MOSL: HINDALCO (Buy)-Novelis delivers strong operating performance
​Hindalco: Novelis delivers strong operating performance
(HNDL IN, Mkt Cap USD8.0b, CMP INR228, TP INR310, 36% Upside, Buy)
- Novelis reported another strong quarter, with adj. EBITDA growing 8% YoY to USD289m (7% beat) in 1QFY18, driven by higher volumes and benefit of lower-cost scrap. Interest cost declined 23% YoY to USD62m on refinancing debt at lower cost. Adj. PAT was up~4x YoY at USD101m. FCF stood at negative USD77m (increase of USD69m YoY) on seasonal working capital increase and higher LME.
Volumes rebound; strong performance in N. America drives margins
- Shipments grew 4% YoY to 785kt, driven by a rebound in cans. Can volumes were secured under long-term contracts, which has improved visibility. Adj. EBITDA per ton increased by USD13 YoY to USD368 on higher margins in N. America, partly offset by unwinding of FX gains in S. America.
- EBITDA guidance of USD1.1-1.15b; FCF guidance raised
- EBITDA was guided at USD1.1-1.15b for FY18 on improved visibility in cans and higher auto mix. Pricing risk in cans is now behind with the long-term contracts. FCF guidance is USD400-450m on higher operating profit and lower interest cost, partly offset by likely working capital rise. Volume is expected to increase ~3% in FY18E. Auto will drive further growth in FY19E.
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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