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This is an entirely free service. No payments are to be made.Hindalco has announced its standalone financial results for the quarter ended September 2012. Net sales for the company declined by 1.7% YoY while net profits declined by 28.6% YoY. Here is our analysis of the results:
(Rs m) | 2QFY12 | 2QFY13 | Change | 1HFY12 | 1HFY13 | Change |
Net sales | 62,719 | 61,635 | -1.7% | 123,027 | 121,915 | -0.9% |
Expenditure | 56,116 | 56,482 | 0.7% | 107,762 | 112,130 | 4.1% |
Operating profit (EBDITA) | 6,603 | 5,153 | -22.0% | 15,266 | 9,784 | -35.9% |
Operating profit margin (%) | 10.5% | 8.4% | 12.4% | 8.0% | ||
Other income | 1850 | 1,324 | -28.4% | 3637 | 4338 | 19.3% |
Interest (net) | 675 | 279 | -58.7% | 1342 | 1093 | -18.6% |
Depreciation | 1741 | 1,728 | -0.8% | 3495 | 3432 | -1.8% |
Profit before tax | 6037 | 4,471 | -25.9% | 14066 | 9597 | -31.8% |
Exceptional Item | - | |||||
Tax | 1012 | 882 | -12.8% | 2601 | 1760 | -32.3% |
Profit after tax/(loss) | 5025 | 3,589 | -28.6% | 11465 | 7837 | -31.6% |
Net profit margin (%) | 8.0% | 5.8% | 9.3% | 6.4% | ||
No. of shares (m) | 1914 | |||||
Diluted earnings per share (Rs) | 10.5 | |||||
P/E ratio (x)* | 10.7 |
(Rs m) | 2QFY12 | 2QFY13 | Change | 1HFY12 | 1HFY13 | Change |
Raw Materials | 46,231 | 46,188 | -0.1% | 82,246 | 82,684 | 0.5% |
% of sales | 73.7% | 74.9% | 66.9% | 67.8% | ||
Staff costs | 2,915 | 3,129 | 7.3% | 5,416 | 6,031 | 11.4% |
% of sales | 4.6% | 5.1% | 4.4% | 4.9% | ||
Power & fuel | 7,528 | 8,065 | 7.1% | 13,882 | 15,638 | 12.7% |
% of sales | 12.0% | 13.1% | 11.3% | 12.8% | ||
Other Expenditure | 4639 | 5304 | 14.3% | 9175 | 11526 | 25.6% |
% of sales | 7.4% | 8.6% | 7.5% | 9.5% | ||
Purchase of traded goods | -5198 | -6203 | NA | -2956 | 11526 | NA |
% of sales | -8.3% | -10.1% | -2.4% | 9.5% | ||
Total operating cost | 56116 | 56482 | 0.7% | 107762 | 112130 | 4.1% |
% of sales | 89.5% | 91.6% | 87.6% | 92.0% |
While the actual coal production could commence only post FY15, with meaningful contribution only from FY17, the approval is a sentiment positive for the company given the recent regulatory overhang on coal block allocation. Moreover, it will give a higher visibility on the profitability of the upcoming Mahan smelter, which is likely to start the commissioning process over the next few months. However given the cost escalations of Mahan and Utkal, we believe that return ratios for the Mahan project would tend to be sub-optimal in nature, despite commissioning of coal block.
We expect India aluminum margin to improve going forward as the production issues at Renukoot and Hirakud are behind us. We believe that the Utkal project commissioning remains a critical event given a) with captive bauxite it would be highly profitable and b) it is among the most delayed projects and commissioning would be EPS accretive.
At the current price of Rs 112, the stock trades at a P/BV multiple of 1.6x our estimated FY15 book value per share. We maintain our Buy view on the stock.
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