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Hindalco may report 9.8% revenue growth for last quarter: RK Global
Edited by : AL CIRCLE
3 min read
RK Global Shares & Securities has recommended `Buy` on Hindalco Industries with a price target of Rs 154 as against the current market price (CMP) of Rs 130.65 in its report dated Apr. 18, 2012. The broking house gave the following rationale:
Revenue expected to grew 9.8% Y-o-Y on voluminous growth: We expect that the company is likely to post revenue growth of 9.8% Y-o-Y to Rs75171million in Q4FY`12 compared to Rs68464million in Q4FY`12 on the back of voluminous growth in the aluminium segment. However; average aluminium price came down by ~13% to Rs2177/ton in Q4FY12 compared to Rs2502/ton in corresponding quarter of previous year. It is expected to have benefit from its by-product business which will add towards the revenue growth of the company.
Total Expenditure (as a % of sales) expected to go up likely to impact EBIDTA by 3.2%: Hindalco total expenditure expected to grew by 1.8% Y-o-Y (as a % of sales) to Rs66320million in Q4FY`12 compared to Rs59319million in Q4FY`11. With the incremental cost, we expect EBITDA will decline by 3.2% to Rs8851million during the Q4 compared to Rs9145million of the corresponding quarter of previous year.
EBITDAM and PBDTM expected to be impacted ~12% and ~10% respectively: We expect that EBITDAM will decline by 1185bps to 11.77% in Q4FY`12 compared to 13.36% in Q4FY`11. PBDTM too expected to fall by 1004bps to 12.66% in Q4FY12 compared to 14.07% in corresponding quarter on the back of higher cost. However; we expect that the PATM to remain flat at 10.94% in line with 10.35% of the corresponding quarter of previous year. PAT expected to grow by 16.1% Y-o-Y to Rs8226million in Q4FY`12 compared to Rs7083million in Q4FY`11.
Outlook and Valuation: At CMP of Rs130 the stock is trading at EV/EBITDA of 6x FY13E EBITDA of Rs53349million. Our valuation incorporates the expansion plans in aluminium and Novelis business which is assumed to take effect FY13 respectively. We have revised our valuation due to the volatility in the commodity market based on the uncertainty in the global market. We have revised copper price of LME at USD8475/ton and USD8950/ton for FY12 and FY13E. We have also cut down our INR/USD estimate to Rs44.78/dollar and Rs46/dollar for FY12E & FY13E. Considering this, our target price has been revised downward by 13% from Rs177/share earlier to Rs154/share. We valued Hindalco core business at Rs135 per share using EV/EBITDAx of 6.5, Novelis business at Rs53 per share using EV/EBITDAx of 5.5 and Idea busiess at Rs10/share based on market cap. Our target price Rs154 (adjusted debt) offers upside potential of ~18.3% from the current level. We recommend our investors to ``Buy`` the stock at this level.
Revenue expected to grew 9.8% Y-o-Y on voluminous growth: We expect that the company is likely to post revenue growth of 9.8% Y-o-Y to Rs75171million in Q4FY`12 compared to Rs68464million in Q4FY`12 on the back of voluminous growth in the aluminium segment. However; average aluminium price came down by ~13% to Rs2177/ton in Q4FY12 compared to Rs2502/ton in corresponding quarter of previous year. It is expected to have benefit from its by-product business which will add towards the revenue growth of the company.
Total Expenditure (as a % of sales) expected to go up likely to impact EBIDTA by 3.2%: Hindalco total expenditure expected to grew by 1.8% Y-o-Y (as a % of sales) to Rs66320million in Q4FY`12 compared to Rs59319million in Q4FY`11. With the incremental cost, we expect EBITDA will decline by 3.2% to Rs8851million during the Q4 compared to Rs9145million of the corresponding quarter of previous year.
EBITDAM and PBDTM expected to be impacted ~12% and ~10% respectively: We expect that EBITDAM will decline by 1185bps to 11.77% in Q4FY`12 compared to 13.36% in Q4FY`11. PBDTM too expected to fall by 1004bps to 12.66% in Q4FY12 compared to 14.07% in corresponding quarter on the back of higher cost. However; we expect that the PATM to remain flat at 10.94% in line with 10.35% of the corresponding quarter of previous year. PAT expected to grow by 16.1% Y-o-Y to Rs8226million in Q4FY`12 compared to Rs7083million in Q4FY`11.
Outlook and Valuation: At CMP of Rs130 the stock is trading at EV/EBITDA of 6x FY13E EBITDA of Rs53349million. Our valuation incorporates the expansion plans in aluminium and Novelis business which is assumed to take effect FY13 respectively. We have revised our valuation due to the volatility in the commodity market based on the uncertainty in the global market. We have revised copper price of LME at USD8475/ton and USD8950/ton for FY12 and FY13E. We have also cut down our INR/USD estimate to Rs44.78/dollar and Rs46/dollar for FY12E & FY13E. Considering this, our target price has been revised downward by 13% from Rs177/share earlier to Rs154/share. We valued Hindalco core business at Rs135 per share using EV/EBITDAx of 6.5, Novelis business at Rs53 per share using EV/EBITDAx of 5.5 and Idea busiess at Rs10/share based on market cap. Our target price Rs154 (adjusted debt) offers upside potential of ~18.3% from the current level. We recommend our investors to ``Buy`` the stock at this level.
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