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Hindalco Industries 3QFY2013 performance highlights and results update

Contributed by Angel Broking

Disappointing 3QFY2013 standalone results: Hindalco Industries (Hindalco)’s standalone net sales increased by 3.0% yoy to Rs.6,790cr (below our estimate of Rs.7,199cr) mainly on account of lower than expected aluminium production during the quarter. Hindalco’s standalone EBITDA decreased by 18.6% yoy to Rs.582cr and adjusted net profit decreased 35.8% yoy to Rs.289cr (below our estimate of Rs.404cr).

Novelis performance- A mixed bag: For 3QFY2013 Novelis posted a 5.7% yoy decline in net sales due to lower conversion premiums and lower aluminium prices. The EBITDA, however, grew by 30.1% yoy to $173mn. Further, Novelis’ net profit stood at US$3mn as compared to a net loss of US$12mn in 3QFY2012

Outlook and valuation: Although Hindalco is expanding its capacities three-fold over the coming four-five years, low aluminium prices, sticky costs and delay in commencement of mining from captive blocks are expected to mute its profitability growth. In the near-term, there is lack of clarity over production from the Mahan coal block for its upcoming Mahan smelter. Without captive coal block, the Mahan smelter (expected to commission in FY2014) is expected to face cost pressures, resulting in lower return ratios over the next two years. We maintain our Neutral recommendation on the stock.