CMP Rs120, Target Rs147, Upside 22.3% 

• Q4 FY12 standalone revenue of Rs60bn was quite lower than our estimate of Rs70bn. The underperformance was due to lower copper and aluminium production.
• Copper production declined 27.4% qoq due to maintenance shutdown. EBIT from the division plunged 74% qoq to 0.8bn.
• Aluminium production too was impacted due to some operational issues at both its smelter. EBIT declined 44.2% qoq to 2.7bn
• Operating profit of Rs4.6bn was 46.4% lower on a qoq basis due to a sharp increase in other expenditure
• Other income of Rs3bn was quite higher due to dividends received from its subsidiaries
• Novelis numbers showed recovery on a qoq basis, both in volumes and margin
• We maintain our BUY rating on Hindalco with a revised 9-month price target of Rs147

Lower production led to an underperformance in topline

Hindalco in Q1 FY13 registered revenues of Rs60bn, quite lower than our estimate of Rs70bn, on account of lower copper and aluminium production. Copper division revenue was lower by 22.9% qoq to Rs39bn due a 27.4% decline in copper production and lower byproduct revenue. Copper production declined sharply in Q1 FY13 after registering its all time high quarterly production in Q4 FY12 as the company had taken maintenance shutdown. We are surprised by the shutdown as the company had taken its bi-annual shutdown in Q2 FY12. Aluminium division revenue too was lower by 17.5% qoq on account of lower aluminium production and lower product premiums. Aluminium metal production decreased by 8.3% qoq to 132,000 tons from 144,000 tons in Q4 FY12. The decline in aluminium production was due to operational issues in both the smelters. Alumina production during the quarter too was lower by 2.9% qoq to 335,000 tons.