Fo­cus on Cut­ting Debt, Firm Metal Prices to Aid Hin­dalco

Co to use large part of cash flow to re­duce debt to 52k-cr by March-end; re­cov­ery in de­mand post de­mon­eti­sa­tion to re­flect in Q4

The Economic Times - - Smart -

alu­minium price of $1700 per tonne (which is 10% lower than the cur­rent LME alu­minium price) and a steady per­for­mance of its US sub­sidiary Novelis, Hin­dalco should achieve con­sol­i­dated EBIDTA or operating profit of ₹ 14,000 crore for FY18. This would mostly go in repaying debt. Hin­dalco’s capex, un­likely to cross ₹ 1,000 crore in the next one year, would be to­wards down­stream projects and help in low­er­ing cost. Against an EBIDTA fore­cast of ₹ 14,000 crore, the stock is cur­rently trad­ing at 5.8 times its EV (en­ter­prise v a l u e ) by E B I D TA o f F Y 1 8 . His­tor­i­cally, the scrip has traded in the range of 7 to 8 times when earn­ings growth has been strong.

Novelis ac­counts for around half of the com­pany’s rev­enue; its earn­ings are fairly sta­ble as the US sub­sidiary pri­mar­ily con­verts alu­minium into bev­er­age cans and ve­hi­cle body sheets. The com­pany is less af­fected by volatil­ity in alu­minium prices.

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