At time of the second quarter earnings, 'Fighting hard' is what we said Hindalco Industries Ltd. (HIL) was doing to beat the slowdown. Those efforts seem to be yielding results for the A.V. Birla group flagship company. Turnover have been climbing over the past three quarters. Also, YoY sales growth has been improving over the concerned quarters.
Operating Profit (EBDIT)
Operating Profit Margin (%)
Profit before Tax
Profit after Tax/(Loss)
Net profit margin (%)
No. of Shares
Diluted Earnings per share
The performance is commendable considering the difficult operating environment. Average prices of aluminium on the LME weakened by 16% in the quarter ended December '01 compared to the same quarter in the previous year. Further, weakness in the global and domestic economy resulted in a subdued demand environment. That said, sales in 3QFY02 have increased led by a 5.1% increase in volumes. This is contrary to last quarter when volumes declined and realisations improved. This change in QoQ performance could be due to higher sale of primary and semi-fabricated products. Exports markets continue to remain weak with slide in volumes and realisations.
While realisations declined, the company could not cut back on costs, which have eaten into operating margins. OPM has declined by 4 and 2.8 percentage points, YoY, during the quarter and 9 months ended December '01. The improved sale volumes from higher production led to higher operating costs. This could indicate that raw material costs have not declined commensurate to the drop in aluminium prices. Also, manufacturing costs have increased due to higher power costs. Power cost is among the largest constituents of operating expenses in production of primary metal.
The company continues to reduce interest expense. Interest costs, YoY, have reduced in all the quarters of the current fiscal. This could be due to the ongoing initiative of re-financing debt to take advantage of the low interest rate regime. Other income has increased on the back of dividends from Indal. Also, investments in debt markets have generated good returns with yields declining.
At Rs 686, the scrip trades on a multiple of 7.8x 9mFY02 annualised earnings. With rise in aluminium prices and indications of a pick up in the domestic economy, valuations of the counter have increased over the past quarter.
LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India. Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: firstname.lastname@example.org. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407