Sell

Novelis has indicated that its Q3FY25 EBITDA could range at USD360-370mn (-21% QoQ; -14% vs Emkay). Q3 shipments are expected to range at 900-910kt – slightly lower than our estimate of 913kt, and 945kt shipments in Q2

Hindalco delivered a strong upstream performance that is on a firm foot vs a starkly different downstream performance with bleak near-term outlook for Novelis, balancing out one another in Q2 and resulting in EBITDA beat of 9.5% at business segment level.

We downgrade Hindalco to SELL from Reduce following a disappointing outlook from Novelis. We had recently initiated coverage on Hindalco indicating that the stock is pricing in all the positives and a part of that optimism was around Novelis in the lead up to its IPO, which was later called off.

National Aluminium Company’s (NALCO) EBITDA was significantly lower than our/consensus estimates. We estimate Alumina sales to be down 56% YoY while Aluminium sales to be down 11% YoY.

Hindalco India’s Q1FY23 EBITDA exceeded our estimate. India aluminium cost increase of 17% QoQ was offset by lower-cost inventory from the past quarter.

Extended monsoons have also disrupted coal supplies in Q3. Hence, operationally Q3 should be weak. In addition, plans to diversify into unrelated minerals outside India at a peak of euphoria for Lithium and Cobalt could be value-dilutive, in our view. We revise FY20E EBITDA/PAT by 62%/66%, factoring in dismal Q2 results and also cut FY21/22E EBITDA by 24%/3% factoring in lower profitability. We value the stock at 4.5x Sep-21E EV/EBITDA. Downgrade NALCO to Sell with a TP of Rs37 (43 earlier) with UW stance in EAP. Key risk is higher alumina prices. Despite higher sales in Q2FY20, EBIT was significantly down, indicating that the company...

Declining aluminum prices likely to impact future performance For Q4FY19, the aluminium segment's blended cost of production (CoP) declined by US$249/tonne QoQ, from US$2025/tonne in Q3FY19 to US$1776/tonne in Q4FY19. The decline in aluminium CoP was primarily driven by reduction in power costs as availability of linkage and e-auction coal improved. During the quarter, the company was also able to secure ~72% of its coal requirement through the linkage and captive blocks, which aided reduction in cost of production. However, recent trend of reduction in...

7 May 2019 Lower cost of production (CoP) in aluminum and zinc international was the key driver of its growth and better-than-estimated performance. Other led by a mark-to-market gain on the structured investment in Anglo Reported aluminum CoP was down USD249/t QoQ to USD1,776/t due to lower alumina and coal cost. Reported EBITDA/t increased by USD74 QoQ to USD131. Zinc-int CoP was down USD269/t QoQ to USD2,540/t owing to higher volumes (+42% QoQ). Iron ore EBITDA doubled QoQ to INR2.4b, led by higher volumes in Karnataka. Electrosteels EBITDA increased 35% QoQ to INR3.4b, driven by a 35% QoQ increase in sales volume. EBITDA/t was flat QoQ at INR8,597/t. VEDL has paid ~USD270m for the structured investment in Anglo-America PLC in a related-party transaction with its holding company. The total investment is ~USD500m; the balance has to be paid in the next 4-5 quarters. It has recognized a mark-to-market gain of ~USD150m on the investment.

Vedanta's Q3FY19 performance was a mixed bag wherein the topline came in above our estimates while EBITDA came in lower than our estimates. On account of higher-than-expected other income, PAT came in higher than our estimate The consolidated topline came in at | 23669 crore (up 4.2% QoQ, down 2.8% YoY, our estimate: | 20917.7 crore) EBITDA for the quarter was at | 5645 crore (down 16.5% YoY, up 8.4% QoQ) lower than our estimate of | 5789.1 crore. The EBITDA margin...

Strong Quarter; Valuation Continues to Remain Pricey Novelis' adjusted EBITDA rose by 12% YoY to US$302mn aided by higher value-added automobile sheet shipment volume, operational efficiencies and better product-mix. Automotive shipments grew by 12% YoY and beverage can shipments grew by 5% YoY. Novelis has raised its adjusted...

We believe that the stock has run ahead of fundamentals while outperforming its global peers. Further, the current stock price doesn't capture LME price risk, and also the overall cost is likely to head northwards. However, persistent and widening deficit in global markets (ex-China) on the back of strong demand growth and limited new supplies continues to deplete inventories and could aid a rally in aluminium prices thus posing a risk to our call. At CMP, the stock trades at 8xFY19E EV/EBITDA. We maintain our REDUCE recommendation on the stock with an...

In-line quarter; Valuation Continues to Remain Pricey Hindalco Industries has delivered an in-line performance in 4QFY17 with its standalone operating profit growing by 14.4% YoY and 13.7% QoQ to Rs13.5bn (vs. our estimate of Rs12.2bn). Revenue from Aluminium segment increased by 9.4% YoY and 12.8% QoQ led by higher sales volume. However, segmental EBIT margin declined by 126bps QoQ (flat on YoY basis) to 16.5%, after hitting a multi-year high of 17.8% in 3QFY17 largely due to stabilization of new smelters and higher volume. Copper revenue rose by 47.9% YoY (+24% QoQ) due to 25% YoY and 10.5% QoQ rise in LME copper prices and 19.4% YoY and 18.1% QoQ rise in volume to 1.11 lakh tonne. Notably, the...

In-line Quarter; Rich Valuation Restricts Further Upside Hindalco's standalone EBITDA surged by 88% yoy (+2% qoq) to Rs11.6bn in 2QFY17, largely in-line with our estimate of Rs11bn. Aided by higher sales volume, the revenue from Aluminium segment grew by 10% yoy (+16% qoq), while the segmental EBITDA margins increased by 1,023bps yoy (down 475bps qoq) to 16.4%. Notably, the segmental margins were at a multi-year high in 1QFY17 largely due to stabilization of new smelters which helped in operational efficiency like lower power and fuel costs coupled with higher volumes. However, revenue from Copper segment declined by 9% yoy (up...

ICICI Securities Ltd | Retail Equity Research Hindalco reported a good set of Q1FY17 numbers wherein EBITDA and PAT came in higher than our estimate. Aluminium operations led the beat while copper operations volume came in lower than estimate. Lower cost of raw materials, especially energy inputs aided margin expansion during the quarter The topline came in lower than our estimate on the back of lowerthan-expected copper volumes. Revenues came in at | 7597.3 crore (down 11.4% YoY), below our estimate of | 8370.4 crore. Revenues...