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Saturday, February 22, 2014

Hindalco Analysis with good Future ahead

Higher Volumes

By looking at Hindlaco results we see that Higher volumes boost topline by 5.8% yoy Standalone revenue of `72.7bn was higher by 5.8% yoy and 15.4% qoq. Aluminium production increased by 0.7% yoy and 6.1% qoq to 140,000ton.
Copper production too was higher by 6% yoy and 15.6% qoq at 89,000 tons. The Mahan smelter managed to increased its production from 7,400ton in Q2 FY14 to 18,100ton and that at Utkal increased from 41,000ton to 87,000ton.

EBITDA impacted by high power costs

Aluminium business EBIT was lower due to high power cost. Reduction in spot premium qoq basis lead to a 20bps decrease in EBIT margins. Aluminium business EBIT stood at 6.9%, lowest in the last five years. A strong operatinal performance (at a 3Year high) by the copper division arrested further slide on profitabilty. Power and Fuel costs as a % of sales increased from 11% in Q3 FY13 to 13% due to lower linkage coal.

Earnings growth to resume


Hindalco has underperformed over the last one year due to soft aluminium prices globally, project delays and allocation of coal block to the Mahan smelter. As seen downside for aluminium prices is limited as it is below the mean of the global cost curve. Novelis would register strong earnings growth on the back of increased capacity and change in product mix. This would drive the earnings of the consolidated entity over the next one year.

Hindalco Analysis with good Future ahead

Higher Volumes

By looking at Hindlaco results we see that Higher volumes boost topline by 5.8% yoy Standalone revenue of `72.7bn was higher by 5.8% yoy and 15.4% qoq. Aluminium production increased by 0.7% yoy and 6.1% qoq to 140,000ton.
Copper production too was higher by 6% yoy and 15.6% qoq at 89,000 tons. The Mahan smelter managed to increased its production from 7,400ton in Q2 FY14 to 18,100ton and that at Utkal increased from 41,000ton to 87,000ton.

EBITDA impacted by high power costs

Aluminium business EBIT was lower due to high power cost. Reduction in spot premium qoq basis lead to a 20bps decrease in EBIT margins. Aluminium business EBIT stood at 6.9%, lowest in the last five years. A strong operatinal performance (at a 3Year high) by the copper division arrested further slide on profitabilty. Power and Fuel costs as a % of sales increased from 11% in Q3 FY13 to 13% due to lower linkage coal.

Earnings growth to resume


Hindalco has underperformed over the last one year due to soft aluminium prices globally, project delays and allocation of coal block to the Mahan smelter. As seen downside for aluminium prices is limited as it is below the mean of the global cost curve. Novelis would register strong earnings growth on the back of increased capacity and change in product mix. This would drive the earnings of the consolidated entity over the next one year.