Maintain 'buy' on Hindalco – TP Rs.179 - Geojit BNP Paribas Financial Services Limited

- Buy rating on Hindalco is maintained with a target price of Rs.179 over one year. The stock is being traded in the range of Rs.118.

- The company has reported standalone EBITDA of Rs. 860 crore for 4QFY12. EBITDA has beaten market expectations.

- PAT at Rs. 640 crore is also better than market expectations.

- Interest expenses are in line with estimates while better than expected other income, lower depreciation and lower tax rates led to better than expected PAT.

- EBITDA beat was driven by copper smelting with higher than expected production.

- Copper cathode production at 95000 ton was 9% higher than expected and aluminium metal production at 144000 tons 2% lower than estimates.

- However, aluminium average sales price premiums increased sequentially and were significantly higher than expected.

- Hindalco is traded at 6.3 multiple of FY13 expected earnings and at 6 multiple of FY14 expected earnings. The valuation is cheap while compared to its global peers.

- There could be some downward risk to the target price if the commissioning of the Mahan Smelter and Utkal refinery are delayed beyond the expectations.

- Stock performance from here on will hinge on aluminium price recovery and timely execution of expansion projects.

- Any sharp rise in linkage coal price may also affect performance of the stock.

Source : Equity Bulls

Keywords