Hindalco Industries: Unlikely to fire in absence of coal

Brokerage house JM Financial has maintained its ‘Hold’ rating on Hindalco Industries  after the firm met the company’s management. JM Financial retained its negative bias on the stock citing delay in clearances of the Mahan coal block and sees full coal availability in 2-3 years. The firm has set a price target of Rs 105 per share.

Source: JM Financial report

Key Takeaways From The Management Meet

Trial production starts at Utkal alumina; FY14 guidance of 400ktons; synergies can be better tapped when Aditya smelter gets commissioned

Mahan coal block awaits clearances; full coal availability 2-3 years away in our opinion

Aditya smelter will contribute meaningfully only in FY15E; low visibility on MNH Shakti coal block as of now

Hindalco does not have the requisite permissions to sell power in case of interim surplus

Capitalization of Rs 5000 crore each towards Utkal and Mahan expected in 2HFY14.

Y/E March	FY11A	FY12A	FY13E	FY14E	FY15E
Net sales	718,008	803,931	801,928	874,004	949,211
Sales growth (%)	18.6	12	-0.2	9	8.6
EBITDA	79,449	76,369	78,368	94,652	107,870
EBITDA (%)	11	9.4	9.7	10.8	11.4
Adj Net Profit	23,996	28,444	30,269	21,265	22,801
EPS (Rs)	12.5	14.9	15.8	11.1	11.9
EPS growth (%)	-13.3	18.5	6.4	-29.7	7.2
ROCE (%)	7.8	6.9	5.8	4.6	5.2
ROE (%)	9.5	9.3	9	5.8	5.8
PE (x)	8.1	6.9	6.4	9.2	8.6
Price/Book (x)	0.7	0.6	0.6	0.5	0.5
EV/EBITDA (x)	4.2	6.1	7.4	6.1	5.5