Now Get InvestmentGuruIndia.com news on WhatsApp. Click Here To Know More
Another strong quarter; smelter now at full capacity
Valuations attractive; Maintain Buy
2QFY19 EBITDA declined 16% QoQ (+140% YoY) to INR8.5b (in-line), led by lower LME. Adj. PAT was down 19% QoQ (+140% YoY) at INR5.1b (our estimate: INR5.4b). Effective tax rate stood at 38%, higher than our estimate of 33% and 34% in 1Q.
* Alumina : Production was down 18% QoQ at 477kt due to seasonal factors. Sales, however, increased ~1% QoQ to 324kt, led by destocking. Alumina realization increased 2% QoQ to USD570/t (our estimate: USD550/t). Calculated cost of production (CoP) increased QoQ.
* Aluminum : Production increased 4% QoQ (8% YoY) to 114kt, which is now near full capacity. Sales increased ~10% QoQ to 115kt. Aluminum realization declined by USD357 QoQ to USD2,162/t, as against a decline in LME of ~USD200/t. Product premiums were lower. CoP was lower QoQ, aided by operating leverage benefit and currency depreciation.
Alumina prices will drive earnings; valuations attractive; Maintain Buy
* While alumina prices have come off from recent highs, the market is expected to remain tight, given the partial shutdown at Hydro’s alumina facilities and rising aluminum production. NACL is a key beneficiary of higher alumina prices as it is net long and has the advantage of low-cost captive bauxite.
* We have cut our alumina price estimate from USD450 to USD400/t for 4QFY19 and FY20. EBITDA is reduced by 4%/18% to INR31.9b/INR23b for FY19/20E.
* We expect EBTIDA to increase by ~90% to INR31.9b in FY19, driven by strong sector tailwinds. Stock is trading at attractive valuations of EV/EBITDA of 4.6x FY20E. We value the stock at 5.5x FY20E EV/EBITDA at INR90/sh. Maintain Buy.
To Read Complete Report & Disclaimer Click Here
For More Motilal Oswal Securities Ltd Disclaimer http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html SEBI Registration number is INH000000412
Above views are of the author and not of the website kindly read disclaimer