MOSL: HINDALCO (Buy)-Novelis’ performance remains robust, with strong spreads
HINDALCO: Novelis’ performance remains robust, with strong spreads
(HNDL IN, Mkt Cap USD6.1b, CMP INR194, TP INR240, 24% Upside, Buy)
- 3QFY20 results of Hindalco's (HNDL) subsidiary Novelis, highlights the company's continued strength in its high-margin business with EBITDA up 7% YoY.
- We maintain our FY20/FY21 estimates and reiterate our Buy rating. Given HNDL's low-cost integrated production, it is well placed to benefit as LME is recovering from recent lows. Moreover, HNDL continues benefiting from the strong outlook for Novelis' high-margin business.
EBITDA remains strong; however, North America declines
- Novelis' adj. EBITDA grew 7% YoY to USD343m (v/s est. USD364m), led by better margins. EBITDA/t was up 7% YoY (-5% QoQ) to USD430/t (v/s est. USD442/t). Adj. PAT increased 10% YoY to USD146m.
- Volumes declined 4.5% QoQ to 797kt (v/s est. 824kt).
- EBITDA for the company's North America (NA) business declined 26% QoQ, which was partly compensated by 20% QoQ growth in the South America (SA) business.
- FCF before capex was up 43% YoY to USD483m in 9MFY20 due to higher EBITDA and lower working capital from low aluminum prices.
- Net debt/EBITDA further reduced to 2.3x (v/s 2.8x last year).
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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