Published on 23/06/2021 9:49:07 AM | Source: ICICI Direct

Buy Hindalco Ltd For Target Rs. 475 - ICICI Direct

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Healthy performance….

For Q4FY21, both Hindalco’s India business as well as Novelis reported a healthy performance. Hindalco’s India business reported healthy performance for Q4FY21 wherein reported topline, EBITDA and PAT came in higher than our estimates. Better-than-expected performance of India business was primarily on the back of higher-than-expected aluminium and copper sales volume. The aluminium segment reported sales of 329000 tonnes (higher than our estimate of ~325000 tonne) while copper sales were at 107000 tonnes (higher than our estimate of ~85000 tonne).

For Q4FY21, Hindalco’s India business reported topline of | 14471 crore (up 45% YoY, 27% QoQ) higher than our estimate of | 13340 crore. EBITDA of Hindalco’s India business was at | 1886 crore (up 30% YoY, 23% QoQ) higher than our estimate of | 1724 crore. PAT for Hindalco’s India business was at | 653 crore, (up 72% YoY, 32%QoQ), higher than our estimate of | 439 crore. For Q4FY21, Novelis’ operational performance for Q4FY21 also came in better than our estimate. For the quarter, total flat rolled product (FRP) shipments were at 983 kilotonnes (KT), up 21% YoY (higher than our estimate of 950 KT) while adjusted EBITDA/tonne was at US$514/tonne, up 9% YoY (higher than our estimate of US$500/tonne).

Novelis reported healthy performance for Q4FY21…

For Q4FY21, Novelis’ total flat rolled product (FRP) shipments were at 983 kilotonnes (KT), up 21% YoY (higher than our estimate of 950 KT). Growth in FRP shipments was aided by addition of the acquired Aleris business and record automotive and beverage can shipments as well as continued strong demand for building & construction and other specialty flat rolled aluminium products. For the quarter, Novelis' net sales increased 33% YoY to US$3.6 billion. The increase in topline was primarily driven by a 21% increase in shipments, favourable product mix and higher average aluminium prices. Adjusted EBITDA came in at US$505 million, up 32% YoY (higher than our estimate of US$475 million)

For FY22, ~33% of Hindalco’s domestic volume are hedged…

For FY22, the company has additionally hedged 5% of domestic aluminium volume at US$2344/tonne. Earlier for FY22, Hindalco had already hedged ~28% of its domestic aluminium volume at US$1840/tonne. Hence, now overall for FY22 ~33% of Hindalco’s domestic aluminium volume is hedged.

Valuation & Outlook

For the, both Indian operations as well as Novelis reported healthy performance. Hindalco’s consolidated net debt is down by | 14883 crore to | 47419 crore as on March 31, 2021 from its peak of | 62302 crore as on June 30, 2020, auguring well for the company. We value the stock on an SoTP basis and arrive at a target price of |475 (earlier | 390). We maintain our BUY recommendation on the stock.


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