Hindalco - 1QFY2013 Result Update - Angel Broking

Disappointing 1QFY2013 standalone results: Hindalco Industries (Hindalco)'s standalone net sales remained flat at Rs.5,964cr (below our estimate of Rs.7,265cr) mainly on account of lower aluminium and copper production during the quarter. Hindalco's standalone EBITDA decreased by 46.6% yoy to Rs.463cr. The net profit also decreased by 34.1% yoy to Rs.425cr (below our estimate of Rs.508cr).

Novelis performance - A mix bag: For 1QFY2013 Novelis posted an 18.1% yoy decline in net sales due to a decline in both volumes and realizations. The EBITDA also fell by 21.5% yoy to $234mn. However; Novelis' net profit grew by 46.8% yoy to $91mn due to higher other income and lower taxes.

Outlook and valuation: Although Hindalco is expanding its capacities three-fold over the coming four-five years, low aluminium prices, rising costs and delay in commencement of mining from captive blocks are expected to mute its profitability growth. In the near-term, there is lack of clarity over production from Mahan coal block for its upcoming Mahan smelter. Without a captive coal block, the Mahan smelter (expected to commission in 2HCY2012) is expected to face cost pressures, resulting in lower return ratios over the next two years. Moreover, we do not rule out delays in upcoming projects. We maintain our Neutral view on the stock.

Source : Equity Bulls

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