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: Volumes led growth - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Aug 7, 2003

    Indal: Volumes led growth

    Indian Aluminium Company Ltd. (Indal), a 96% subsidiary of Hindalco, reported its June quarter performance recently. Despite a strong 23% topline growth, the company’s bottomline failed to respond. The company’s net profits grew by only 6%. However, it must be noted that compared to the last two quarters, the company’s performance has improved, especially the topline.

    (Rs m) 1QFY03 1QFY04 Change
    Sales 3,102 3,809 22.8%
    Other Income 109 56 -48.8%
    Expenditure 2,698 3,251 20.5%
    Operating Profit (EBDIT) 404 558 38.1%
    Operating Profit Margin (%) 13.0% 14.7%  
    Interest 61 53 -12.9%
    Depreciation 165 186 13.0%
    Profit before Tax 287 375 30.4%
    Extraordinary items (6) - -100.0%
    Tax 41 120 192.7%
    Profit after Tax/(Loss) 240 255 6.0%
    Net profit margin (%) 7.7% 6.7%  
    No. of Shares 71.1 71.3  
    Earnings per share 13.5 14.3  
    P/E Ratio   10.1  

    The topline growth of the company showed an improvement of 23% YoY. This could partly be attributed to the fact that realisations have improved as the aluminium and alumina prices were ruling higher during the June quarter as compared to the prices prevailing in the corresponding quarter last year. Moreover, strong volumes growth on the alumina and the metal front further aided the topline. Also, the company’s continuous focus on value-added products, which have better realisations, seemed to be reaping benefits. Exports also showed a significant improvement. All of the above led to an improvement in operating margins for the quarter (up 170 basis points). However, the benefit of this failed to reflect on the bottomline owing to a considerable 21% increase in operating expenditure and due to a significantly higher provision for taxes.

    Cost breakup
      1QFY03 1QFY04 % change
    Raw material 1,141.2 1,019.1 -10.7%
    Staff Costs 348.2 389.0 11.7%
    Power & fuel 753.8 1,034.8 37.3%
    Other Exp 708.4 846.1 19.4%
    Total (% of sales) 95.1% 86.3%  
    Note: Total costs excludes change of stock-in-trade

    As can be seen in the table above, though the expenditure increased 21% in absolute terms, expenditure as a percentage of sales has actually reduced from 95% to 86% YoY. However, the fact remains that there was a considerable rise in expenses related to power and fuel and other administrative expenditure. This was due to the Kerala government’s hike in power tariffs by 0.5 paise per unit, which affected the company’s power expenses adversely. As a result of this, the company’s smelter has become unviable and continues to suffer heavy financial losses. Hence, the company has decided to de-energize the smelter operations at Alupuram from August 1, 2003. Also, there was a 40% increase in power generation from the Hirakud captive power plant to support the increased metal production.

    The interest outgo for the company was lower by 13%, as the company continues to take advantage of softer interest rates. The 13% increase in depreciation could partially be a factor of the company’s expansion of its smelting capacity.

    At Rs 144, the stock is trading at a P/E multiple of 10.1x its 1QFY04 annualised earnings. Going forward, with the company’s expansion of its smelting capacity (at Hirakud, Orissa) to 65,000 MTPA, the company is well placed to reap the benefits of any upturn in aluminium demand, both domestic and international. Also, its expansion of captive power to support aluminium production will be reflected in the quarterly results in the form of lower power costs. The company has also increased its stake in Utkal Alumina to 55%, thus making Utkal its subsidiary and providing it with greater access to alumina. Moreover, the company will also benefit from its synergies with the parent company, Hindalco. Being a 96% subsidiary of the parent, the liquidity of the stock is very low. Moreover, despite Hindalco denying any near term merger plans, in the long term Indal is likely to get merged with the parent.

     

     

    Equitymaster requests your view! Post a comment on "Indal: Volumes led growth". 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