MOSL: HINDALCO (Buy)-Novelis-Excellent quarter and an excellent deal-Upgrade TP to factor in sale of Korea unit
​Hindalco: Novelis: Excellent quarter and an excellent deal; Upgrade TP to factor in sale of Korea unit; Maintain Buy
(HNDL IN, Mkt Cap USD6.5b, CMP INR187, TP INR242, 29% Upside, Buy)
- Novelis reported one of its best-ever EBITDA of USD292m (+5% YoY/15% QoQ; beat of 7%), led by a better metal mix and operating cost savings. FCF generation (post capex and interest) rose ~2x YoY to USD332m. Interest cost fell 25% YoY to USD59m on lower debt and refinancing. Adj. PAT was up 62% YoY to USD47m. For FY17, adj. EBITDA (ex-metal lag) was up 12% YoY to INR1,085m. FCF generation was higher than guided at USD361m (v/s USD160m in FY16).
Volumes recover on strong auto shipments; margins improve
- Shipments were flat YoY at 789kt (1% beat), bucking the declining trend over past few quarters, led by strong growth in auto shipments (+26% YoY). EBITDA/t increased USD19/30 YoY/QoQ to USD370/t.
Ulsan plant (S Korea) 50% JV @ USD315m with Kobe Steel is value-accretive
- The plant was under-utilized (~220kt production in FY17 v/s capacity of 350-400kt) and faces competition from Chinese players. The deal would leverage on Kobe's facilities in China to drive better utilization and sustainability. Management expects no EBITDA/volume impact from the deal. Cash flow of USD260m (net of taxes/fees) would go toward further deleveraging.
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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