Hindalco, Secures coal supply; but pricing the key… :: ICICI Securities,

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Buy Hindalco between Rs 146 and Rs 151. Stoploss at Rs 136 :: HDFC Securities

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Exceptional items adversely impact PAT… • Hindalco Industries:: ICICI Securities, PDF link

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Technicals - Cipla, Arvind, Hindalco, Karur Vysya Bank, IOC:: Business Line

Hindalco Ltd Q1FY14 results:: Team Microsec Research

Hindalco Ltd announced its standalone Q1FY14 results on 13^th August, 2013.

The company misses the consensus estimates by a huge margin. The net sales arrived at INR5766.69 crore, which was down by 3.31% and 16.61% on YoY and QoQ basis. On Yoy basis, the copper sales fell by 8% due to shutdown of Hirakund plant, but aluminium sales were up by 7%. On QoQ basis, the sales of copper and aluminium both fell by 8% and 21%, respectively. The EBITDA for the quarter was INR478.45 crore, which was marginally up by 3.31% on YoY basis, but down by 25.62% on QoQ basis. The company posted net profit (excluding non-recurring item of INR203 crore in current quarter) of INR271.09 crore, which was down by 8.03%on YoY basis and also down by 43.8% on QoQ basis.

Please find below the result analysis for Novelis Inc, which contributes 67% in terms of revenue to the consolidated results.

Novelis Inc, a flagship company of Hindalco Ltd announced its Q1FY14 results on 12^th August, 2013.

Novelis’ performance in the first quarter of fiscal 2014 was negatively impacted by lower can shipments in North America due partly to unseasonably cooler and wet weather in the region, continued pricing pressures in North America, Europe, and Asia, and higher employee incentive costs due to a modification of its long term incentive plan, partially offset by an increase in the benefits it received from utilizing scrap metal. The decline in can volumes in North America were partially offset by continued strong demand for its automotive products globally and higher can shipments in Asia.

  

•

“Net sales” for the three months ended June 30, 2013 was $2.4 billion, a decrease of 6% compared to the $2.6 billion reported in the same period a year ago. "Cost of goods sold (exclusive of depreciation and amortization)" for the three months ended June 30, 2013 was $2.1 billion, a decrease of 4% compared to the $2.2 billion we reported in the same period a year ago. These decreases were primarily the result of lower third party shipments and lower conversion premiums due to competitive market pressures. "Cost of goods sold (exclusive of depreciation and amortization)" was also lower due to higher benefits we received from using scrap metal.

•	It reported "Net income" of $14 million in the three months ended June 30, 2013, which is down compared to $91 million in the three months ended June 30, 2012, due primarily to the items mentioned above.

Management’s Comments:

•

·         All of company’s strategic expansion projects are progressing well. It has spent $181 million on capital expenditures globally for the three months ended June 30, 2013, which primarily relates to its strategic expansion projects in Oswego, New York; Yeongju, South Korea; Ulsan, South Korea; Changzhou, China; Pinda, Brazil, and Nachterstedt, Germany, as well as expenditures on implementing a new ERP system.

Novelis is experiencing pricing pressures and increased competition, which are negatively impacting its profitability. The pricing pressures and competition are most notable in North America, Europe, and Asia regions, which resulted in unfavorable reductions in conversion premiums with the renewals of can supply contracts. One factor contributing to the competitive landscape in Asia is the significantly higher local market premium that it must pay for the purchases of aluminum in Asia. It experienced a reduction in demand for its can products in North America partly due to an cooler, wet weather in the region, which has reduced beverage can consumption levels. Benefits from the utilization of scrap increased due to favorable discounts it received on the procurement of scrap and higher usage of scrap, partially offset by the decline in average aluminum prices to $1,834 per metric tonne during the three months ended June 30, 2013 compared to $1,977 per metric tonne during the three months ended June 30, 2012. Demand for its automotive industry products continues to be strong globally, which is driven by an increase in the use of aluminum in vehicles.

Regards,

Team Microsec Research

Operational resilience seen; high debt a key concern Hindalco ::Centrum

Operational resilience seen; high debt a key concern
Hindalco’s standalone performance was above expectations with PAT at RSs4.8bn (up 11% QoQ and higher than our estimates by 12%). EBITDA stood at ~Rs6.4bn (margin of ~9.2%, up 70bps QoQ). Better value added product sales coupled with operational efficiencies led to 10.5% QoQ improvement in EBITDA despite flat LME realizations. Commissioning of Mahan and Utkal projects have started which is expected to drive volume growth and FRP commissioning at Hirakud is expected to result in higher VAP share in aluminium business. We remain positive on the recovery in LME prices going ahead and revise our estimates marginally to account for higher debt on books. Maintain buy.

Volumes improve marginally QoQ but VAP share increases: Aluminium production stood at 142kt, up 2% QoQ and copper production at ~85kt was up 1% QoQ. VAP share in production went up smartly from 43% in FY12 to 47% in FY13 and VAP volumes stood at 255kt in FY13 (up 4.5%). Alumina sales were up 4% YoY to 281kt in FY13.

EBIT improves for both aluminium and copper divisions: EBIT for aluminium division went up by 37% QoQ to Rs2.8bn despite flat realizations on account of higher VAP share and operational efficiencies. EBIT for copper division also increased by ~15% QoQ to ~Rs2.6bn (EBIT margin of 5.6%, up 80bps QoQ).

EBITDA margin improves sequentially: Operational efficiencies and increase in value added product share led to improvement of standalone margin to 9.2% (up 70bps QoQ). Margin for FY13 stood at 8.5% in a tough operational year marked by lower realizations and higher raw material and coal costs.

Hindalco Industries Buy Target Price: Rs122:: Centrum

Initiating Coverage

Hindalco Industries

Buy

Target Price: Rs122

CMP: Rs96  

Upside: 27.1%

Worst is behind and priced in

We expect the worst to be over for Hindalco with the commissioning of Mahan and Utkal projects in H1FY14 expected to ease cash flows, release long standing CWIP and deleverage the stretched balance sheet. We see volume growth ahead in domestic aluminium business and successful implementation of raw material projects (bauxite and coal) for new capacities alleviating market concerns on returns and margins. Novelis is expected to continue providing solid earnings support with relentless focus on increasing recycling volumes, expansion in growth segments and process & cost improvements. We expect consolidated EBITDA CAGR of 12.8% during FY13-15E on the back of volume growth and better LME aluminium realization (which we believe is near its bottom from a medium term view). We initiate coverage with a BUY rating and a target price of Rs122.

Hindalco Industries:: JPMorgan

In our view, the current stock price of HNDL is only pricing in Novelis
(downstream subsidiary, 100% owned) and a part of the current India
business in FY14E and not even Novelis in FY15E. With project
commissioning on the way and India ally recovery (as production
stabilizes), we expect the sharp discount to our fair value estimate to
narrow. Admittedly, reported earnings for the standalone business would
be under pressure given higher capital costs as projects start flowing
through the P&L, however, cash earnings should pick up as the projects
deliver positive EBITDA. HNDL remains among our top picks in India
and we remain OW with a PT of Rs160, implying ~50% upside
potential.
 Novelis - Adjusted EBITDA impacted by one-time expenses: Novelis, the
downstream subsidiary (100% owned by HNDL), reported weak numbers with
adjusted EBITDA at $185mn, down 13% y/y, while adjusted EBITDA stood at
$267/T, down 15% y/y and 27% q/q. Results were impacted by Enterprise
Resource Planning (ERP) implantation issues. As per the company, Q3 impact
due to ERP was $39mn ($19mn in lost volumes and $20mn in start-up cost).
Adjusted for the impact, EBITDA/T stood at $323/T, up marginally y/y.
Production has now normalized, though the company does see some
incremental costs in North America in Q4 and pricing pressure in some
markets. We adjust our FY13 estimates to reflect the one-time costs. Excluding
North America, volumes increased y/y across all other regions, with South
America reporting multi-quarter high volume sales. Net debt increased
modestly to $4.5bn. The company expects Q4 EBITDA to be higher y/y.
 Brazil expansion commissioned; Capex for FY13E increased to $750mn: In
our view, Novelis is likely to see the benefits from the capex done over the last
2-3 years. The Pinda facility in Brazil was commissioned in Dec-12 ($325mn
investment). The capex for FY13E has been increased to $750mn.
 HNDL - See large upside with catalysts around the corner: We value HNDL
on FY14E and on our numbers the existing India + Novelis comes to
Rs123/share. Given that we think Novelis is likely to see EBITDA growth
driven by higher volumes, our FY15E Novelis/share value stands at Rs116
(6.5x EV/EBITDA for $1.3bn EBITDA, where we see upside). While
investors are worried about the sharp increase in reported interest and
depreciation costs (from new capacity commissioning), in our view, cash
earnings should go up as EBITDA>interest. We believe the three key catalysts
for re-rating in FY14E are: a) start of bauxite mining; b) India ally recovery; c)
Novelis ramp up of volumes. Key risks include large delays in Utkal refinery
commissioning.

Hindalco: BUY :: Business Line

Angel Broking - Hindalco - RU2QFY2013- Result Updates

Hindalco - RU2QFY2013

Hindalco :Emerging from dark clouds… :Nomura research,

Al prices bottoming, expansion
nearing completion & stable
Novelis at attractive valuation

Annual Report Analysis - Hindalco Industries ::Edelweiss, PDF link

Hindalco Industries (Hindalco) annual report analysis for FY12 highlights  actuarial losses of INR10.1bn incurred during the year on the post retirement defined benefit scheme which, with the change in the accounting policy, were charged of directly through reserves. The scheme is underfunded though no detailed disclosures are available. Besides, the company has incurred losses of INR5.4bn as cost of exiting certain businesses which were charged of through the BRR. Forex loss stands at INR8.7bn but no details on unhedged position are available. 

Hindalco Industries (HNDL) Earnings to remain under pressure in Q2: Kim

Hindalco Industries (HNDL)
Earnings to remain under pressure in Q2


Q1 EBITDA declined 9% QoQ to Rs19bn. Last quarter, HNDL’s domestic
business suffered due to falling metal EBITDA (aluminum -33% QoQ,
copper -56% QoQ). We think Q2 performance may not be different because:
1) aluminum prices have reduced 6% since July and, 2) the local Pollution
Control Board (PCB) asked HNDL to shut down its power plants at the
Hirakud aluminum plant. We forecast profit to decline 10% QoQ in Q2 and
15% for full-year FY13. We maintain SELL on HNDL given risks to the
domestic earnings that accounts for 70% of total profit. The share price may
fall below our TP if HNDL’s power plants are shut for a longer period.

Hindalco Industries: The Devil Is In The Details, We retain Sell : Nirmal Bang

The Devil Is In The Details, We retain Sell Hindalco’s FY12 consolidated EBITDA was 4.6% above our expectation at Rs81,894mn, while PAT was 23.8% above our estimate largely due to lower tax rate and higher EBITDA. PBT was 12% higher than our estimate, while the effective tax rate for the year stood at 18.1% as compared to our estimate of 20.8% and last year’s tax rate of 25.1%. Besides this, there was a substantial increase in the leverage, with consolidated net debt/equity jumping from 0.73x to 1.02x due to increased capex as well as rupee transactions of foreign subsidiaries in a falling currency environment. A detailed analysis reveals that FY12 PAT and EBITDA has been overstated by Rs12,775mn and Rs15,512mn with the company routing certain expenses through reserves and surplus and booking some prior period income during the year. We continue to retain our Sell rating with a target price of Rs107 on Hindalco

Angel Broking - Hindalco- Company Update and Result Update

Hindalco - Company Update

Hindalco (HNDL IN) N(V): Valuations interesting, but little to get excited about  HSBC Research

RPower, Hindalco, GSPL, Jet Airways, reports by Kotak Sec PDF links

Angel Broking - Hindalco - RU4QFY2012 - Result Updates

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Hindalco - RU4QFY2012

Technicals -Insecticides India, Dwarikesh Sugar, hindalco, United Phosphorous, Kalindee Rail, Rishi Laser, ::Business Line

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Please advise on the outlook for Insecticides India and Dwarikesh Sugar Industries. Are these stocks worth holding?

P.K. Srivastava

Insecticides India (Rs 410): The graph of Insecticide India is very pleasing to the eye. It has been climbing up steadily marked by very shallow corrections. The long-term uptrend that began at December 2008 low continues to be strong. This positive structural trend will be threatened only if the stock goes on to close below Rs 275.

Medium-term supports for the stock exist at Rs 345 and Rs 292. Investors with a short- to medium-term perspective can continue to hold the stock as long as it trades above Rs 350. The stock will face resistance in the zone between Rs 400 and Rs 480 in the upcoming months.

Targets on a break above this band are Rs 515 and Rs 617.

Dwarikesh Sugar Industries (Rs 35.9): The stock is in a severe bear market since the February 2006 peak. While the intense downward spiral halted in November 2008, the stock is fluctuating in the range between Rs 28 and Rs 140 since then.

It will continue to face strong resistance around Rs 140 and the long-term outlook will turn positive only on a firm close above this level. Subsequent long-term targets are Rs 168 and Rs 200.

A fresh leg of the downtrend began at the November 2010 peak. The stock has now reached its long-term base level around Rs 28. Investors still holding on to the stock can continue to do so with stop at Rs 25. The stock will face resistance at Rs 68 and Rs 93 in the medium-term. Investors with short to medium-term investment horizon can divest their holdings at either of these levels.

Can I buy Hindalco and United Phosphorous at current levels?

Jayakumar

Hindalco Industries (Rs 119.8): Hindalco is in a medium-term correction from the peak of Rs 252 recorded in January 2011. This decline is correcting the up-move recorded in the stock from the March 2009 low. The stock is attempting to halt around its key long-term support at Rs 133. The zone between Rs 110 and Rs 120 is critical from a long-term perspective. Investors can buy the stock in declines with stop at Rs 105.

But fresh purchases should be avoided on decline below Rs 105. Next halt for the stock can be at Rs 68 or even Rs 37. Resistances for the stock over the upcoming months will be at Rs 165, Rs 180 and Rs 200. Investors with a shorter investment horizon can sell the stock at either of these levels.

Long-term view will turn positive only on close above Rs 200. Next target for the stock would be Rs 250.

United Phosphorous (Rs 113.7): United Phosphorus is also declining sharply since February. This decline has pulled the stock below its long-term support at Rs 129. It would be best if investors wait for the stock to move above Rs 128 and recording a strong close above this level before initiating fresh purchases on this counter.

The stock has feeble support at current levels, around Rs 110. But further decline will pull the stock lower to the long-term support zone between Rs 70 and Rs 80.

Medium-term targets for the stock are Rs 153, Rs 166 and Rs 180. Long-term view will turn positive only on close above Rs 180, opening the possibility of a rally to the previous peak at Rs 220.

The stock, however, has strong long-term resistance around Rs 220.

The stock could find it difficult to move beyond this hurdle just yet.

I have bought Kalindee Rail Niman and Rishi Laser at Rs 180 and Rs 64 respectively. Let me know the outlook for these stocks.

N. Gopalakrishnan

Kalindee Rail Nirman (Rs 68.7): Kalindee Rail Nirman is currently trading at a multi-year low. The stock has strong support in the zone between Rs 80 and Rs 90 where it bottomed in October 2008, March 2009 and April 2011. The stock is currently trading at Rs 74 that was the trough formed in July 2006.

Breach of this support can cause a steep fall that can drag the stock to the next long-term base between Rs 11 and Rs 32. Investors should, therefore, divest their holding on a steep decline below Rs 65.

Rallies in the upcoming months will face resistance at Rs 135 or Rs 176. Investors should divest their holding if the stock is unable to move past the first obstacle.

Rishi Laser (Rs 26.2): Rishi Laser too continues to be in the long-term downtrend that commenced from the bull-market peak in January 2008. The recovery in 2009 could help the stock retrace only one-third of the previous decline and the stock is once again moving towards its 2009 low.

Investors can hold the stock with stop at Rs 19. The stock could attempt to move higher to Rs 49, Rs 64 or Rs 89 in the medium-term. Investors with a short-term perspective can exit the stock if it fails to move beyond Rs 49. Long-term outlook will turn positive only on a strong close above Rs 90.

Query Corner: Hindalco Industries in medium-term decline ::Business Line

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Please advise on the outlook for Insecticides India and Dwarikesh Sugar Industries. Are these stocks worth holding?

P.K. Srivastava

Insecticides India (Rs 410): The graph of Insecticide India is very pleasing to the eye. It has been climbing up steadily marked by very shallow corrections. The long-term uptrend that began at December 2008 low continues to be strong. This positive structural trend will be threatened only if the stock goes on to close below Rs 275.

Medium-term supports for the stock exist at Rs 345 and Rs 292. Investors with a short- to medium-term perspective can continue to hold the stock as long as it trades above Rs 350. The stock will face resistance in the zone between Rs 400 and Rs 480 in the upcoming months.

Targets on a break above this band are Rs 515 and Rs 617.

Dwarikesh Sugar Industries (Rs 35.9): The stock is in a severe bear market since the February 2006 peak. While the intense downward spiral halted in November 2008, the stock is fluctuating in the range between Rs 28 and Rs 140 since then.

It will continue to face strong resistance around Rs 140 and the long-term outlook will turn positive only on a firm close above this level. Subsequent long-term targets are Rs 168 and Rs 200.

A fresh leg of the downtrend began at the November 2010 peak. The stock has now reached its long-term base level around Rs 28. Investors still holding on to the stock can continue to do so with stop at Rs 25. The stock will face resistance at Rs 68 and Rs 93 in the medium-term. Investors with short to medium-term investment horizon can divest their holdings at either of these levels.

Can I buy Hindalco and United Phosphorous at current levels?

Jayakumar

Hindalco Industries (Rs 119.8): Hindalco is in a medium-term correction from the peak of Rs 252 recorded in January 2011. This decline is correcting the up-move recorded in the stock from the March 2009 low. The stock is attempting to halt around its key long-term support at Rs 133. The zone between Rs 110 and Rs 120 is critical from a long-term perspective. Investors can buy the stock in declines with stop at Rs 105.

But fresh purchases should be avoided on decline below Rs 105. Next halt for the stock can be at Rs 68 or even Rs 37. Resistances for the stock over the upcoming months will be at Rs 165, Rs 180 and Rs 200. Investors with a shorter investment horizon can sell the stock at either of these levels.

Long-term view will turn positive only on close above Rs 200. Next target for the stock would be Rs 250.

United Phosphorous (Rs 113.7): United Phosphorus is also declining sharply since February. This decline has pulled the stock below its long-term support at Rs 129. It would be best if investors wait for the stock to move above Rs 128 and recording a strong close above this level before initiating fresh purchases on this counter.

The stock has feeble support at current levels, around Rs 110. But further decline will pull the stock lower to the long-term support zone between Rs 70 and Rs 80.

Medium-term targets for the stock are Rs 153, Rs 166 and Rs 180. Long-term view will turn positive only on close above Rs 180, opening the possibility of a rally to the previous peak at Rs 220.

The stock, however, has strong long-term resistance around Rs 220.

The stock could find it difficult to move beyond this hurdle just yet.

I have bought Kalindee Rail Niman and Rishi Laser at Rs 180 and Rs 64 respectively. Let me know the outlook for these stocks.

N. Gopalakrishnan

Kalindee Rail Nirman (Rs 68.7): Kalindee Rail Nirman is currently trading at a multi-year low. The stock has strong support in the zone between Rs 80 and Rs 90 where it bottomed in October 2008, March 2009 and April 2011. The stock is currently trading at Rs 74 that was the trough formed in July 2006.

Breach of this support can cause a steep fall that can drag the stock to the next long-term base between Rs 11 and Rs 32. Investors should, therefore, divest their holding on a steep decline below Rs 65.

Rallies in the upcoming months will face resistance at Rs 135 or Rs 176. Investors should divest their holding if the stock is unable to move past the first obstacle.

Rishi Laser (Rs 26.2): Rishi Laser too continues to be in the long-term downtrend that commenced from the bull-market peak in January 2008. The recovery in 2009 could help the stock retrace only one-third of the previous decline and the stock is once again moving towards its 2009 low.

Investors can hold the stock with stop at Rs 19. The stock could attempt to move higher to Rs 49, Rs 64 or Rs 89 in the medium-term. Investors with a short-term perspective can exit the stock if it fails to move beyond Rs 49. Long-term outlook will turn positive only on a strong close above Rs 90.