Top gainer today: Hindalco surges over 5 per cent after Q2 result declaration — Check brokerage report

Hindalco share price: Aluminium manufacturing company, Hindalco Industries Ltd. declared its quarterly report of the month ending September on November 11. 

Even though Hindalco Industries recorded a decline in Consolidated Profit After Tax (PAT) of 35 per cent, results were still better than estimated, which led to the stock surge more than 5 per cent. 

At the counter as of 1:35 pm, the stock quoted Rs 453.95 apiece on NSE, which was up by 5.61 per cent. On BSE, the stock traded at Rs 454.60 apiece, which was 5.78 per cent on the upside. 

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Hindalco share: Nuvama’s brokerage review

According to brokerage firm Nuvama Institutional Equities, Hindalco’s standalone (including Utkal Alumina) adjusted Earnings before interest, taxes, depreciation, and amortization (EBITDA) slid 47 per cent QoQ to Rs 1,920 crores which was better than the estimate of Rs 1,790 crore, due to higher aluminium CoP and lower aluminium prices. The outperformance stems from lower-cost aluminium inventory and higher profitability in the copper segment.

The brokerage firm believes aluminium CoP would have peaked out in Q2FY23 and would fall 3–5 per cent QoQ in Q3FY23 on the back of improving coal linkage. Meanwhile, management is focused on growth with plans to invest USD 800 crore (from internal accruals) over FY23–27. We value Novelis at 6x FY24E EV/EBITDA and India operations at 4.5x FY24E EV/EBITDA, which yield an Sum of the Parts valuation (SoTP) based 

Nuvama’s report further said that aluminium EBITDA was at Rs1,750 crore which was down by 47 per cent QoQ and EBITDA/t came in at USD 646, down from USD685/t QoQ. The decline is attributable to higher CoP which was up 20 per cent QoQ amid higher coal, CP coke, and CT pitch costs. 

Management explained to Nuvama that Q2FY23 EBITDA was inflated by Rs 300 crore because of low-cost inventory, which was sold in Q2FY23. Sales volume increased by 5 per cent QoQ to 340kt. They guided for 3–5 per cent QoQ lower aluminium CoP in Q3FY23. Copper EBITDA range-bound, Tc/Rc margins improved. Copper sales volume increased by 11 per cent QoQ to 112kt with copper rods sales of 85kt against 80kt QoQ. 

Copper performance remained resilient and recorded EBITDA of Rs 540 crore, down by 4 per cent QoQ. Management guided for a quarterly EBITDA run rate of Rs 450–500 crore which was up from earlier guidance of Rs 400 crore.

Nuvama has evaluated that the Hidalco’s Q3FY23 could be a weak quarter amid lower aluminium prices, affecting Indian operations, and lower profitability at Novelis due to higher energy cost and lower scrap spread. The brokerage firm believes Hindalco is pursuing its growth plan while keeping a tight leash on debt. 

Hindalco Share Target Price: 

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Hindalco Industries Ltd consolidated Q2 result:

Consolidated revenue of Hindalco Industries Ltd. for the second quarter stood at Rs 56,176 crore against Rs 47,665 crore, up 18 per cent YoY due to better realisations and operational efficiencies. 

Hindalco reported an EBITDA of Rs 5,743 crore against Rs 8,045 crore in Q2 FY23, down 29 per cent YoY, impacted by rising input costs and unfavourable macros, partially offset by better operational performance of copper and downstream businesses. 

Consolidated PAT in Q2 FY23 was at Rs 2,205 crore compared to Rs 3,417 crore in Q2 FY22, a decline of 35 per cent YoY. 

Consolidated Net Debt to EBITDA remained strong at 1.47x on September 30, 2022 compared to 1.93x on September 30, 2021.

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