shares information on aluminium Hindalco share

Hindalco Ltd (updated - 12 May 2010)
Even though when Hindalco recorded strong quarterly numbers, its share price took a hit on Tuesday. With a loss of 3.3 per cent, it was the fourth worst performing stock in the Sensex, which declined 1.1 per cent. The BSE Metal Index, however, fell 2.6 per cent.

Net sales of the company jumped 43 per cent on a yearon-year basis and 2 per cent sequentially to touch Rs 5,404 crore. This was largely driven by better realisations, as share of value-added products (like flat-rolled products, extrusion and copper-cathode rods) in total revenues rose. Operating profit nearly tripled to Rs 835 crore, though up just 12 per cent sequentially, mostly helped by a 1,000-basis-point drop in raw material costs. However, net profit more than doubled to Rs 664 crore, as there was a tax outgo vis-à-vis tax refund of Rs 110 crore a year ago. Analysts reckon that the overall outlook for metal prices is pulling the company’s share price down, rather than fundamentals.

One of the lowest cost producers of aluminium has been witnessing sustained selling pressure as aluminium prices crashed to $1,400 a tonne last year. With the Chinese government trying to put a lid on the heating economy, traders have increased their risk aversion. Last week, aluminium has seen a 8.1 per cent erosion in prices along with other metals. The share price of Hindalco has had a strong correlation with the price of the metal on the London Stock Exchange; many times they seem to move in tandem.

Going ahead, prices are expected to improve as the risk aversion decreases. The aluminum business is expected to continue its strong growth due to prospects of recovery in global markets, strong domestic demand, timely completion of scheduled expansion projects, improved visibility and positive outlook for Novelis. Its fixed price contracts, which bind the company to sell at lower prices, are likely to expire by November, which may improve the company’s cash flow. However, the low-margin but key copper business (70 per cent of overall revenues) may pull down the overall performance. This is because treatment charges and refining charges (TC/RC) margins are likely to remain low. According to the company, the annual benchmark TCRC for 2010 has been settled at 38 per cent lower than the previous year.
source - business standard

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Financials
The company reported sales (standalone) of Rs 19,536 crore, a growth of 7%, in FY10. Net profit was down 14% to Rs 1,916 crore, mainly due to higher coal cost and lower aluminium and copper prices in international markets. On the consolidated basis, net profit was Rs 3,925 crore against Rs 484 crore a year ago. The surge was mainly due to the unrealised derivative gain of about $578 million (approximately Rs 2,700 crore) and improved margins at Novelis.

Valuations
Hindalco's stock price has fallen on weak European demand and volatility in global metal prices. If we compare Hindalco with its peers such as Nalco, its subsidiary Novelis is the differentiating factor. Beverage business can give steady volume growth to Hindalco. In the case of players such as Nalco, margins would largely depend on aluminium prices. As of now, Hindalco's stock is trading at a price-to-earning (P/E) ratio of 14. The company's profitability in the next two years is expected to increase significantly because of lower cost of operation, higher volume and increase in margins. Investors can look for the stock for a long-term prospective.
source - Economic Times

Hindalco Ltd (updated - 23 June 2010)
It was easy to track Hindalco’s share price earlier. All you needed to do was follow trends on the London Metal Exchange (LME), and you would have found that the Hindalco stock would replicate the same. But this is set to change now as the company rises up on the value chain and becomes an integrated aluminium products player — something it envisaged to be when it acquired Novelis.

Around 60 per cent of Hindalco’s earnings are now sourced from Novelis, which is not linked to aluminium prices. Moreover, even Novelis has reduced the cyclical element from its operations and is a dominant global player in the cans business, which is not caught in cyclical trends. The cans business accounts for 58 per cent of the product mix, from the earlier 45 per cent.

Moreover, Novelis has turned the corner and is likely to expand capacity by 10 per cent, thereby generating around Rs 4,500 crore in operating profits, reckon analysts. Already, its operating profit margins have improved 120 basis points on asequential basis to 15.9 per cent. The company just about got some help with LME prices remaining steady, and the improvement in copper margins from Rs 900 a tonne in the December 2009 quarter to Rs 2,000 a tonne in the March quarter provided some succour too.

Hindalco’s greenfield and brownfield expansion plans are also said to be on track. The 1.5-million-tonne Utkal alumina refinery as well as the Mahan aluminium project are to be completed by the second quarter of 2011-12. Essentially, Hindalco will triple its aluminium facilities in the next three years and it already has the reputation of of the low-cost manufacturers in the world. It has achieved financial closure for the project with Rs 5,600 crore so far - analysts estimate around Rs 1,700 crore has been spent and Rs 2,400 crore of expansion spending is slated for the current fiscal. With more visibility coming on stream on the Utkal project, the company can expect better valuations.
source - business standard

Hindalco Industries good for long-term investment (updated - 08 July 2010)
Hindalco Industries, a formidable player in non-ferrous segment, has seen its stock surging to a record high of Rs 184 in the first week of April 2010. Since then, however, it has plunged by around 22% in tandem with its metal peers. The sharp fall can be attributed to the concerns of a crisis in the European economy and a weaker-than-expected recovery in the US trade. However, investors need not worry as long-term growth parameters look intact for Hindalco.

Business
The company has presence in two fast-growing non-ferrous metal segments - aluminum and copper. It is among the top five aluminium producers in the world. With its subsidiaries, such as Novelis and Aditya Birla Minerals, the company is able to diversify its portfolio giving natural hedge against global business volatility.

The company focuses more on process efficiency rather than sticking to volume growth. This has helped Hindalco in achieving better margins in the case of Novelis, which the company acquired in 2007. Novelis is likely to sustain strong operating performance as it is a dominant player in the metal cans business. The segment accounts for 58% of Novelis' product mix.

Sales of FMCG companies are poised to increase and so do profits of Novelis given its dominance in the cans business. Further, demand for FMCG products is somewhat insulated from the industry cycle. This shields Novelis from concerns of slowing demand in the commodity segment. Outlook for other applications, such as automobiles, is also positive.

The company is investing heavily on both greenfield and brownfield projects. These projects will give Hindalco a much-needed increased capacity to meet growing industry demand. Management foresees inorganic route for growing its downstream aluminium business and aims to achieve 40% self-sufficiency of copper for its smelter in India.

Outlook
Long-term growth outlook for Hindalco seems positive. Operating profit before depreciation is expected to increase over and above the impressive growth during the quarter ended March 2010 on account of cost savings and high capacity utilisation. Given its capacity expansion, Hindalco is well positioned to take advantage of higher demand in emerging markets and South America. Further, China's decision to allow its currency to appreciate can indirectly benefit Hindalco.

An appreciating Yuan can lead to higher Chinese import of commodities, which will in turn support prices of both copper and aluminium. This could lead to higher margins for Hindalco in the coming quarters. Also, Australian government's decision to reconsider its mining tax can further add to Hindalco's revenues as its subsidiary Aditya Birla Mineral has copper mines in Australia.

Hindalco Ltd (updated - 05 Aug 2010)
With aluminium prices recovering from recent lows, Hindalco is set to see volumes grow. The company may have just timed it all very well. Aluminium prices have rebounded from a low of $1,850 a tonne — a level that was below operating costs and led many smelters to shut shop. The prices are now around $2,200 a tonne.

The improving demandsupply balance and reducing inventory overhang have increased the estimated average London Metal Exchange (LME) price assumption to $2,300 a tonne, according to analysts at Ambit Capital. Volume growth and cost improvements should further boost profitability of subsidiary Novelis. In addition, analysts expect the business to deliver adjusted earnings before interest, tax, depreciation and amortisation (Ebitda) of $315 in the next financial year, compared to $306 in the March quarter.

Hindalco’s standalone net revenue at around Rs 5,146 crore in the June quarter was amild surprise. But, its net earnings of Rs 534 crore were in line with estimates. Higher realisations in the copper business also helped. Hindalco is now well placed to benefit from the expansion of its aluminium capacities, which will nearly grow to double their current size in the next four years.

The first commissioning is expected at Hirakud in the second quarter of financial year 2011, where capacity is being increased to 161 kilo tonnes per annum (ktpa) in Phase-I and to 213 ktpa in Phase-II by 2012. These capacities would include modern production techniques that could reduce manufacturing costs, said analysts.

This is expected to lead to volume growth of around 26 per cent till 2013, believe analysts. With prices not looking to head south again and, in fact, firming up of late, the volume growth will be welltimed and the turnaround at Novelis will add to the positive sentiment.

The key at the moment is the outlook on aluminum prices. A fall of five per cent will lead to a four per cent decrease in the estimated Ebitda for FY12. On the other hand, a five per cent appreciation in the exchange rate will lead to a six per cent drop in FY12 Ebitda, say analysts.
source - business standard