Hindalco: Fighting hard - 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: Fighting hard

Oct 30, 2001

With a weakening global economy the aluminium industry was already in the midst of a downturn prior to the September 11 incidents. The terrorist attacks only aggravated the pessimistic outlook towards the sector. Prior to the September events, aluminium prices on the London Metal Exchange (LME) were lower by 7.8% since start of the fiscal.

(Rs m) 2QFY01 2QFY02 Change 1HFY01 1HFY02 Change
Net Sales 5,508 5,573 1.2% 11,160 11,063 -0.9%
Other Income 329 438 33.1% 636 764 20.1%
Expenditure 2,861 3,039 6.2% 5,818 6,009 3.3%
Operating Profit (EBDIT) 2,647 2,534 -4.3% 5,342 5,054 -5.4%
Operating Profit Margin (%) 48.1% 45.5%   47.9% 45.7%  
Interest 168 102 -39.3% 329 206 -37.4%
Depreciation 354 375 5.9% 707 744 5.2%
Profit before Tax 2,454 2,495 1.7% 4,942 4,868 -1.5%
Tax 776 824 6.2% 1,636 1,585 -3.1%
Profit after Tax/(Loss) 1,678 1,671 -0.4% 3,306 3,283 -0.7%
Net profit margin (%) 30.5% 30.0%   29.6% 29.7%  
No. of Shares (eoy) 74.5 74.5   74.5 74.5  
Diluted Earnings per share* 90.1 89.7   88.8 88.1  
P/E Ratio   6.0     6.1  
* annualised            

The company has managed to improve performance as compared to the first quarter of the current fiscal. Net sales are higher, although marginally, as compared to a YoY decline in 1QFY02. Hindalco has managed to post higher sales by focusing on high value added, downstream products. With the reported decline in sale volumes the rise in turnover is even more commendable considering the weakness in aluminium prices. Sale of products was lower by 2.1% YoY.

Higher realisations and to that extent lower sensitivity to aluminium commodity prices seems to be the upshot from presence in downstream businesses of rolled & extrusion products, redraw rods, foils and aluminium alloy wheels. The focus on improved product mix has also led to higher export realisations. Sharp rupee depreciation during the quarter is likely to have helped the cause.

Lower sale volumes and higher production across the board, except for extrusions, has led to a build up in 2QFY02 inventory. Despite the improved realisations, the company could not protect its operating margins, as expenses rose at a faster clip. Consequently, OPM is lower by 260 and 220 basis points for the quarter and half-year ended September '01 respectively. Raw material and manufacturing costs, which are the largest components of operating expenses, have been the key reason behind higher costs. That said, the company is fighting higher expenses through improved operating efficiencies. Initiatives on this front include Project Rocket 2K: Profit Improvement Exercise, which is expected to yield savings of Rs 400 m by FY04.

Interest expense continues to decline, as the company financed high cost debt with low cost borrowings. The sharp decline, however, seems to suggest the re-payment of loans. Other income has increased on the back of dividend from Indal. The company has provided for deferred tax liability and corresponding alterations have been made in the previous year to make comparison meaningful. Deferred tax upto March '01 will be provided for at the end of the current fiscal.

At Rs 542 the Hindalco scrip is trading on a multiple of 6.1x 1HFY02 annualised earnings. Valuations have decreased since start of the fiscal, reflecting fundamentals, at which time the scrip was trading on a multiple of 9.1x FY01 earnings.


Equitymaster requests your view! Post a comment on "Hindalco: Fighting hard ". Click here!

  

More Views on News

HINDALCO Announces Quarterly Results (3QFY20); Net Profit Down 22.0% (Quarterly Result Update)

Feb 17, 2020 | Updated on Feb 17, 2020

For the quarter ended December 2019, HINDALCO has posted a net profit of Rs 2 bn (down 22.0% YoY). Sales on the other hand came in at Rs 102 bn (down 14.3% YoY). Read on for a complete analysis of HINDALCO's quarterly results.

HINDALCO Announces Quarterly Results (1QFY20); Net Profit Down 94.5% (Quarterly Result Update)

Aug 13, 2019 | Updated on Aug 13, 2019

For the quarter ended June 2019, HINDALCO has posted a net profit of Rs 226 m (down 94.5% YoY). Sales on the other hand came in at Rs 101 bn (down 5.1% YoY). Read on for a complete analysis of HINDALCO's quarterly results.

HINDALCO 2018-19 Annual Report Analysis (Annual Result Update)

Aug 7, 2019 | Updated on Aug 7, 2019

Here's an analysis of the annual report of HINDALCO for 2018-19. It includes a full income statement, balance sheet and cash flow analysis of HINDALCO. Also includes updates on the valuation of HINDALCO.

HINDALCO 2017-18 Annual Report Analysis (Annual Result Update)

Dec 21, 2018 | Updated on Dec 21, 2018

Here's an analysis of the annual report of HINDALCO for 2017-18. 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

Why We Picked This Small-cap Stock for Our Hidden Treasure Subscribers (Profit Hunter)

Sep 17, 2020

This leading household brand will profit big time in a post covid world.

My Top Stock to Buy in this Market Selloff (Profit Hunter)

Sep 22, 2020

The recent correction offers a great opportunity to buy this high conviction smallcap stock.

What Do the Charts Say About Buying Smallcaps Now? (Fast Profits Daily)

Sep 18, 2020

Everyone seems to be excited about buying smallcaps now...but is it the right thing to do? What do the charts tell us? Find out in this video...

How Much Money Do You Need to Be a Professional Trader? (Fast Profits Daily)

Sep 17, 2020

In this video I'll answer a question I get asked often: How much capital do I really need to trade the markets for a living? Let's find out...

More

Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms

HINDALCO SHARE PRICE


Sep 25, 2020 (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 - BODAL CHEMICALS COMPARISON

COMPARE HINDALCO WITH

MARKET STATS