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EARNINGS REVIEW
Hindalco Industries (HALC.BO)
Neutral Equity Research
Above expectations: Higher volumes, better copper margins
What surprised us
3QFY12 stand-alone net income of Rs4.5 bn (-2% yoy and -10% qoq) was
9% above GSe and 3% above Bloomberg consensus. EBITDA came in at
Rs7.1 bn, 12% above Gse, on higher sales volume in both aluminium and
copper and strong copper margins (from by-product credits). Highlights:
Aluminium (34% of sales, 57% of EBIT): Alumina volumes improved (on
easing bauxite constraints at Renukoot), driving higher aluminium
volumes. Segment revenues grew 13% yoy on higher volumes and
realisations (aided by INR depreciation). EBIT margin fell (down 550bp
qoq; 960bp yoy) to 13.9% on higher energy and input costs. Copper:
Copper volumes improved 9% yoy (after the planned shutdown in 2Q) and
CCR volumes surged 44% yoy on robust demand from the cables segment.
EBIT margins improved (+130bp yoy) on better by-product realizations and
higher Tc/Rc rates. Management expects the Mahan smelter to be
commissioned by 1QFY13 and Utkal Alumina by Dec 2012. Mahan coal
block is still awaiting forest clearance. Novelis reported 3QFY12 adjusted
EBITDA of $137 mn and net loss of $4 mn on lower volumes due to destocking
in Europe and Asia. Novelis lowered FY12 EBITDA guidance to
$1.05bn-$1.08bn (from $1.1bn-$1.15bn). The Board has approved allotment
of warrants to promoters for up to 150mn shares per SEBI formula.
What to do with the stock
We lower our FY12E-FY14E EPS 1% to 11% on lower Novelis earnings. We
maintain our Neutral rating and 12-m P/B-based TP of Rs159. At a FY13E
P/B of 0.8X with 9.7% ROE, risk/reward looks balanced. Risks: Higher LME
prices (upside), delayed project execution (downside).
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
Above expectations: Higher volumes, better copper margins
What surprised us
3QFY12 stand-alone net income of Rs4.5 bn (-2% yoy and -10% qoq) was
9% above GSe and 3% above Bloomberg consensus. EBITDA came in at
Rs7.1 bn, 12% above Gse, on higher sales volume in both aluminium and
copper and strong copper margins (from by-product credits). Highlights:
Aluminium (34% of sales, 57% of EBIT): Alumina volumes improved (on
easing bauxite constraints at Renukoot), driving higher aluminium
volumes. Segment revenues grew 13% yoy on higher volumes and
realisations (aided by INR depreciation). EBIT margin fell (down 550bp
qoq; 960bp yoy) to 13.9% on higher energy and input costs. Copper:
Copper volumes improved 9% yoy (after the planned shutdown in 2Q) and
CCR volumes surged 44% yoy on robust demand from the cables segment.
EBIT margins improved (+130bp yoy) on better by-product realizations and
higher Tc/Rc rates. Management expects the Mahan smelter to be
commissioned by 1QFY13 and Utkal Alumina by Dec 2012. Mahan coal
block is still awaiting forest clearance. Novelis reported 3QFY12 adjusted
EBITDA of $137 mn and net loss of $4 mn on lower volumes due to destocking
in Europe and Asia. Novelis lowered FY12 EBITDA guidance to
$1.05bn-$1.08bn (from $1.1bn-$1.15bn). The Board has approved allotment
of warrants to promoters for up to 150mn shares per SEBI formula.
What to do with the stock
We lower our FY12E-FY14E EPS 1% to 11% on lower Novelis earnings. We
maintain our Neutral rating and 12-m P/B-based TP of Rs159. At a FY13E
P/B of 0.8X with 9.7% ROE, risk/reward looks balanced. Risks: Higher LME
prices (upside), delayed project execution (downside).
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