Standalone revenue of Rs68.77bn was marginally higher than our estimate due to higher aluminium and copper production volumes
Aluminium production was higher on the back of a ramp-up of both the aluminium smelters. Alumina production remained impacted due to lower availability of bauxite from the Belgaum refinery
Copper production too recovered during the quarter, increasing by 8% qoq on account of better utilization of the smelters
Operating profit of Rs5.8bn was 13% higher on a qoq basis as power costs declined
Maintain Buy with a revised 9-month price target of Rs128.
|(Rs mn)||Q3 FY13||Q2 FY13||% qoq||Q3 FY12||% yoy|
|Power and fuel costs||(7,549)||(8,065)||(6.4)||(7,385)||2.2|
|OPM (%)||8.5||8.4||11 bps||10.8||(229 bps)|
|Effective tax rate (%)||20.1||19.7||18.2|
|Adj. PAT margin (%)||6.3||5.8||49 bps||6.8||(47 bps)|
|Ann. EPS (Rs)||18.1||15.0||20.8||18.8||(3.9)|
Higher volumes boost revenue
Standalone revenue increased 11.5% qoq to Rs68.7bn and was higher than our estimate of Rs67.3bn due to higher aluminium and copper cathode production. Revenue from aluminium business increased 5% qoq to Rs22.1bn as aluminium production recovered on a qoq basis. Aluminium production increased 8.6% qoq to 139,000 tons due to ramp-up of both the aluminium smelters. Alumina production was marginally lower at 326,000 tons as production from Belgaum refinery declined due to unavailability of bauxite. Aluminium premiums declined in this quarter as sales of value added products declined 5% qoq to 59,000 tons due to poor market conditions. Revenue from copper business increased 15% qoq to Rs46.6bn which was higher than our estimate. Increase in copper revenue was led by higher production of copper cathodes which increased 8% qoq to 84,000 tons. Copper cathode rods production was flat on a qoq basis at 37,000 tons. With the greenfield projects at Mahan Aluminium, Hirakud FRP and Utkal Aluminium in the final stages of implementation, the company expects to improve aluminium production by H1 FY14.
Quarterly production performance
|(Tons)||Q3 FY13||Q2 FY13||% qoq||Q3 FY12||% yoy|
Operating profit surges 13% qoq as coal cost declines
In Q3 FY13, Hindalco’s operating profit increased 13% on a yoy basis to Rs5.8bn, marginally higher than our estimate of Rs5.6bn. Operating costs increased 11% qoq to Rs62.9bn as material costs increased 16% qoq to Rs46.5bn on account of higher production volumes. Power costs declined 6% qoq to Rs7.5bn due to lower coal costs during the quarter. Power costs as a % of sales declined from 13.1% in Q2 FY13 to 11% in Q3 FY13. OPM shrunk 229bps on a yoy basis and increased 11bps on a qoq basis. Aluminium production improved on account of better smelter performances while the alumina operations were impacted by lower availability of bauxite. EBIT from the aluminium division declined 33% yoy but increased 22% qoq to Rs2.1bn. On the other hand, EBIT of Rs2.25bn from the copper business was higher than our expectation.
|As a % of net sales||Q3 FY13||Q2 FY13||bps qoq||Q2 FY12||bps yoy|
|Power and fuel costs||11.0||13.1||(210)||11.1||(12)|
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