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Key Takeaways
Utkal Alumina: slow but progressing
Despite having all the statutory clearances in place for a long time, 1.5mtpa Utkal Alumina
refinery has faced delays. A weaker administration and local disturbances have been
challenging and dragging the project. The company has recently completed negotiations
with the locals and now expects no further disturbances. The project is expected to be
commissioned in 2HCY12.
Though the bauxite will be initially transported by trucks, the cost is likely to increase by
only USD5/ton because the distance between the bauxite mine and refinery is only
~24km. nearly 10kms of bitumen road has already been constructed. The land for
laying conveyor belt from mine to refinery for transporting bauxite has now been acquired
and the possession taken. The conveyor belt will be commissioned in next 24 months.
Hindalco has faced cost overrun in the project and revised expected cost of production
(CoP) is USD140-150/ton (Vs USD110/ton estimated earlier).
Mahan smelter: may look to buy merchant power
Hindalco expects 359ktpa Mahan smelter to get commissioned in 2HCY12. Since there is
still no visibility of coal for its captive power plants, Hindalco may explore the option of
buying power directly in merchant market as lot of new power generation capacities
(11 power plants) are expected to get commissioned in the region. If the merchant
power is not attractive, 900MW (150MW *6 units) CPP will be commissioned in phases.
It expects the cost of production of aluminum in the range of USD1700-1900/ton depending
upon the availability of raw materials.
Novelis: on track to achieve its targeted EBITDA
Novelis is on track to achieve its targeted US$1.15-1.2b EBITDA through de-bottlenecking,
expansions in emerging markets and focusing on product mix improvement. Novelis
expects demand for Cans to remain stable (form ~50-55% of revenue) and is experiencing
positive traction in demand from automobiles segment (form 15% of revenue).
Current valuations ignore growth; Maintain Buy
Strong and stable cash flows from business of Novelis and copper smelter have reduced
volatilities in the consolidated earnings of Hindalco. Utkal and Mahan projects are moving
slowly and steadily. The stock trades at attractive PE of 8.2xFY13 and EV/EBITDA
5.7xFY13. In our estimate, we are not factoring upside from Utkal and Mahan projects.
Maintain Buy.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Key Takeaways
Utkal Alumina: slow but progressing
Despite having all the statutory clearances in place for a long time, 1.5mtpa Utkal Alumina
refinery has faced delays. A weaker administration and local disturbances have been
challenging and dragging the project. The company has recently completed negotiations
with the locals and now expects no further disturbances. The project is expected to be
commissioned in 2HCY12.
Though the bauxite will be initially transported by trucks, the cost is likely to increase by
only USD5/ton because the distance between the bauxite mine and refinery is only
~24km. nearly 10kms of bitumen road has already been constructed. The land for
laying conveyor belt from mine to refinery for transporting bauxite has now been acquired
and the possession taken. The conveyor belt will be commissioned in next 24 months.
Hindalco has faced cost overrun in the project and revised expected cost of production
(CoP) is USD140-150/ton (Vs USD110/ton estimated earlier).
Mahan smelter: may look to buy merchant power
Hindalco expects 359ktpa Mahan smelter to get commissioned in 2HCY12. Since there is
still no visibility of coal for its captive power plants, Hindalco may explore the option of
buying power directly in merchant market as lot of new power generation capacities
(11 power plants) are expected to get commissioned in the region. If the merchant
power is not attractive, 900MW (150MW *6 units) CPP will be commissioned in phases.
It expects the cost of production of aluminum in the range of USD1700-1900/ton depending
upon the availability of raw materials.
Novelis: on track to achieve its targeted EBITDA
Novelis is on track to achieve its targeted US$1.15-1.2b EBITDA through de-bottlenecking,
expansions in emerging markets and focusing on product mix improvement. Novelis
expects demand for Cans to remain stable (form ~50-55% of revenue) and is experiencing
positive traction in demand from automobiles segment (form 15% of revenue).
Current valuations ignore growth; Maintain Buy
Strong and stable cash flows from business of Novelis and copper smelter have reduced
volatilities in the consolidated earnings of Hindalco. Utkal and Mahan projects are moving
slowly and steadily. The stock trades at attractive PE of 8.2xFY13 and EV/EBITDA
5.7xFY13. In our estimate, we are not factoring upside from Utkal and Mahan projects.
Maintain Buy.
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