EUR 120.00 For Business Accounts Only

MOSL: HINDALCO (Buy)-Operationally in line-input costs appear to have peaked

Hindalco: Operationally in line; input costs appear to have peaked; Valuations attractive: Maintain Buy

(HNDL IN, Mkt Cap USD6.3b, CMP INR199, TP INR302, 52% Upside, Buy)

 

Hindalco India (standalone + Utkal): 3QFY19 EBITDA of INR17.2b (-1% QoQ) came in 5% higher than our estimate of INR16.7b owing to the better-than-expected copper business performance. Finance cost was flat QoQ at INR4.8b, while other income increased 13% QoQ to INR2.1b. PAT declined 2% QoQ to INR7.1b (consol. PAT up by 45% YoY to INR46b YTD).

• Aluminum EBITDA/t declined 6% QoQ to USD551 (our estimate: USD532) due to lower LME prices, partly offset by lower cost of production and positive hedging impact (+INR900m). Aluminum production and sales were largely stable QoQ at 324kt and 323kt, respectively.
• Aluminum CoP reduced by USD59 QoQ with input costs reaching peak levels. CoP in 4Q is expected to be flat or slightly lower, given the fall in CPC and caustic prices, and flattish oil and coal costs.
• Copper production increased 46% QoQ to 105kt post maintenance shutdown. Sales rose 25% QoQ to 99kt. Copper EBITDA/t was lower by 14% QoQ; however, copper EBITDA increased 11% QoQ to INR4.3b due to higher volumes.
• Consol. EBITDA declined 4% QoQ (+14% YoY) to INR39.7b on the back of lower LME and tapering of recycling spreads at Novelis.