MOSL: HINDALCO (Buy)-Lower LME, copper shutdown impacts performance-Valuations attractive
HINDALCO: Lower LME, copper shutdown impacts performance; Valuations attractive; Maintain Buy
(HNDL IN, Mkt Cap USD5.6b, CMP INR176, TP INR239, 36% Upside, Buy)
1QFY20 (Standalone + Utkal) EBITDA at INR11.4b (v/s est. of INR10.9b) was down 16% QoQ on lower LME prices and plant shutdown in the copper business. Finance cost rose 8% QoQ (6% YoY) to INR4.9b. Other income decreased 65% QoQ (+43% YoY) on a high base (which includes MTM gains). Adj. PAT was down 63% QoQ (-74% YoY) to INR1.9b (v/s est. INR1.8b).
- Aluminum EBITDA/t decreased 12% QoQ to USD400 (est. USD365) on lower realization (LME was lower ~USD70), partly offset by lower costs. Aluminum production and sales remained largely stable QoQ at 326kt (+2%) and 320kt (-2%), respectively. Aluminum EBITDA was down 15% QoQ to INR8.9b.
- Aluminum CoP was lower USD49 QoQ on the back of lower coal and carbon costs. CoP is expected to reduce further as lower caustic and oil prices seep in.
- Copper production/sales were down 15%/18% QoQ to 76kt/82kt on the back of planned maintenance shutdown. This, along with lower LME and by-product volumes, led to 20% QoQ decline in Copper EBITDA to INR2.5b.
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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