MOSL: HINDALCO (Buy)- Novelis beats estimates with best-ever quarter-EBITDA guidance raised-raising target price
​Hindalco:Novelis beats estimates with best-ever quarter; EBITDA guidance raised; raising target price; Reiterate Buy
(HNDL IN, Mkt Cap USD9.4b, CMP INR270, TP INR328, 21% Upside, Buy)
Novelis reported the historically best quarter, as adj. EBITDA grew 12% YoY to USD302m (7% beat) in 2QFY18, driven by higher volumes and margins. After a long time, beverage can volumes have started growing in North America. Interest cost declined 22% YoY to USD62m on refinancing of debt a few quarters ago. Adj. PAT increased 12x YoY to USD83m. FCF came in strong at USD101m, despite working capital increase on higher LME. Novelis received USD314m from Kobe Steel toward Ulsan JV. Net debt/EBITDA is now at 3.5x.
Volumes rebound on beverage cans and strong growth in auto
Shipments grew 4% YoY to 802kt, driven by a rebound in cans. Auto volumes increased 12% YoY. Adj. EBITDA per ton increased 2% QoQ to USD377, led by stronger margins and volume growth in North America.
EBITDA guidance raised by USD50m; Net debt reduction of at least USD700m
Guidance for EBITDA is raised by USD50m to USD1.15-1.2b for FY18 on the back of improved visibility in cans and a higher auto mix. Pricing risk in cans is now behind with the long-term contracts. FCF guidance is maintained at USD400-450m, despite a rise in working capital. Novelis will reduce net debt by at least USD700m in FY18.
Hindalco Industries is engaged in the production and sale of aluminum and copper in India and internationally. Co.'s aluminum products include rolled products, extrusions, foils, primary aluminum ingots, billets, wire rods, and aluminum slabs; and aluminum chemicals, such as standard alumina, standard hydrate and specialty aluminas and hydrates for use in refractories, ceramics, fire retardant plastics, alum, and zeolite applications. Co. also offers aluminum foil and packaging solutions to pharmaceuticals, healthcare, dairy, confectionery, processed foods, personal products, and tobacco industries, as well as to the heat, ventilation, and air conditioning industries.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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