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.
Hindalco: Market's on guard - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Aug 2, 2002

    Hindalco: Market's on guard

    While aluminium prices did climb after the global economic lows in October '01 to a high of $1,438/ tonne, non-ferrous metal prices -- similar to other commodities -- have been slipping with downturn in global capital markets, which could push back an economic recovery. Consequently, challenging times experienced in FY02 have continued into FY03 for the aluminium industry.

    (Rs m) 1QFY02 1QFY03 Change
    Net Sales 5,490 5,860 6.7%
    Other Income 326 315 -3.4%
    Expenditure 2,970 3,591 20.9%
    Operating Profit (EBDIT) 2,520 2,269 -10.0%
    Operating Profit Margin (%) 45.9% 38.7%  
    Interest 104 79 -24.0%
    Depreciation 370 413 11.6%
    Profit before Tax 2,372 2,092 -11.8%
    Tax 761 690 -9.3%
    Profit after Tax/(Loss) 1,611 1,402 -13.0%
    Net profit margin (%) 29.3% 23.9%  
    No. of Shares 74.5 73.7  
    Diluted Earnings per share* 87.4 76.1  
    P/E Ratio   7.9  
    (annualised)      

    For most of FY02, Hindalco Industries Ltd. (HIL) reported negative to low single digit topline growth. The high single digit growth seen in 4QFY02 was primarily led by higher volumes, as international prices ruled lower YoY. The company is likely to have commissioned the 33,000 metric tonne per annum (MTPA), 9th aluminium potline in December '01, which facilitated growth. For the quarter ended June '02, the company continued to benefit from higher aluminium production capacity, as compared to last fiscal. Production, during the concerned period, was higher across the board with sale volumes rising by 10% YoY. The same does indicate that realisations were lower. Encouragingly, production of downstream products -- close to consumers -- foils and wheels has increased considerably. Pricing power in these products is higher.

    Products prices, on blended basis, have declined by 2.9% YoY. As mentioned earlier, stickiness in downstream product prices is higher compared to commodity prices. Much of the damage to realisations is likely from aluminium ingots/billets. International aluminium prices were lower by an estimated 10% YoY in 1QFY03. Aluminium -- a high but volatile margin business -- contributes an estimated 40% of gross sales. The salutary impact of presence in downstream business does reflect on blended realisations. Similar to 4QFY02, operating costs have increased due to higher volume sales, which also indicates that unit cost has not fallen commensurately with realisations. Manufaturing and staff costs have increased sizably. We indicated in our earlier report that rise in coal prices at start of FY02 has led to higher energy costs. Also, the company entered into a fresh wage agreement at start of 2002. The agreement is valid upto December '04 and entails an estimated 30% hike in wages.

    Interest rates have been declining over the past 5 consecutive quarters. The company is likely to have benefited from the softening interest rate regime. That said, gross interest expense has incrased but net interest is lower due to capitalisation of interest. On the other hand, lower interest rates also affects other income of the company. Other income increased significantly in the previous fiscal, as debt funds performed well in the declining interest rate scenario.

    Going forward, the company expects global aluminium consumption to grow by 1% YoY, while production could rise by 4%. Consequently, international prices could remain subdued. We expect aluminium prices to remain stable at existing levels. That said, China is a swing factor with demand growth in double digits leading to more comfortable regional demand-supply dynamics. HIL exports performed well, which could have been lifted by China. Domestic demand could get support, with improved growth in auto and construction sector.

    At 599, the scrip is trading on a multiple of 7.9x 1QFY03 annualised earnings. The scrip trades in a band of 6x-9x earnings. Over the past few weeks, the stock price has declined from Rs 700 levels. On July 21, 2002, the board approved the amalgamation of the copper business of Indo Gulf Corporation Ltd. with itself. The amalgamation is likely for enhancing balance sheet size. Also, the company has declared an open offer for outstanding non-promoter shares in Indal at Rs 120/ share. Hindalco is likely to be among the front runners in bidding for National Aluminium Company Ltd. (Nalco). We reckon, the company could require an estimated Rs 75 bn. Markets are likely to have exited the stock, as financial risk profile could change considerably post acquisition of Nalco. Also, consolidated margins -- with copper and Indal -- is likely to be pulled down.

     

     

    Equitymaster requests your view! Post a comment on "Hindalco: Market's on guard". 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.

    Hindalco Industries: Strong Operational Performance Boosts Profitability (Quarterly Results Update - Detailed)

    Nov 30, 2016

    Hindalco Industries has reported a 1.1% YoY increase in the topline while the bottomline has accelerated by 255.4% YoY.

    Hindalco Industries: Cost Efficiency Boosts Profitability (Quarterly Results Update - Detailed)

    Aug 18, 2016

    Hindalco Industries has reported a 11.4% YoY decline in the topline while the bottomline has accelerated by 379% YoY.

    Hindalco Industries: A Stellar performance (Quarterly Results Update - Detailed)

    Jun 6, 2016

    Hindalco Industries has reported a 7.5% YoY decline in the topline while the bottomline has accelerated by 123.4% YoY.

    Hindalco Industries: Realisations Hurt Topline (Quarterly Results Update - Detailed)

    Feb 17, 2016

    Hindalco Industries has reported a 5.3% decline in topline while the bottomline has declined by 88.7%

    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

    HINDALCO SHARE PRICE


    Aug 17, 2017 03:18 PM

    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 8-QTR ANALYSIS

    Detailed Quarterly Results With Charts

    COMPARE HINDALCO WITH

    MARKET STATS