RBS' Q3 earnings expectations for metal sector

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RBS' Q3 earnings expectations for metal sector

Many metal companies like Hindalco Industries, Sterlite Industries (India) and Steel Authority of India (SAIL) will soon announce their Q3FY10 results. In an interview with CNBC-TV18, Rahul Jain, Assistant Director, RBS, talks about his expectations from these companies.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ News and Notices about Hindalco See interviews with Hindalco Management See what other Experts & Brokerages are saying about Hindalco See previous Results of Hindalco Hindalco BSE | NSE 10/02/12 Are Mutual Funds betting on Hindalco?

Many metal companies like Hindalco Industries , Sterlite Industries (India) and Steel Authority of India (SAIL) will soon announce their Q3FY10 results. In an interview with CNBC-TV18, Rahul Jain, Assistant Director, RBS, talks about his expectations from these companies.

Here is a verbatim transcript of the exclusive interview with Rahul Jain on CNBC-TV18. Also watch the accompanying video.

Q: What are you expecting to see this quarter from Hindalco?

A: Hindalco should report a strong topline growth that is mostly driven by copper prices, which are up by 75% year on year; the aluminium prices are up only by 9%. On an earnings before interest, taxes, depreciation and amortization (EBITDA), we see 1% growth and on the profit after tax (PAT), we see much flat earnings with Rs 500 crore on the PAT number. Key reason for this is that there has been a decline in treatment and refining charges (TCRC) margins and also there would be slight increase in cost of aluminium making in the last quarter due to higher input prices of coal and other things.

Q: What would you expect from Sterlite, year on year of course numbers would be very high, but quarter on quarter there would still be some improvement?

A: We do not cover Sterlite at this stage. But I can say that Hindustan Zinc reported very strong numbers; their earnings were up significantly over the last year almost up by three times, so that would flow through Sterlite earnings. But Sterlite has diluted its equity significantly over the last few months and years, so that reduces the impact.

The key thing what people are looking for in Sterlite is progress on key milestones especially on commissioning of the power plant, the allocation of coal blocks. Also, in case of Vedanta Aluminium, people are looking for the commissioning of the Niyamgiri mines, which has been delayed quite sometime. So, these two are far more important things to watch out for. Even in Hindustan Zinc, there is an expansion which will happen in the next three-six months. So it's more of a delivery and how it pans out which is what people would be focused on.