Hindalco: Proving mettle - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Hindalco: Proving mettle

May 6, 2003

In this rangebound market, one stock has quietly gained ground on the bourses since the beginning of the current fiscal. Hindalco, the largest private sector aluminium player, has consistently gained ground in the past one month. While the Sensex has lost 3.4% to date since the start of FY04 (7.5% from its April 7, 2003 peak), Hindalco has gained 15.2% in the same period. What is attracting investors to the stock? In this article, we try to look at some of the reasons, which could have played a part in raising optimism towards the company.

To begin with, Hindalco has already announced its 4QFY03 and FY03 results. The results are, however, not comparable to the corresponding period last year on account of the inclusion of Indo Gulf’s copper business performance with the company. However, let us just look at a couple of numbers in the results. The topline of the company (aluminium division) grew by almost 8% in 4QFY03, which was mainly on account of higher volume sales and a greater share of the value added products in the company’s total revenues. For the full year, the company’s aluminium production showed an increase of 2% while its sales volumes increased by 1.3%. For FY04, the company is targeting a growth of nearly 25% in metal production on expectations of a higher aluminium demand, both domestic and exports. Higher demand would consequently result in higher prices for the metal. Thus, in this sense, the company is well poised to reap the benefits of any upturn in demand.

The value added segment also plays an important role in maintaining the revenues of the company, as downstream products tend to insulate from volatility witnessed in metal prices. The share of the value added products in the total turnover the company has increased from 38% in FY02 to 40% in FY03. In this segment, the sales of extrusions and foils divisions increased by 19% and 14% respectively.

Another factor contributing to the build up of optimism towards the sector could be the rise in aluminium prices on the LME. Aluminium prices have not only increased by over 1% in the last one month, aluminium futures are also trading at a premium to the spot. This assumes significance when compared to the months of February and March, when the futures were trading at par or at a discount to the spot aluminium prices. This again could be due to the improved outlook towards the aluminium industry on the hopes of a recovery in world economies.

On the domestic front, the company has targeted an average growth of 8% in the next 4-5 years. Also, the issue of non-availability of coal has been resolved thus resulting in savings in power costs in FY04. With the brownfield expansion and other cost reduction measures, Hindalco is likely to bring down the cash cost of production of aluminium by US$ 50 per tonne. The passage of the Electricity Bill 2003 is also a positive for the aluminium industry, as over 1/3rd of aluminium is consumed by this sector.

At Rs 631, the company is trading at a P/E multiple of 8x its FY03 earnings (excluding the write-off of Rs 1.6 bn). Given the historical P/E band of the company at 8x-13x, valuations seem to be on the lower end of the spectrum.

Equitymaster requests your view! Post a comment on "Hindalco: Proving mettle". Click here!

  

More Views on News

Supercycle or Not these 5 Metal Stocks Delivered Superb Gains (Views On News)

Sep 8, 2021

These stocks have rallied than 100% in the last year. Is there more upside to come?

HINDALCO Announces Quarterly Results (1QFY22); Net Profit Up 668.5% (Quarterly Result Update)

Aug 9, 2021 | Updated on Aug 9, 2021

For the quarter ended June 2021, HINDALCO has posted a net profit of Rs 33 bn (up 668.5% YoY). Sales on the other hand came in at Rs 414 bn (up 63.6% YoY). Read on for a complete analysis of HINDALCO's quarterly results.

Hindalco Q4 Profit Surges 189% as Demand Surpasses Pre-Covid Level (Views On News)

May 24, 2021

A look into the country's leading aluminium and copper manufacturer's stellar Q4 performance.

HINDALCO Announces Quarterly Results (3QFY21); Net Profit Up 76.2% (Quarterly Result Update)

Feb 11, 2021 | Updated on Feb 11, 2021

For the quarter ended December 2020, HINDALCO has posted a net profit of Rs 3 bn (up 76.2% YoY). Sales on the other hand came in at Rs 114 bn (up 11.0% YoY). Read on for a complete analysis of HINDALCO's quarterly results.

HINDALCO 2019-20 Annual Report Analysis (Annual Result Update)

Nov 23, 2020 | Updated on Nov 23, 2020

Here's an analysis of the annual report of HINDALCO for 2019-20. It includes a full income statement, balance sheet and cash flow analysis of HINDALCO. Also includes updates on the valuation of HINDALCO.

More Views on News

Most Popular

Sansera Engineering IPO: Key Points to Consider (Views On News)

Sep 8, 2021

This IPO is a pure OFS and the company is looking to raise Rs 12.8 bn at the upper price band of Rs 744.

5 Stocks that Turned Rs 1 Lakh into Rs 1 Crore (Views On News)

Sep 7, 2021

Patience is one of the biggest virtues you need to have if you want to become a crorepati in the stock market.

The Top Stocks to Sell in this Bull Market (Profit Hunter)

Sep 8, 2021

When I saw the list of so-called 'value stocks' published by a leading brokerage, my worst fears came true.

5 Indian Companies that are Leading the AI Race (Views On News)

Sep 9, 2021

During the pandemic, India reported the highest increase in the use of AI at 45% compared to other major economies. AI has potential to add US$90 bn to the Indian economy by 2025.

How to Create a Second Income from Trading (Profit Hunter)

Sep 10, 2021

My trading system that works in all kinds of markets.

More

Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2021
Get our special report Multibagger Stocks Guide (2021 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

HINDALCO SHARE PRICE


Sep 17, 2021 (Close)

TRACK HINDALCO

  • Track your investment in HINDALCO with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

HINDALCO - SOUTHERN MAGNESIUM & CHEMICALS COMPARISON

COMPARE HINDALCO WITH

MARKET STATS