Detailed Report | Sector: Metals
th
13 Annual Global Investor Conference
BSE Sensex
32,273
S&P CNX
10,085
Hindalco Industries
TP: INR310 (+25%)
Mr Satish Pai
MD
Hindalco Industries
CMP: INR247
Buy
CEO TRACK
Financials Snapshot (INR b)
2017 2018E 2019E
Y/E Mar
Net Sales
1,001.8 1,075 1,148
EBITDA
124.4 136.6 146.7
Net Profit
19.1
44.2
54.6
EPS (INR)
8.6
19.8
24.5
EPS Gr.(%)
-28.5 131.6
23.7
BV/Sh. (INR)
129.9 148.2 171.3
RoE (%)
7.4
14.3
15.4
RoCE (%)
7.3
8.3
9.2
P/E (x)
28.9
12.5
10.1
P/BV (x)
1.9
1.7
1.4
EV/EBITDA(x)
8.2
6.9
5.9
De-risked businesses delivering strong free cash flows
Focus on stakeholder value
We hosted Mr Satish Pai, MD and CEO of Hindalco (HNDL), as part of ‘CEO Track’ at our
annual conference. Key takeaways:
HNDL’s business is robust and de-risked. Novelis and copper segments operate on
conversion model, with LME being a pass-through. These two businesses account for
more than 60% of EBITDA, and provide steady cash flows and support balance sheet.
Aluminum smelting is a high margin business; volatility is correlated to metal cycle.
HNDL is present across the entire value chain of aluminum. There are only few
comparable global companies: Norsk Hydro and Hongqiao. Most other players are
either only upstream or only downstream producers.
Superior technology (Pachney) selection for its smelters has helped it achieve stable
operations, while competition is struggling to stabilize GAMI pots (Chinese).
HNDL has access to high quality bauxite, strong logistics, and conveyors for bulk
transportation of minerals from mines. It has secured a diversified mix of coal supply
in proximity to its captive power plants. This has helped it achieve cost leadership in
aluminum production, globally.
Novelis has global leadership in supplying flat-rolled products to the auto industry.
Novelis will continue to look for expansion in the auto space to cater to strong growth
in demand. New investments are expected in the US and China. Pricing pressure in can
business has eased. Electric vehicles are likely to accelerate light-weighting and drive
demand for aluminum.
HNDL continues to focus on accelerated deleveraging and allocation of capital in
downstream, which is less capital intensive. HNDL has already prepaid INR78b debt
and plans to prepay another INR30b during FY18.
There is merit in hedging primary aluminum production, as it helps tide over volatility
in LME and provides net gains because forwards curves have always been in contango.
Our view
We remain bullish on the stock due to (a) strong business fundamentals, (b) free cash flow
generation, and (c) the managements’ focus on deleveraging, high IRR projects, and
attractively-valued inorganic opportunities so as to deliver stakeholder’s value. We re-
iterate BUY, with a target price of INR310/share (6.5x FY19E).
Sanjay Jain – Research Analyst
(SanjayJain@MotilalOswal.com); +91 22 6129 1523
September 2017
Dhruv Muchhal – Research Analyst
(Dhruv.Muchhal@MotilalOswal.com); +91 22 6129 1549
1
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

Hindalco Industries
13 Annual Global Investor Conference
th
Robust and de-risked business model
HNDL’s business is robust and de-risked. Novelis and copper segments operate on
conversion model, with LME being a pass-through. These two businesses account
for more than 60% of EBITDA, and provide steady cash flows and support the
balance sheet. Upstream, that is, aluminum business is high-margin; volatility is
correlated to the metal cycle.
High-margin-high-volatility
aluminum business
supported by two steady
cash flow converter
businesses
Exhibit 1:
Robust business
Source: MOSL
More than 60% of EBITDA is
independent of LME; our
estimates suggest 68% in
FY18
Exhibit 2:
EBITDA split
Smelting 24%
Alumina Utkal 8%
Alumina special
4%
Copper 10%
Novelis 54%
Source: MOSL
Presence across the aluminum value chain
HNDL is one of the very few companies in the world present across the value chain.
Its operations start from coal and bauxite mining and stretch right up to high-end
products like flat rolled products (FRP) used in automobiles. Only Norsk Hydro and
Hongqiao are the other two players that have such presence across the value chain.
September 2017
2

Hindalco Industries
13 Annual Global Investor Conference
th
Exhibit 3:
Presence across the aluminum value chain
Source: MOSL, Company
Upstream/aluminum smelting – cost leadership and stable operations
Access to high quality
bauxite
HNDL’s upstream smelting business in India has access to 28 bauxite mines located
in close proximity to its refineries. Captive bauxite mines have total proved and
probable reserves of 246mt.
Exhibit 5:
Coal supply chain
Exhibit 4:
Bauxite and alumina supply chain
Source: Company
Source: Company
Utkal alumina refinery has access to good quality bauxite (high in alumina content
and low in silica) in Baphimali mine, with ~189mt of proved and probable reserves,
and mine life of 42 years. The refinery is located close to the mines. Bauxite is
September 2017
3

Hindalco Industries
13 Annual Global Investor Conference
th
transported through long-distance conveyor belt. Alumina is transported to Mahan
and Aditya smelters through dedicated BTAP wagons.
Hindalco has successfully ensured long-term availability of coal through linkages and
captive mines.
Linkage coal meets over 35% of supply for each smelter.
Long-term coal linkage contract with Coal India; typically for five years
New Linkage: October-November 2016, and 1QFY18
Existing Linkage: 2013/2014
Bidding/tendering of captive mines meets another 35% of supply for each
smelter. HNDL has acquired four coal blocks in 2015:
Kathautia, Gare Palma IV/5, Gare Palma IV/4, and Dumri
Purchase from the market through E-auction and imports meets balance
requirements.
Exhibit 6:
Coal sourcing strategy
Only 25-30% coal cost
exposured to market
prices.
Market linked, 4.5
Linkage-existing,
3.5
Captive, 4.0
Linkage-auction,
4.0
Qty. in mt
Source: MOSL, Company
HNDL has benefitted from improvement in domestic supply of coal, start of new
bauxite mines at Bhaphimali, installation of conveyors for coal and bauxite in past
two years. This has helped in reducing cost of production.
Exhibit 7:
Cost of production (USD/t)
Other
P&F
Staff
RM & cons.
All-in Metal Price
433
133
401
220
379
118
316
199
360
131
309
215
374
91
325
225
382
106
344
229
463
146
486
298
433
124
583
267
576
188
773
363
613
207
856
363
642
216
812
366
669
271
874
382
695
226
816
314
664
542
289
647
291
370
798
430
747
360
932
422
798
353
906
472
781
754
319 276
842
399
926
419
628
209
825
331
534
185
707
327
Source: MOSL, Company
September 2017
4

Hindalco Industries
13 Annual Global Investor Conference
th
It is interesting to note that HNDL’s cost of production (CoP) has fallen in line with
fall in aluminum prices (Exhibit 7) in past two years.
As HNDL has been able to manage its costs in trying times, the margins have become
stable despite falling product premiums.
Exhibit 8:
Margins and product premium over all-in-aluminum (USD/t)
EBITDA/t (incl. Utkal margins)
911
856
851
809
643
977
800
432
FY10
FY11
FY12
FY13
436
FY14
415
FY15
353
FY16
486
FY17
551
431
446
Product premium
782
Source: MOSL, Company
The decline in the product
premiums is driven by rising
domestic over supply and
dilution in product mix
Exhibit 9:
Product premium over all-in-aluminum (USD/t) and share of value-added
products
911
VAP (%)
856
851
809
643
551
431
60
61
40
45
43
31
25
FY16
27
FY17
Product premium
446
FY10
FY11
FY12
FY13
FY14
FY15
Source: MOSL, Company
There is merit in hedging aluminum production
HNDL has been hedging 30-50% of its production to protect its margins against
volatility in LME. This exercise has been remunerative for the company because
both aluminum and USD/INR rates trade at premium in forward market.
September 2017
5

Hindalco Industries
13 Annual Global Investor Conference
th
Exhibit 10:
Aluminum forward curves have mostly been in contango (USD/t)
150
100
50
0
-50
2016
2015
2014
2013
2012
2011
2010
Source: MOSL, Bloomberg
Average hedging gains have outstripped average hedging losses by USD38/t in eight
years (Exhibit 10). According to annual report FY17, HNDL has hedged ~980kt
aluminum production at average LME of USD1,796/t. However, it has also sold
forward USD1.375b at an average rate of INR72.03/USD. If we were to make MTM
adjustments, the average realization would equal to USD2,000/t at current USD/INR
rate. Therefore, we believe there is merit in hedging.
Average hedging gains have
outstripped average
hedging losses by USD38/t
over eight years
Exhibit 11:
Hedging gains on aluminum products recycled in P&L (USD/t)
131
96
70
23
-5
-28
FY10
-21
FY11
FY12
FY13
FY14
FY15
FY16
FY17
Source: MOSL, Company
38
Growth: Focus on downstream and high IRR projects
Mr Pai re-iterated his strategy of focusing on accelerated deleveraging, operational
excellence, higher value addition, customer centricity, and cash conservation to
deliver stakeholder value.
Mr Pai emphasized that incremental capital allocation will be towards high IRR de-
bottlenecking at alumina refinery at Utkal and less capital intensive downstream
projects. There are huge opportunities for growth in auto segment for Novelis.
Electric vehicles will accelerate growth in light-weighting and drive demand for FRP.
Mr Pai is very mindful of valuations for any inorganic opportunities.
September 2017
6

Hindalco Industries
13 Annual Global Investor Conference
th
Exhibit 12:
EBITDA (INR billion)
Copper TcRc
Novelis
Smelting
106
22
63
14
FY16
Utkal
124
31
73
14
FY17
137
38
74
13
147
46
144
41
79
14
54
26
22
6
FY09
70
26
36
8
FY10
86
29
49
8
FY11
82
22
50
10
FY12
81
19
52
10
FY13
83
17
54
11
FY14
89
16
55
16
FY15
77
14
FY18E FY19E FY20E
Source: Company, MOSL
Accelerated deleveraging
HINDL has already repaid INR78b debt until August 2017 and plans to repay another
INR30b during FY18, as it has strong free cash flows.
Exhibit 13:
Operating cash flow (INR billion)
After working capital
Before working capital
120
69
85
69
68
78
30
72
81
103
127
111
121
125
120
127
125
40
34
46
54
40
43
55
49
62
76
71
FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E FY20E
Source: Company, MOSL
Exhibit 14:
Free cash flow (INR billion)
Strong free cash flows are
driven by end of capex cycle
and asset sweating
73
69
78
38
24
-5
-4
-34
-90
-122
-115
-50
46
-24
Source: Company, MOSL
September 2017
7

Hindalco Industries
13 Annual Global Investor Conference
th
Exhibit 15:
Accelerated deleveraging driving equity value
8.0
6.0
4.0
2.0
0.0
3.2
4.1
2.3
2.5
4.0
5.7
6.4
6.3
Net Debt /EBITDA
Equity value (RHS)
310
249
336
400
320
240
160
3.7
2.8
2.2
1.7
80
0
5.2
Source: Company, MOSL
Exhibit 16:
Sum-of-the-parts valuations
Y/E March
EBITDA
EV/EBTIDAx
Target EV
Net Debt
EQ = (EV-net Debt)
A. INR/share(EQ)
Investments (quoted)
B. INR/share (invest)
C.discount factor (%)
Equity Value (A+B*(1-C%))
USD/INR
LME
2016
86,542
2017
124,359
2018E
136,646
6.5
888,198
387,658
500,539
225
68,340
31
20
249
64.9
1,940
2019E
146,728
6.5
953,729
318,472
635,257
285
68,340
31
20
310
65.0
2,025
2020E
144,181
6.5
937,174
243,711
693,463
311
68,340
31
20
336
65.0
1,950
Source: MOSL
553,792
465,385
67.1
1,665
September 2017
8

Hindalco Industries
13 Annual Global Investor Conference
th
Financials and Valuations
Income Statement
Y/E March
Net sales
Change (%)
Total Expenses
EBITDA
% of Net Sales
Depn. & Amortization
EBIT
Net Interest
Other income
PBT before EO
EO income (exp)
PBT after EO
Tax
Rate (%)
Reported PAT
Minority interests
Share of asso.
Adjusted PAT
Change (%)
2013
801,928
-0.8
721,344
80,584
10.0
28,611
51,973
20,791
10,122
41,304
-2,216
39,088
8,857
22.7
30,231
-196
-158
32,485
-4.4
2014
876,955
9.4
794,092
82,863
9.4
35,528
47,335
27,016
10,172
30,491
-3,960
26,531
5,249
19.8
21,282
200
668
25,710
-20.9
2015
1,042,811
18.9
953,365
89,446
8.6
35,906
53,540
41,784
11,047
22,803
-19,401
3,402
2,564
75.4
838
-5,957
1,747
27,943
8.7
2016
1,000,538
-4.1
894,485
106,053
10.6
41,961
64,091
50,467
12,113
25,738
-22,083
3,654
5,148
140.9
-1,494
-2,378
1,749
24,717
-11.5
2017
1,001,838
1.4
877,479
124,359
12.4
44,572
79,786
57,424
11,110
33,472
-76
33,395
14,326
42.9
19,069
-174
-251
19,069
-22.9
2018E
1,074,744
7.3
938,098
136,646
12.7
45,200
91,446
40,935
10,867
61,378
61,378
17,063
27.8
44,315
-107
-251
44,171
131.6
2019E
1,147,772
6.8
1,001,045
146,728
12.8
46,076
100,651
37,594
13,452
76,510
76,510
21,619
28.3
54,891
-251
54,639
23.7
(INR Million)
2020E
1,143,857
-0.3
999,676
144,181
12.6
47,184
96,997
35,967
17,092
78,121
78,121
22,119
28.3
56,003
-251
55,751
2.0
Cash Flow Statement
Y/E March
EBITDA
XO Exp. (income)
tax paid
Change in WC
CF from Op. Activity
(Inc)/Dec in FA + CWIP
Free Cash Flow
(Pur)/Sale of Inv. & yield
Others
CF from Inv. Activity
Equity raised/(repaid)
Debt raised/(repaid)
Interest
Dividend (incl. tax)
CF from Fin. Activity
(Inc)/Dec in Cash
Add: Opening Balance
Closing Balance
E: MOSL Estimates
2013
80,584
1,410
-13,478
-38,740
29,776
-118,711
-88,936
10,729
-357
-108,340
128
143,356
-36,728
-3,977
102,779
24,215
81,556
105,771
2014
82,863
-4,821
-9,586
9,623
78,079
-94,236
-16,156
10,910
1,672
-81,655
16,305
48,689
-46,919
-3,149
14,926
11,351
105,771
117,121
2015
89,446
-5,872
-11,280
-863
71,431
-59,776
11,655
15,680
-796
-44,892
47
28,323
-50,253
-2,488
-24,371
2,168
117,121
119,289
2016
106,053
-17,472
-7,830
21,960
102,710
-39,891
62,818
10,658
604
-28,629
3
-19,714
-50,308
-2,575
-72,594
1,486
119,289
120,775
2017
124,359
3,622
-7,797
6,691
126,875
-29,376
97,499
1,491
7,701
-20,185
33,141
-25,430
-60,754
-2,479
-55,523
51,167
120,962
172,129
2018E
136,646
401
-17,384
-9,077
110,586
-27,804
82,782
10,867
20,433
3,496
2019E
146,728
465
-20,656
-5,578
120,958
-27,836
93,122
13,452
-14,384
(INR Million)
2020E
144,181
527
-20,061
508
125,154
-27,869
97,285
17,092
-10,777
-52,511
-40,935
-3,648
-97,094
16,988
172,129
189,118
-55,872
-37,594
-3,648
-97,114
9,460
189,118
198,578
-56,564
-35,967
-3,648
-96,180
18,197
198,578
216,775
September 2017
9

Hindalco Industries
13 Annual Global Investor Conference
th
Financials and Valuations
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
BV/Share (adj.)
DPS
Payout (%)
Valuation (x)
P/E
Cash P/E
P/BV
EV/Sales
EV/EBITDA
Dividend Yield (%)
Return Ratios (%)
EBITDA Margins (%)
Net Profit Margins (%)
RoE
RoCE (pre-tax)
RoIC (pre-tax)
Working Capital Ratios
Fixed Asset Turnover (x)
Asset Turnover (x)
Debtor (Days)
Inventory (Days)
Payable (Days)
Growth (%)
Sales
EBITDA
PAT
Leverage Ratio (x)
Current Ratio
Interest Cover Ratio
Debt/Equity
2013
17.0
30.7
100.7
1.4
9.7
13.1
7.2
2.2
1.1
11.0
0.6
10.0
4.1
18.0
5.9
10.7
1.7
0.8
40.7
65.2
43.8
-0.8
-1.6
-4.4
1.9
2.5
2.4
2014
12.5
27.5
114.6
1.0
9.4
17.8
8.1
1.9
1.1
11.9
0.4
9.4
2.9
11.6
4.6
7.6
1.2
0.8
38.4
69.5
54.1
9.4
2.8
-20.9
1.7
1.8
2.2
2015
13.5
17.8
105.4
1.0
8.6
16.4
12.5
2.1
1.0
11.4
0.4
8.6
2.7
12.3
4.9
6.9
1.2
0.9
32.2
64.6
54.3
18.9
7.9
8.7
1.6
1.3
2.6
2016
12.0
19.6
101.8
1.0
9.8
18.6
11.3
2.2
1.0
9.5
0.4
10.6
2.5
11.6
5.9
7.5
1.0
0.9
29.0
61.0
51.5
-4.1
18.6
-11.5
1.5
1.3
2.6
2017
8.6
28.6
129.9
1.1
15.0
26.0
7.8
1.7
1.0
7.7
0.5
12.4
1.9
7.4
7.3
9.1
1.0
0.9
30.1
66.6
65.1
1.4
17.3
-22.9
1.6
1.4
1.6
2018E
19.8
40.2
148.2
1.4
8.3
11.2
5.5
1.5
0.8
6.5
0.6
12.7
4.1
14.3
8.3
10.8
1.0
1.0
30.5
66.5
64.4
7.3
9.9
131.6
1.6
2.2
1.2
2019E
24.5
45.3
171.3
1.4
6.7
9.1
4.9
1.3
0.7
5.5
0.6
12.8
4.8
15.4
9.2
12.3
1.1
1.1
30.6
66.2
64.5
6.8
7.4
23.7
1.6
2.7
0.8
2020E
25.0
46.3
195.0
1.4
6.5
8.9
4.8
1.1
0.6
5.1
0.6
12.6
4.9
13.7
8.9
12.1
1.1
1.1
30.7
66.2
64.5
-0.3
-1.7
2.0
1.7
2.7
0.6
Cash Flow Statement
Y/E March
EBITDA
XO Exp. (income)
tax paid
Change in WC
CF from Op. Activity
(Inc)/Dec in FA + CWIP
Free Cash Flow
(Pur)/Sale of Inv. & yield
Others
CF from Inv. Activity
Equity raised/(repaid)
Debt raised/(repaid)
Interest
Dividend (incl. tax)
CF from Fin. Activity
(Inc)/Dec in Cash
Add: Opening Balance
Closing Balance
E: MOSL Estimates
2013
80,584
1,410
-13,478
-38,740
29,776
-118,711
-88,936
10,729
-357
-108,340
128
143,356
-36,728
-3,977
102,779
24,215
81,556
105,771
2014
82,863
-4,821
-9,586
9,623
78,079
-94,236
-16,156
10,910
1,672
-81,655
16,305
48,689
-46,919
-3,149
14,926
11,351
105,771
117,121
2015
89,446
-5,872
-11,280
-863
71,431
-59,776
11,655
15,680
-796
-44,892
47
28,323
-50,253
-2,488
-24,371
2,168
117,121
119,289
2016
106,053
-17,472
-7,830
21,960
102,710
-39,891
62,818
10,658
604
-28,629
3
-19,714
-50,308
-2,575
-72,594
1,486
119,289
120,775
2017
124,359
3,622
-7,797
6,691
126,875
-29,376
97,499
1,491
7,701
-20,185
33,141
-25,430
-60,754
-2,479
-55,523
51,167
120,962
172,129
2018E
136,646
401
-17,384
-9,077
110,586
-27,804
82,782
10,867
20,433
3,496
-52,511
-40,935
-3,648
-97,094
16,988
172,129
189,118
2019E
146,728
465
-20,656
-5,578
120,958
-27,836
93,122
13,452
-14,384
-55,872
-37,594
-3,648
-97,114
9,460
189,118
198,578
(INR Million)
2020E
144,181
527
-20,061
508
125,154
-27,869
97,285
17,092
-10,777
-56,564
-35,967
-3,648
-96,180
18,197
198,578
216,775
September 2017
10

Hindalco Industries
13 Annual Global Investor Conference
th
NOTES
September 2017
11

Disclosures:
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
Motilal Oswal Securities Ltd. (MOSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOSL, the Research Entity (RE) as defined in the Regulations, is engaged in the business of providing Stock
broking services, Investment Advisory Services, Depository participant services & distribution of various financial products. MOSL is a subsidiary company of Motilal Oswal Financial Service Ltd. (MOFSL). MOFSL is a listed
public company, the details in respect of which are available on
www.motilaloswal.com.
MOSL is registered with the Securities & Exchange Board of India (SEBI) and is a registered Trading Member with National Stock
th
Exchange of India Ltd. (NSE) and Bombay Stock Exchange Limited (BSE), Metropolitan Stock Exchange Of India Ltd. (MSE) for its stock broking activities & is Depository participant with Central Depository Services Limited
(CDSL) & National Securities Depository Limited (NSDL) and is member of Association of Mutual Funds of India (AMFI) for distribution of financial products. Details of associate entities of Motilal Oswal Securities Limited are
available on the website at
http://onlinereports.motilaloswal.com/Dormant/documents/Associate%20Details.pdf
Hindalco Industries
13 Annual Global Investor Conference
Pending Regulatory Enquiries against Motilal Oswal Securities Limited by SEBI:
SEBI pursuant to a complaint from client Shri C.R. Mohanraj alleging unauthorized trading, issued a letter dated 29th April 2014 to MOSL notifying appointment of an Adjudicating Officer as per SEBI regulations to hold
inquiry and adjudge violation of SEBI Regulations; MOSL requested SEBI to provide all documents, records, investigation report relied upon by SEBI which were referred in Show Cause Notice and also sought personal
hearing. The matter is currently pending.
MOSL, it’s associates, Research Analyst or their relative may have any financial interest in the subject company. MOSL and/or its associates and/or Research Analyst may have beneficial ownership of 1% or more securities in
the subject company at the end of the month immediately preceding the date of publication of the Research Report.
MOSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a)
from time to time, have a long or short position in, act as principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and
earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other
potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the specific recommendations made by the analyst(s),
as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOSL even though there might exist an inherent conflict of interest in some of the stocks mentioned in the
research report.
Research Analyst may have served as director/officer, etc. in the subject company in the last 12 month period. MOSL and/or its associates may have received any compensation from the subject company in
the past 12 months.
In the last 12 months period ending on the last day of the month immediately preceding the date of publication of this research report, MOSL or any of its associates may have:
a)
managed or co-managed public offering of securities from subject company of this research report,
b)
received compensation for investment banking or merchant banking or brokerage services from subject company of this research report,
c)
received compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company of this research report.
d)
Subject Company may have been a client of MOSL or its associates during twelve months preceding the date of distribution of the research report.
MOSL and it’s associates have not received any compensation or other benefits from the subject company or third party in connection with the research report. To enhance transparency, MOSL has incorporated a Disclosure
of Interest Statement in this document. This should, however, not be treated as endorsement of the views expressed in the report. MOSL and / or its affiliates do and seek to do business including investment banking with
companies covered in its research reports. As a result, the recipients of this report should be aware that MOSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research
Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.
SRCM is likely to add grinding capacity by ~16mt over FY17-FY20 with ~43% of
incremental capacity would be added in east in Bihar, Odisha and WB/Jharkhand.
Terms & Conditions:
This report has been prepared by MOSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and may not be altered in any way, transmitted to,
Additionally ~23%
form, without prior written
capacity would be added in North to reduce
copied or distributed, in part or in whole, to any other person or to the media or reproduced in any
of the grinding
consent of MOSL. The report is based on the facts, figures and information that are considered
true, correct, reliable and accurate. The intent of this report is not recommendatory in nature. The information is obtained from publicly available media or other sources believed to be reliable. Such information has not
been independently verified and no guaranty, representation of
freight cost
implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice.
warranty, express or
while ~32% of the incremental capacity would be in South and West
The report is prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments for the clients. Though
markets. Hence
the same time.
next 2-3
recipients as customers by virtue their receiving this report.
disseminated to all the customers simultaneously, not all customers may receive this report at
over the
MOSL will not treat
years SRCM would
of
have presence across all the
Analyst Certification
markets
of
against the current exposure
part of the compensation of the research analyst(s) was, is, or
would
The views expressed in this research report accurately reflect the personal views
as
the analyst(s) about the subject securities or issues, and no
to North and East market. SRCM
will be directly or
indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.
have total capacity
Hindalco Industries
in Bihar and adjoining market with capacity market
of ~6-7mt
Disclosure of Interest Statement
Analyst ownership of the stock
No
share of ~25- 30%. This could bode really well for SRCM given the strong growth in
A graph of daily closing prices of securities is available at
www.nseindia.com, www.bseindia.com.
Research Analyst views on Subject Company may vary based on Fundamental research and Technical Research. Proprietary
trading desk of MOSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated from MOSL research activity and therefore it can have an independent view with regards to
Bihar market on back of strong push towards infrastructure and low cost housing.
subject company for which Research Team have expressed their views.
Regional Disclosures (outside India)
Deserves premium valuations; reiterate Buy
SRCM is the most cost-efficient
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use would be contrary to law,
regulation or which would subject MOSL & its group companies
player in the industry.
within
superior execution capability enables it to achieve RoIC of
to registration or licensing requirements
Its
such jurisdictions.
For Hong Kong:
This report is distributed in Hong Kong by Motilal Oswal capital
over
(Hong Kong)
(FY19E).
a licensed corporation (CE AYY-301) licensed and regulated by the Hong Kong Securities and Futures Commission (SFC)
Markets
~50%
Private Limited,
SRCM’s gross-block-to-capacity (GB/capacity) – currently at
pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst Regulations) 2014 Motilal Oswal Securities (SEBI Reg No. INH000000412) has an agreement with
~USD53/tonne
in
has been structurally trending downward, as the proportion of
Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of research report
–
Hong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any
investment or investment activity to which this document relates is only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these securities,
products and services in any jurisdiction where their offer or sale is not qualified or
expansion has
The Indian Analyst(s) who compile this report is/are
is at 28% discount to peers,
brownfield
exempt from registration.
increased. Its GB/capacity
not located in Hong Kong & are not conducting Research
Analysis in Hong Kong.
which is also reflected in its superior RoCE profile
For U.S.
Motilal Oswal Securities Limited (MOSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United States. In addition MOSL is
not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States.
Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by MOSL, including the products and services described herein are not available to or intended for U.S.
persons. This report is intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional
investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major institutional
investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and
interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOSL has entered into a chaperoning agreement with a U.S.
registered broker-dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, MOSIPL, and
therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account.
For Singapore
Motilal Oswal Capital Markets Singapore Pte Limited is acting as an exempt financial advisor under section 23(1)(f) of the Financial Advisers Act(FAA) read with regulation 17(1)(d) of the Financial Advisors Regulations and is a
subsidiary of Motilal Oswal Securities Limited in India. This research is distributed in Singapore by Motilal Oswal Capital Markets Singapore Pte Limited and it is only directed in Singapore to accredited investors, as defined in
the Financial Advisers Regulations and the Securities and Futures Act (Chapter 289), as amended from time to time. In respect of any matter arising from or in connection with the research you could contact the following
representatives of Motilal Oswal Capital Markets Singapore Pte Limited:
Disclaimer:
The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person
or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for informational purpose and may not be used or considered as an offer document or solicitation of
offer to buy or sell or subscribe for securities or other financial instruments. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or
appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment
objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this document should make such investigations
as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult its own advisors to
determine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable for all investors. Certain transactions -including those involving futures, options, another derivative
products as well as non-investment grade securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of
the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as endorsement of the
views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make modifications and alternations to this statement as may be required from time to time
without any prior approval. MOSL, its associates, their directors and the employees may from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities
mentioned in this document. They may perform or seek to perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities
functions as a separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of information that is already
available in publicly accessible media or developed through analysis of MOSL. The views expressed are those of the analyst, and the Company may or may not subscribe to all the views expressed therein. This document is
being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. This report is not
directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would
be contrary to law, regulation or which would subject MOSL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to
certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. Neither the Firm, not its directors, employees, agents or
representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information.
The
person accessing this information specifically agrees to exempt MOSL or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOSL or any of its affiliates or
employees responsible for any such misuse and further agrees to hold MOSL or any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this
information due to any errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022-3980 4263; www.motilaloswal.com. Correspondence Address: Palm Spring
Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad (West), Mumbai- 400 064. Tel No: 022 3080 1000. Compliance Officer: Neeraj Agarwal, Email Id:
na@motilaloswal.com,
Contact No.:022-30801085.
Registration details of group entities.: MOSL: NSE (Cash): INB231041238; NSE (F&O): INF231041238; NSE (CD): INE231041238; BSE (Cash): INB011041257; BSE(F&O): INF011041257; BSE(CD); MSE(Cash): INB261041231;
MSE(F&O): INF261041231; MSE(CD): INE261041231; CDSL: IN-DP-16-2015; NSDL: IN-DP-NSDL-152-2000; Research Analyst: INH000000412. AMFI: ARN 17397. Investment Adviser: INA000007100. Motilal Oswal Asset
Management Company Ltd. (MOAMC): PMS (Registration No.: INP000000670) offers PMS and Mutual Funds products. Motilal Oswal Wealth Management Ltd. (MOWML): PMS (Registration No.: INP000004409) offers wealth
management solutions. *Motilal Oswal Securities Ltd. is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs, Insurance and IPO products. * Motilal Oswal Commodities Broker Pvt. Ltd. offers Commodities
Products. * Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. offers Real Estate products. * Motilal Oswal Private Equity Investment Advisors Pvt. Ltd. offers Private Equity products
September 2017
12