/investments at a 20% discount to market price.
Hindalco Industries
Hindalco is the largest non-ferrous metal producer in India and is focused on the
production of aluminium and copper. It produces 345,000tpa of integrated
aluminium and 660,000tpa of alumina. Its downstream products include rolled,
aluminium foil, wire rods and alloy wheels. Hindalco plans to expand its copper
smelter production from 180,000 to 250,000tpa. It recently acquired two copper
mines, which could meet up to one-third of its concentrate requirements.
Hindalco's 97%-owned subsidiary Indal produces 110,000tpa of aluminium and
401,000tpa of alumina/alumina hydrate.
Statement of Risk
We believe a sharp fall in global prices for aluminium, which in turn is linked to
the recovery of the global economy, as well as continuing strong Chinese
imports, is the key risk factor for Indian aluminium companies
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Hindalco Industries
N ovelis Q1 FY12 numbers strong
Event: Q1 adjusted EBITDA in line with guidance
Novelis reported strong Q1 FY12 adjusted EBITDA of US$306m (+.9%QoQ, 16%
YoY, in line with our estimate of US$300m) despite a marginal 3% YoY increase
in shipments at 797kt, led by: 1) better pricing due to strong market conditions; and
2) a better sales mix. Net income was US$62m (+24% QoQ, +24% YoY). Net
sales were US$3,113m (+5% QoQ, +23% YoY). Total shipments were 797kt
(767kt/30kt rolled/ingot). Shipments in Asia/Europe/North America grew
4%/2%/4% YoY.
Impact: on track to achieve FY12 adjusted EBITDA guidance
The company had guided for an adjusted EBITDA of US$1.15-1.2bn (UBS
estimate is US$1.2 bn) for FY12. The strong performance in Q1 indicates Novelis
is on track to achieve FY12 guidance. Management is optimistic about the outlook
for the business, particularly the can and auto segments, for the rest of FY12. The
mill expansions in South Korea (c350 kt), North America (c220 kt) and Brazil
(c220kt) are on track to be completed on budget by end-2013, end-2012, and mid
2013, respectively.
Action: Novelis continues to cushion operating earnings for Hindalco
Novelis has a stable business model, and provides a cushion to Hindalco
Industries’ (Hindalco’s) consolidated EBITDA on the downside. We estimate
Novelis will contribute approximately 55% of consolidated EBITDA for FY13.
Hindalco is currently trading at 4.5x FY13E EV/EBITDA.
Valuation: maintain Buy rating, with price target of Rs240.00
We base our price target of Rs240.00 on a sum-of-the-parts valuation. We value
Hindalco’s Indian business at 5.5x FY13E EBITDA, Novelis at 6.5x FY13E
EBITDA, and listed subsidiaries/investments at a 20% discount to market price.
Hindalco Industries
Hindalco is the largest non-ferrous metal producer in India and is focused on the
production of aluminium and copper. It produces 345,000tpa of integrated
aluminium and 660,000tpa of alumina. Its downstream products include rolled,
aluminium foil, wire rods and alloy wheels. Hindalco plans to expand its copper
smelter production from 180,000 to 250,000tpa. It recently acquired two copper
mines, which could meet up to one-third of its concentrate requirements.
Hindalco's 97%-owned subsidiary Indal produces 110,000tpa of aluminium and
401,000tpa of alumina/alumina hydrate.
Statement of Risk
We believe a sharp fall in global prices for aluminium, which in turn is linked to
the recovery of the global economy, as well as continuing strong Chinese
imports, is the key risk factor for Indian aluminium companies
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