Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Hindalco Industries (HNDL)
Metals & Mining
Copper shines, aluminium lags. Hindalco reported 3QFY12 EBITDA of Rs7.1 bn (-
3.4% yoy), 10.9% ahead of our estimate. The outperformance can be attributed to a
strong show from the copper segment driven by higher Tc/Rc and byproduct realization
while the aluminium segment lagged. The stock appears inexpensive at 5X FY2013E
EBITDA (ex-CWIP). However, recent stock price run-up, project execution risks and raw
material sourcing issues underpin our negative stance. REDUCE; TP of Rs160 unchanged.
EBITDA outperformance on higher copper deliveries and better byproduct realizations
Hindalco reported standalone EBITDA of Rs7.1 bn (-3.4%yoy, +6.8% qoq), 10.9% ahead of our
estimate. Net income of Rs4.5 bn was 15.4% ahead of our estimate driven primarily by EBITDA
beat. The EBITDA-level outperformance was driven by a combination of higher deliveries and
better byproduct credit realizations partly neutralized by a spike in raw material costs.
Copper segment shines, aluminium misses estimate
The copper segment reported EBIT of Rs2.2 bn (+46.3% qoq, +51.1% yoy), handsomely ahead of
our estimate of Rs1.5 bn. The outperformance can likely be attributed to higher-than-expected
cathode production of 87 kt (7 kt above our estimate) and better byproduct realizations. The
aluminium segment reported EBIT of Rs3.1 bn (-27.7% qoq, -33.4% yoy), 23.9% lower than our
estimate of Rs4.1 bn. The underperformance can be attributed to higher-than-expected power
and fuel cost and raw material cost. Aluminium production at 146 kt was in line with our estimate.
Alumina production grew 3.2% sequentially to 343 kt on resumption of bauxite availability.
Board approves issue of 150 mn warrants to founders
The Hindalco board approved issue of up to 150 mn warrants to founders on a preferential basis
at a price not less than SEBI’s pricing formula. Founders own 32.1% of the company, which may
increase to 37% post warrant conversion. Hindalco has raised equity financing for the third time in
the past five years. Infusion of funds is necessary in our view in light of aggressive capex plans of
the standalone business and possibly lower financing from Novelis due to its aggressive capex
plans. Net debt/ EBITDA at 3.3X FY2013E and net debt/equity ratio at 0.9X FY2013E financials are
marginally stretched.
Maintain REDUCE
Hindalco at 5X FY2013E adjusted EBITDA appears inexpensive. However, we expect the near-term
performance to be weak dictated by (1) likely delay in commissioning of greenfield projects and
potential escalation in project costs, (2) uncertainty on coal sourcing for the Mahan Smelter, and
(3) recent run-up in the stock price. We maintain our REDUCE rating with a target price of Rs160.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Hindalco Industries (HNDL)
Metals & Mining
Copper shines, aluminium lags. Hindalco reported 3QFY12 EBITDA of Rs7.1 bn (-
3.4% yoy), 10.9% ahead of our estimate. The outperformance can be attributed to a
strong show from the copper segment driven by higher Tc/Rc and byproduct realization
while the aluminium segment lagged. The stock appears inexpensive at 5X FY2013E
EBITDA (ex-CWIP). However, recent stock price run-up, project execution risks and raw
material sourcing issues underpin our negative stance. REDUCE; TP of Rs160 unchanged.
EBITDA outperformance on higher copper deliveries and better byproduct realizations
Hindalco reported standalone EBITDA of Rs7.1 bn (-3.4%yoy, +6.8% qoq), 10.9% ahead of our
estimate. Net income of Rs4.5 bn was 15.4% ahead of our estimate driven primarily by EBITDA
beat. The EBITDA-level outperformance was driven by a combination of higher deliveries and
better byproduct credit realizations partly neutralized by a spike in raw material costs.
Copper segment shines, aluminium misses estimate
The copper segment reported EBIT of Rs2.2 bn (+46.3% qoq, +51.1% yoy), handsomely ahead of
our estimate of Rs1.5 bn. The outperformance can likely be attributed to higher-than-expected
cathode production of 87 kt (7 kt above our estimate) and better byproduct realizations. The
aluminium segment reported EBIT of Rs3.1 bn (-27.7% qoq, -33.4% yoy), 23.9% lower than our
estimate of Rs4.1 bn. The underperformance can be attributed to higher-than-expected power
and fuel cost and raw material cost. Aluminium production at 146 kt was in line with our estimate.
Alumina production grew 3.2% sequentially to 343 kt on resumption of bauxite availability.
Board approves issue of 150 mn warrants to founders
The Hindalco board approved issue of up to 150 mn warrants to founders on a preferential basis
at a price not less than SEBI’s pricing formula. Founders own 32.1% of the company, which may
increase to 37% post warrant conversion. Hindalco has raised equity financing for the third time in
the past five years. Infusion of funds is necessary in our view in light of aggressive capex plans of
the standalone business and possibly lower financing from Novelis due to its aggressive capex
plans. Net debt/ EBITDA at 3.3X FY2013E and net debt/equity ratio at 0.9X FY2013E financials are
marginally stretched.
Maintain REDUCE
Hindalco at 5X FY2013E adjusted EBITDA appears inexpensive. However, we expect the near-term
performance to be weak dictated by (1) likely delay in commissioning of greenfield projects and
potential escalation in project costs, (2) uncertainty on coal sourcing for the Mahan Smelter, and
(3) recent run-up in the stock price. We maintain our REDUCE rating with a target price of Rs160.
No comments:
Post a Comment