Hindalco’s strong showing
HNDL continued to deliver superlative operational performance from domestic aluminium business led by industry leading cost positioning and optimum utilisations, while Novelis’ performance improved materially and was best ever since Q2FY12 (EBITDA/t at US$370). We like HNDL on account of i) strong earnings visibility from low cost aluminium asset base with favourable coal supply secured, ii) increased EBITDA contribution from Novelis, iii) strong capex discipline resulting in high FCF generation and iv) relentless focus on reducing Net debt/EBITDA through material deleveraging over FY18-19E.
Strong performance at aluminium operations continues; copper shines:
Standalone EBITDA at Rs1,350 crore, was marginally above our estimates, led by strong performance of the aluminium division and solid growth in the copper division. The aluminium division reported EBITDA of Rs 920 crore (up 78% YoY). The copper division reported EBITDA of Rs 500 crore, up 32% YoY.
Outlook. HNDL’s overall aluminium portfolio CoP stands at the 11th percentile in the global cost curve led by sharp cost reduction in several previous quarters and improving coal availability scenario (~70% of coal requirement tied up through captive/linkage) at competitive costs.