MOSL: HINDALCO (Buy)- Healthy volumes and favorable spreads drive perf.-FCF generation remains strong
Hindalco: Healthy volumes and favorable spreads drive perf.; FCF generation remains strong; Reiterate Buy
(HNDL IN, Mkt Cap USD6.5b, CMP INR201, TP INR288, 44% Upside, Buy)
Novelis delivered another strong quarter. Adj. EBITDA increased 12% QoQ to USD357m (our estimate: USD319m), as volumes grew 9% QoQ (+8% YoY) to 870kt and EBITDA/t improved (from an already strong base) by 2% QoQ to USD410/t (our estimate: USD388). Adj. PAT grew 16% QoQ (+27% YoY) to USD154m.
- For FY19, volumes grew 2.7% YoY, adj. EBITDA/t increased to best-ever USD417, adj. EBITDA rose 12% YoY to INR1.36b and adj. PAT increased ~51% YoY to USD556m. Net debt declined USD150m YoY to USD3.4b.
- The share of beverage cans in volumes increased by ~200bp YoY to 63% in FY19, at the cost of lower-margin specialty products. The share of auto in volumes was steady at ~20% due to capacity constraints. Recycled content in shipments increased by ~200bp to 61% in FY19.
- Outlook remains robust for Novelis: Demand for aluminum in auto remains favorable in the US. Chinese auto aluminum market is weak but likely to recover on a positive outlook on EVs. Beverage cans outlook is also turning optimistic. Management has guided for robust EBITDA/t of more than USD400 for FY20. Despite doubling of capex to USD700m (upfronting of project capex) in FY20, FCF is guided to remain significantly positive.
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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