Arihant capital markets has recommended hold rating on Hindalco Industries with a target price of Rs 200, in its research report dated August 18, 2014.
"Hindalco reported rise in its EBITDA margin to 9.4% from 8.2% on YoY basis largely due to decline in other expenses. Revenues increased by 37% on the back of higher premium (over LME prices) and higher volumes (new capacities becoming operational). LME prices for the quarter reduced from $ 1834/t to $1,798/t but the impact was more than offset by higher premium ($ 367/t from $ 247/t) and lower Rupee (59.35/$ from 55.94). PAT decreased by 30.9% to Rs 328 crs largely due to increase in Interest outgo which was along the expected lines. Copper business, on the back of higher TC/RCs reported YoY improvement in EBIT margins to 6.3% from 2.2% (margins was lower due to planned shutdown). Copper cathode volumes increased to 96 kt from 68 kt on YoY basis. However, DAP production declined to 36 kt from 56 kt owing to annual and expansion related shutdown. On comparable basis production of Alumina declined by 16.6% YoY to 291kt. Production suffered due to availability of bauxite at Renukoot plant. Aluminum (ex‐Mahan) on comparable basis improved marginally by 0.6% YoY to 145kt. Total Alumina production (including Greenfield project) was 499kt whereas for Aluminum it was 190kt."
"Novelis has been posting decent show quarter after quarter. Also domestic operations are performing well, with copper business expected to continue its robust performance and aluminum business poised for growth after completion of capex and start of production at new bauxite mine, Utkal alumina refinery and Aditya & Mahan smelter. We have valued Novelis at 6.0x FY16 EV/EBITDA and domestic operations at 5.0x FY16 EV/EBITDA. We have valued investments at Rs 23 per share (25% disc to book value). Our SoTP value for Hindalco stands at Rs 200 per share and recommend HOLD rating on the stock," says Arihant capital markets research report.
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