Hindalco Industries (Q1 FY13)

India Infoline News Service | Mumbai |

Aluminium production too was impacted due to some operational issues at both its smelter. EBIT declined 44.2% qoq to 2.7bn

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
Result table (Standalone)
(Rs mn) Q1 FY13 Q4 FY12 % qoq Q1 FY12 % yoy
Net sales 60,279 76,471 (21.2) 60,309 (0.0)
Material costs (38,951) (53,161) (26.7) (38,252) 1.8
Power and fuel costs (7,573) (7,440) 1.8 (6,353) 19.2
Personnel costs (2,902) (2,678) 8.4 (2,501) 16.0
Other overheads (6,222) (4,544) 36.9 (4,528) 37.4
Operating profit 4,631 8,648 (46.4) 8,675 (46.6)
OPM (%) 7.7 11.3 (363) bps 14.4 (670) bps
Depreciation (1,705) (1,658) 2.8 (1,754) (2.8)
Interest (815) (801) 1.8 (667) 22.1
Other income 3,014 1,605 87.8 1,779 69.4
PBT 5,126 7,794 (34.2) 8,033 (36.2)
Tax (878) (1,395) (37.0) (1,589) (44.7)
Effective tax rate (%) 17.1 17.9
19.8
Adjusted PAT 4,248 6,400 (33.6) 6,445 (34.1)
Adj. PAT margin (%) 7.0 8.4 (132) bps 10.7 (364) bps
Reported PAT 4,248 6,400 (33.6) 6,445 (34.1)
Ann. EPS (Rs) 17.7 26.7 (33.6) 26.9 (34.1)
Source: Company, India Infoline Research

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.


Production volumes
(tons) Q1 FY13  Q4 FY12 % qoq Q1 FY12 % yoy
Aluminium 335,000 345,000 (2.9) 347,071 (3.5)
Alumina 132,000 144,000 (8.3) 123,325 7.0
Rolled Products 25,247 25,247 0.0 24,158 4.5
Extrusion 57,827 55,689 3.8 54,042 7.0
Copper Cathodes 8,886 8,744 1.6 9,637 (7.8)
CC Rods 69,000 95,000 (27.4) 50,830 35.7
Source: Company, India Infoline Research

Segmental results
  Q1 FY13 Q4 FY12 qoq chng Q1 FY13 Q4 FY12
Sales (Rs m)

in % Sales Contribution (%)
Aluminium Business 20,626 24,986 (17.5) 34.2 32.7
Copper Business 39,721 51,544 (22.9) 65.9 67.4
Less: Intersegment Rev (68) (60) 13.4 (0.1) (0.1)
Total 60,279 76,471 (21.2) 100.0 100.0
EBIT (Rs m)

in % EBIT contribution (%)
Aluminium Business 2,701 4,839 (44.2) 52.7 62.1
Copper Business 757 2,931 (74.2) 14.8 37.6
Others 1,668 25 6,624.6 32.5 0.3
Total 5,126 7,794 (34.2)

EBIT margins (%)

in bps

Aluminium Business 13.1 19.4 (627)

Copper Business
BSE 237.25 [0.75] ([0.32]%)
NSE 237.00 [1.10] ([0.46]%)

***Note: This is a NSE Chart

 

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