Hindalco - 2QFY2013 Result Update - Angel Broking

Mixed 2QFY2013 standalone results: Hindalco Industries (Hindalco)'s standalone net sales declined by 1.7% yoy to Rs.6,115cr (below our estimate of Rs.6,423cr) mainly on account of lower aluminium production during the quarter. Hindalco's standalone EBITDA decreased by 23.0% yoy to Rs.515cr and net profit also decreased by 28.6% yoy to Rs.359cr (in line with our estimate of Rs.364cr).

Novelis performance- A mixed bag: For 2QFY2013 Novelis posted a 15.2% yoy decline in net sales due to decline in realizations. The EBITDA, however, grew by 9.2% yoy to $249mn. Further, higher tax provisions resulted in Novelis' net profit declining by 59.2% yoy to $49mn.

Outlook and valuation: Although Hindalco is expanding its capacities three-fold over the coming four-five years, low aluminium prices, sticky 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 captive coal block, the Mahan smelter (expected to commission in 2HFY2013) is expected to face cost pressures, resulting in lower return ratios over the next two years. Maintain Neutral.

Source : Equity Bulls

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