Dear All,
Forwarding you the Result Update on Hindalco-Novelis for 4QFY2011 with a Buy recommendation and a Target Price of `243 (12 months).
Top-line growth aided by higher realisation and shipments: Novelis, Hindalco’s fully-owned subsidiary, reported strong set of numbers for 4QFY2011. The top line increased by 22.3% yoy and 15.6% qoq to US$2,960mn, as total shipments grew by 12.7% yoy and 3.0% qoq to 800kt, driven by strong demand across all product segments. Adjusted EBITDA increased by 21.2% yoy and 17.6% qoq to US$280mn, largely because of portfolio optimisation and increased prices. Thus, adjusted EBITDA/tonne came in at US$350/tonne. Net interest expenses grew by 92.7% yoy to US$79mn. Net profit came in at US $50mn in 4QFY2011 vs. a loss of US$1mn in 4QFY2010.
Capacity expansion to meet strong demand: With demand for automotives, electronics and beverage cans expected to grow by >25%, 10–15% and 4–5%, respectively, in the next five years, Novelis is expanding its capacity by 1,000kt with capex of US$1.5bn; in Brazil by 220kt, Asia by 350kt and North America by 200kt and the balance through debottlenecking. In FY2012, 3–4% of the capacity is expected to be commissioned through debottlenecking. Management has guided for capex of US$550mn–600mn in FY2012, which is likely to be funded through internal cash flows, indicating no dividend payment in FY2012.
Outlook and valuation: We believe Hindalco is well placed to benefit from a) its aluminium expansion plans (capacity increasing by two-three folds in the next two-four years), b) low production cost at its new capacities and c) steady capacity expansion at Novelis. At the CMP, the stock is trading at 7.1x FY2012E and 5.5x FY2013E EV/EBITDA. We maintain our Buy recommendation on the stock with an SOTP target price of `243.
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With best regards,
Fundamental Advisory Desk
Angel Broking
Akruti Star,6th Floor, Road No.7,MIDC, Andheri (E),Mumbai – 93.
Call : (91) (022) 39357600 Ext. 6865
Website : www.angelbroking.com
Disclaimer: Ours is an advisory role. The final decision and consequences based on our information is solely yours. Moreover, in keeping with regulatory guidelines, we do not guarantee any returns on investments. Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice.
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