Hindalco Q3 PAT likely to be flat at Rs 459.4 cr

Country's largest aluminium producer Hindalco Industries' standalone profit after tax is expected to be flat at Rs 459.4 crore in the October-December quarter of FY12 as against Rs 460.3 crore in a year ago quarter.

Net sales are seen going up by 6.8% to Rs 6,319.6 crore from Rs 5,917.9 crore year-on-year.

EBITDA is likely to fall 4.7% to Rs 651.2 crore from Rs 683.4 crore during the same period.

EBITDA margin is expected to be falling at 10.3% in the third quarter of FY12 versus 11.5% in the corresponding quarter of last fiscal.

On quarter-on-quarter basis, net sales are seen going up by 1.6% and EBITDA too is likely to go up 5.4%. EBITDA margin is too seen improving at 10.3% versus 9.9%. However, PAT is likely to fall 8.6%.

Factors to watch:

- Earnings likely to be driven by higher metal volumes and rupee depreciation

- But LME prices will be a dampener: As the fall in commodity prices was higher than the fall in INR

- During Q3FY12, LME prices of aluminum and copper declined sharply to USD 2,100 and USD 7,500

- EBITDA margins will be under pressure on a YoY basis but a slight improvement on a QoQ basis:

- Due to lower LME metal prices and high coal prices on a y-o-y basis

- Costs pressure is expected to moderate QoQ and performance is not likely to improve due to fall in realization

- Marginal reduction in input costs on a q-o-q basis as coal supply improves post monsoon

- 2QFY12 was affected by coal shortage due to heavy monsoon, and company had to rely on external purchase of high cost electricity

- Lower power & fuel costs are expected to neutralize the effects of lower LME prices

- PAT: Will be supported by higher treasury yields and enhanced corpus which will more than offset the higher interest costs

Volumes:

- Likely to report a steady improvement in alumina and aluminium production on YoY as well as sequential basis

- Copper production is likely to witness strong growth of 13% QoQ, but YoY growth would remain at 5-6% and will drive the topline as copper business contributes more than 65% to the topline

Positives going ahead:

- Effect of recent increase in TcRc is not being considered in the quarter but its effect will be visible in CY12:

- Treatment and refining charges (TcRc) up 12.4% for CY2012:

- Higher copper fees and a weakening rupee will cushion Sterlite from waning demand due to the economic slowdown as they are in anticipation of a resurrection in demand

- Leading companies like Jiangxi Copper and Freeport-McMorgan Copper Gold have reached an agreement to raise TcRc by 12.4% yoy to USD 63/tonne and 6.35c/lb, respectively, for CY2012

- Greenfield projects are progressing gradually and have seen both time and cost overruns over last few quarters:

- Utkal Refinery project is now likely to be commissioned 3QFY13, while Mahan Phase-I is likely to be commissioned in 4QFY12