Hindalco Industries (NB Insti) - Novelis Update - Nirmal Bang

- Novelis, a 100% arm of Hindalco Industries, posted just a 3% YoY rise in adjusted EBITDA for 4QFY13 at US$240mn, below our estimate of US$292mn, following lower volume as well as lower EBITDA/tn. On QoQ basis, adjusted EBITDA was up 30% due to the one-time enterprise resource planning (ERP) implementation costs incurred in 3QFY13.

- Novelis reported operating cash flow of US$210mn, lower than even its revised guidance of US$250mn-US$300mn for FY13 (original guidance at the start of the year was US$600mn-US$700mn). On the other hand, on the capex front, it topped its guidance (US$750mn) at US$775mn.

- The above factors led the net debt to rise from US$4.04bn at the end of FY12 to US$4.63bn at the end of FY13. This along with a 9% drop in adjusted EBITDA for FY13 led to a sharp deterioration in the debt/EBITDA ratio - from 3.8x at the end of FY12 to 4.8x at the end of FY13.

- We have retained our consolidated earnings estimates for Hindalco, maintaining our Sell rating on the stock with a TP of Rs75.

Source : Equity Bulls

Keywords