Hindalco - Result Update - Dolat Capital

Hindalco's standalone profits, at Rs.6.4bn were above our estimate and consensus of Rs.4.95bn. Higher other income, inventory liquidation, and higher production in Copper boosted profits.

Net sales rose 11.7% YoY/15% QoQ to Rs.76.4bn (Dolat est: Rs.67bn) due to destocking in aluminum division and higher sales in Copper production..

Aluminum production volumes fell 1.6% QoQ to 1,44,000 tonnes, whereas net revenues increased 11.7% QoQ due to inventory liquidation. Aluminum division's EBIT rose 56.6% QoQ to Rs.4.83bn on the back of better LME prices. Aluminum division's EBIT rose by 56.6% QoQ to Rs.4.83bn (Dce:Rs.4.27bn) and was also boosted by the insurance claim received due to the Hirakud outage in Q2FY12.

Copper production volumes 8.3%QoQ/11%YoY to 95,000 tonnes at rated capacity as against our expectations of 85,000 tonnes due to better availability of better grade of the concentrate The copper division's EBIT rose 35.8% QoQ/42.5%YoY to Rs.2.93bn (Dolat est: Rs.1.9bn).

Staff cost declined by 4.8%YoY/11.9%QoQ to Rs.2.67bn whereas other expenses also declined by 7.8% QoQ to Rs.4.54bn. It had a forex loss of Rs.290mn in Q3FY12 which was not there during the quarter.

There was no update on the projects in the presentation and the timeline of the completion of the projects . They have incurred a capex of Rs.162bn on Mahan, Hirakud FRP and Aditya Aluminum operation and is without Utkal Alumina which is under a SPV.

Hindalco stock has corrected by 21% over last 3 months on back of concerns on delay in expansion plans softer LME prices, and cost pressures. Hindalco stock performance in short term will be driven by performance of Novelis and progress on expansion plans along with the progress on the Mahan Coal block. We maintain our Accumulate rating on the stock with a target price of Rs.140 per share based on SOTP.

Source : Equity Bulls

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