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Hindalco: Stellar performance; Both domestic, overseas operations beat estimate…

What’s Buzzing:

Hindalco, India’s top aluminium manufacturer, reported a stellar performance in Q2FY22 wherein domestic as well as overseas operations (Novelis) performed better than our estimates.

Context:

For Q2FY22, Novelis, Hindalco’s wholly owned subsidiary, reported all-time high adjusted EBITDA/tonne of US$571/tonne (up 16% YoY), higher than our estimate of US$550/tonne. With respect to the domestic operations, for Q2FY22, Hindalco’s India business reported topline of Rs.17393 crore (our estimate of Rs.15752 crore). EBITDA, or operating profit, of Hindalco’s India business was at Rs.3602 crore (our estimate of Rs.2901 crore). Ensuing PAT of Hindalco’s India business was at Rs.1815 crore (our estimate of Rs.1365 crore). For Q2FY22, Hindalco reported consolidated topline of Rs.47665 crore, up 53% YoY and 15% QoQ while consolidated EBITDA was at Rs.8048 crore, up 56% YoY and 19% QoQ. Ensuing consolidated PAT for Q2FY22 was at Rs.3417 crore, up 783% YoY and 23% QoQ.

Our Perspective:

Over the years, Hindalco has transformed its business model to reduce dependence on the volatile LME (London Metal Exchange) price movement and is focusing on a stable portfolio of value added products. This has augured well for the company. Domestic aluminium operations is on a strong footing aided by access of captive alumina. Novelis is also expected to perform well, going forward, on the back of healthy demand from key user industries such as cans and specialty segment. Significant can-maker capacity expansion has been announced across all regions, auguring well for the sector for a longer term horizon. Demand from specialty segment remains healthy with favourable housing fundamentals in the US and Europe driving strong building and construction demand.