Dear All,
Forwarding you the Result Update on Hindalco with a Buy recommendation and a Target Price of ` 240 (12 months)
Hindalco’s 4QFY2011 standalone performance was above our estimates on account of higher-than-expected sales volumes and lower-than-expected cost.
Strong performance in 4QFY2011: Hindalco’s standalone net revenue grew by 26.2% yoy and 14.2% qoq to `6,761cr on account of higher realisation, better product mix and improved copper sales volume. During the quarter, extrusions production was lower by 24.9% yoy and 24.1% qoq to 7kt following lock-out declared at Alupuram in February, 2011, while copper cathode production grew by 13.7% yoy and 5.9% qoq to 85kt and aluminium metal production was flat yoy, though up 12.5% qoq to 139kt. EBITDA increased by 9.5% yoy and 23.6% qoq to `914cr. EBITDA margin dipped by 206bp yoy to 13.5% (up by 102bp qoq) due to lower TC/RCs and higher energy and staff costs. Interest expense fell by 20.0% yoy to `56cr (up 9.3% qoq), while other income grew by 35.4% yoy and 73.4% qoq to `105cr due to higher treasury yield and larger funds, post return of capital from Novelis. Further, tax rate stood lower at 10.4% as against 20.4% in 3QFY2011 but was higher from 1.5% in 4QFY2010. Thus, net profit grew by 6.7% yoy and 53.9% qoq to `708cr.
Outlook and valuation: We believe Hindalco is well placed to benefit from a) its aluminium expansion plans (capacity increasing by nearly 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 7.5x FY2012E and 5.9x FY2013E EV/EBITDA. We maintain our Buy recommendation on the stock with a revised SOTP target price of `240 (earlier `262).
Kindly click on the following link to view the Report.
If you have any further queries, feel free to call us on 022 39357600 Ext: 6865 or mail us at advisory@angelbroking.com
With best regards,
Fundamental Advisory Desk
Angel Broking
Akruti Star,5th 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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