13 August 2013
1QFY14 Results Update | Sector:
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Standalone results above expectations; production starts at
Mahan and Utkal
M.Cap. (INR b) / (USD b) 175.1/2.9
Financials & Valuation (INR b)
Adjusted PAT was higher than our estimate
at INR4.7b (down 2% QoQ), driven by
superior operating performance of the Aluminum segment and higher other
income. Other income was boosted by INR1.03b non-recurring income and INR1b
dividend from subsidiary.
EBITDA increased 3.3% YoY
to INR4.8b and was 13% above our estimate, largely
driven by better product mix and cost reduction in the Aluminum segment.
Aluminum production increased 5% YoY
to 139kt. Despite 8% fall in average LME,
aluminum EBITDA increased 4% QoQ to INR3.5b due to lower cost of production.
Production has begun at Mahan and Utkal.
First metal has been tapped at Mahan
smelter under trial production. Utkal Alumina too has started production. Alumina
production increased 4% YoY to 348kt. Aditya is at an advanced stage.
Copper segment EBITDA was impacted
due to shutdown. Copper EBITDA
declined 58% QoQ to INR1.3b due to unabsorbed fixed costs on lower production.
Other projects may be put on hold:
Hindalco is re-evaluating Aditya Alumina and
the Jharkhand smelter due to delays in getting permits and uncertainties.
We continue to find Hindalco attractive despite headwinds and
high debt. Outlook for the conversion business remains strong. Net debt has
peaked; the USD8b capex will be mostly done in FY14. Cash flows are likely to
improve as various projects start to generate cash. The stock trades at an
attractive P/BV of 0.7x. Maintain
(SanjayJain@MotilalOswal.com); +91 22 3982 5412
(Pavas.Pethia@MotilalOswal.com); +91 22 3982 5413
Investors are advised to refer through disclosures made at the end of the Research Report.