X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Indal: Manages to hold fort - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • May 2, 2002

    Indal: Manages to hold fort

    Indian Aluminium Company Ltd. (Indal), which outperformed sector peers for the first nine months of FY02, is likely to fininsh the fiscal on a similar note. Considering the dent in global & domestic demand and lower realisations for alumina and aluminium, the company has reported respectable topline performance and has managed to hold fort in bottomline growth.

    (Rs m) 4QFY01 4QFY02 Change FY01 FY02 Change
    Net Sales 3,382 3,704 9.5% 12,772 13,684 7.1%
    Other Income 61 121 99.0% 105 353 237.2%
    Expenditure 2,790 3,192 14.4% 10,217 11,466 12.2%
    Operating Profit (EBDIT) 592 512 -13.4% 2,554 2,217 -13.2%
    Operating Profit Margin (%) 17.5% 13.8%   20.0% 16.2%  
    Interest 84 87 3.3% 365 351 -3.6%
    Depreciation 156 147 -5.6% 630 622 -1.3%
    Profit before Tax 412 399 -3.1% 1,665 1,598 -4.0%
    Extraordinary items (55) (19) -65.7% (140) (72) -48.6%
    Tax 45 105 133.3% 365 355 -2.7%
    Profit after Tax/(Loss) 312 276 -11.8% 1,160 1,171 0.9%
    Net profit margin (%) 9.2% 7.4%   9.1% 8.6%  
    No. of Shares 71.1 71.1   71.1 71.1  
    Diluted Earnings per share 17.6 15.5   16.3 16.5  
    P/E Ratio   5.8     5.5  

    Domestic sales have provided impetus to turnover growth, as compared to exports in FY01. Domestic sales for the year are higher by 12.9%. Whereas exports slipped by 6.8% during the same period. A positive sign is the sharp swing in export performance for 4QFY02, registering a growth of 13.1% YoY. Poor export performance was expected, as the global economy, especially U.S -- a key aluminium consumer -- experienced a dramatic downturn in business activity.

    With realisations in domestic and export markets under pressure, higher turnover is likely to have been achieved by higher unit sales, value added downstream products and better product mix. Growth in unit sales was largely acquired from sheets and extrusions division. While all divisions are likely to have reported higher unit volumes, Indal faces capacity constraints in alumina and aluminium with output increasing by only 2% and 1% respectively. Having said that, the company has been dynamic in altering the product mix to protect realisations by focusing on high value (quality) products. Greater presence in the downstream business is likely to have driven better financial performance as compared to its peers.

    Presence in the downstream segment, dynamic product mix and improved efficiencies has assuaged some of the pressure on operating margins. The lower OPM has taken a toll on the operating performance of the company. In FY02, margins took a double hit, as alumina and aluminium prices declined by an estimated 50% and 10%, while caustic soda prices -- a key ingredient -- nearly doubled. Much of the damage to realisations and margins has been inflicted in 2HFY02, which seems to highlight the impact of 9/11. Although YoY power costs have remained flat, per unit cost of power has increased, which has eaten into efficiency gains. Power cost at Alupuram smelter increased by an estimated Rs 11 m per month since August '01.

    Interest expense for the year has been kept under control, which could have resulted from declining interest rates over the past twelve months. The sharp spurt in other income for 3QFY02 has helped push full year numbers considerably higher. Higher cash flows in the previous fiscal is likely to have resulted in higher investment income for FY02. Adjusting for other income, pre-tax profits would be lower by 20%, which indicates that quality of earnings has taken a sizable hit. Effective tax rate -- not including deferred tax -- has declined by 6.2 percentage points.

    Going forward, Indal is addressing smelting capacity constraints by nearly doubling capacity at Hirakud, Orissa to 57,000 metric tonnes per annum (MTPA). This is largely through the transfer of pots from the closed Belgaum, Karnataka unit. Commercial production from enhanced capacity is likely to start by end of FY03. Capitive power at Hirakud is also being expanded to support the higher aluminium production. The Appellate Authority for Industrial & Financial Reconstruction (AAIFR) has approved the merger of Annapurna Foils Ltd. (AFL) with Indal effective from April 1 2002. The merger will result in an additional 4,000 MTPA of foil capacity. With an expected global & domestic economic turnaround, performance if FY03 is likely to be driven by improved realisations, better sheet and foil volumes and possibly lower raw material costs. India is excess in Aluminium, considering capacity expansion, thrust is likely to be laid on export markets.

    At Rs 90, the scrip trades on a multiple of 5.5x FY02 earnings. Despite the challenges, Indal has convincingly managed to hold fort, especially compared to the peers. The company attracts a lower valuation compared to group peer, Hindalco Industries Ltd. (HIL), which could be due to alumina hydrate (commodity) constituting approximately a quarter of sales. Volatility in commodity prices adversely affects operating margins. The higher smelting capacity and greater focus on downstream products could favourably alter the revenue mix.

     

     

    Equitymaster requests your view! Post a comment on "Indal: Manages to hold fort". Click here!

      
     

    More Views on News

    Hindalco: Strong Performance at Operating Level (Quarterly Results Update - Detailed)

    Feb 22, 2017

    Hindalco Industries has reported a 14.5% YoY increase in the topline while the bottomline came at Rs 3.2 billion.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    Proxy Plays: A Smart Way to Bet on 'Off Limits' Companies(The 5 Minute Wrapup)

    Aug 4, 2017

    The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    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: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    TRACK INDAL

    MARKET STATS