Ventura has recommended hold rating on Hindalco Industries
, in its February 12, 2013 research report.
“Hindalco revenues for the quarter grew by 11percent to Rs 6,871.7crore on a QoQ basis led by the higher other income. Other income was stronger, given an enhanced average treasury, along with income of non-recurring nature. During the quarter, LME aluminium declined by 4.6percent YoY, while copper prices grew by 5.6percent on a YoY basis. The aluminum and copper segment contributed Rs 2,215.5 crore (32percent) and Rs 4,660.8 crore (68percent) respectively to Hindalco’s revenues. Alumina production was marginally lower at 326 Kt vs. 328 Kt in Q2FY13, on account of lower production at the Belgaum refinery, reflecting the constraints in the availability of bauxite for this plant. While aluminium sales grew by 5percent to Rs.2,215 crore from Rs.2,105 crore in Q2FY13 led by higher volumes. The performance of aluminium business improved on the back of ramp-up at both the smelters, after the operational set-backs in Q2FY13. The total metal production stood at 139 Kt compared to 128 Kt in Q2FY13. VAP sales were 59 Kt due to poor market conditions.”
“In the Copper business front, revenue rose by 15percent, driven by higher volumes to Rs.4,661 crore from Rs.4,066 crore in Q2FY13. The EBIT of the copper business grew by 8percent to Rs.225 crore vs. Rs.209 crore in Q2FY13. Cathode production was at 84 Kt as against 78 Kt in Q2FY13. The value-added CCR production was maintained at 37Kt. During Q3FY13, Hindalco's EBITDA stood at Rs 582 crore, de- grew by 18.4percent on YoY basis (+13percent QoQ) backed by the higher than expected aluminium realisation and metal volumes. While EBITDA margin remained flat to 8.47percent in Q3FY13 as against 8.36percent in previous quarter with aluminium/copper EBIT margins at 9percent/5percent over the same period. Led by the one-time non-recurring income, other Income for the quarter stood at Rs 318.1 crore higher by 247percent on YoY basis. Surge in interest cost was a negative surprise but higher other income enabled PAT at Rs 434 crore to be ~25percent.”
“At the CMP of Rs 113, the stock trades at a PE multiple of 6.9x and 6.1x FY14 & FY15 consensus earnings estimates (standalone). We believe that all the negatives (uncertain regulatory environment, delay in expansion projects and associated costs) have been factored in. However, further delay in expansion projects, project cost overruns and decline in LME prices could further dent the current valuations. We recommend a HOLD on the stock,” says Ventura research report.
FIIs holding more than 30% in Indian cos
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