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Hindalco Industries: Deleveraging Kicks in, One-Offs Hurt the Bottomline - Views on News from Equitymaster
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  • Aug 22, 2017 - Hindalco Industries: Deleveraging Kicks in, One-Offs Hurt the Bottomline

Hindalco Industries: Deleveraging Kicks in, One-Offs Hurt the Bottomline
Aug 22, 2017

Hindalco Industries has announced the first quarter results of the financial year 2017-2018 (1QFY18). While the topline increased by 28.8% YoY, the bottomline declined marginally by 1.6% YoY. Here is our analysis of the results.

Performance summary:
  • Income from operations increased by 28.8% YoY during 1QFY18. This is on the back of Higher volume and realisation for both Aluminium and Copper segments. Revenue from aluminum segment grew by 9% YoY. Alumina and metal production increased by 2% YoY and 4%YoY, respectively. Value added products (VAP) increased by 15% YoY. Demand for aluminum auto sheets continued to be robust and automotive shipments grew by 16% YoY. Revenue from the copper segment increased by 51% YoY on the back of higher volumes and an increase in copper LME which led to better realisation.
  • Operating profit increased marginally by 2% YoY on the back of supportive macro, higher volume, stable operations largely offset by higher input cost (mainly alumina). Increase in electricity duty by Odisha government also led to increase in cost of production at Aditya and Hirakud Smelters. During the quarter, operating margin stood at 11.7%. Aluminium and Copper segment EBITDA stood at Rs 8.75 billion (up 0.5% YoY) and 3.2 billion (up 22% YoY) respectively.
  • Other income increased by 13.3% YoY during the quarter. Finance cost declined by 18.6% YoY. This is on the back of debt repayment. In April 2017, the company prepaid debt to the tune of Rs 45 billion, aided by QIP. In July 2017, Hindalco further repaid Rs 8.9 billion at Utkal. In the current fiscal year, total aggregate repayment, thus, is at Rs 53.9 billion.
  • Depreciation increased by 12.1% YoY due to progressive capitalization.
  • The bottomline declined marginally by 1.6%YoY primarily on the back of exceptional item. The company recognised a provision of Rs 1.04 billion as exceptional items, on the basis of the recent Supreme Court judgement in a matter relating to mining regulations (to which the company is not a party). The company anticipates that the judgement may have an implication on its existing litigation, which is sub judice. Accordingly, it has provided for the same.

    Financial Snapshot (Standalone)
    (Rs m) 1QFY17 1QFY18 Change
    Total Income 75,847 97,700 28.8%
    Total Expenses 64,600 86,223 33.5%
    Operating profit (EBITDA) 11,247 11,477 2.0%
    Operating profit margin (%) 14.8% 11.7%  
    Other income 2,262 2,563 13.3%
    Interest 5,996 4,878 -18.6%
    Depreciation 3,382 3,792 12.1%
    Profit before tax & exceptional items 4,131 5,371 30.0%
    exceptional items 0 -1,044  
    Tax 1,189 1,431 20.4%
    Net Profit before extraordinary Item 2,943 2,896 -1.6%
    Extraordinary Items   -1  
    Net Profit 2,943 2,895 -1.6%
    Net profit margin (%) 3.9% 3.0%  
    No. of shares (m)   2243  
    Basic diluted earnings per share (Rs) ^   6.9  
    P/E ratio (x) *   32.8  

    * On trailing 12 month basis

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