Reco price/date: Rs 113/November 6;
Current/Target price: Rs 113.70/Nil
Hindalco Industries (Hindalco)'s standalone net sales declined by 1.7 per cent year-on-year to Rs 6,115cr (below our estimate of Rs 6,423 crore) mainly on account of lower aluminium production during the quarter. Its standalone Ebitda decreased by 23 per cent year-on-year to Rs 515 crore and net profit also decreased by 28.6 per cent year-on-year to Rs 359 crore. The Novelis performance was also a mixed bag. Although Hindalco is expanding its capacities three-fold over the coming four-five years, low aluminium prices, sticky costs and delay in commencement of mining from captive blocks are expected to mute its profitability growth. In the near-term, there is lack of clarity over production from Mahan coal block for its upcoming Mahan smelter. Without captive coal block, the Mahan smelter (expected to commission in second Half FY13) is expected to face cost pressures, resulting in lower return ratios over the next two years. Maintain 'Neutral'.
Angel Broking Ltd
JK Cement LTD
Reco price/date: Rs 295/November 6;
Current/Target price: Rs 309/Rs 400
JK Cements reported its results which were way above our and street expectations due to higher than expected margins and other income. Grey cements volumes (cement + clinker) increased 21.2 per cent year-on-year to 1.4 million tonnes due to ramp up of production at Karnataka plant. Realisations for the grey cement business increased 16.4 per cent year-on-year to Rs 3,861 a tonne. Ebitda per tonne for grey cement stood at Rs 626 compared to Rs 208 in Q2FY12 and Rs 795 in Q1FY13. At the current Market Price of Rs 295, the stock is trading at an Enterprise Value per tonne of $44 on FY14E capacity and 1.2x its FY14E book value. The stock is trading at 55 per cent discount to the replacement cost despite having presence in the high margin white cement segment. The company is also likely to enjoy cost advantage over peers due to use of pet coke, which is cheaper than imported coal. Maintain 'Buy'.
Reco price/date: Rs 190/November 7;
Current/Target price: Rs 189.2/Rs 222
During the quarter ended September, primarily led by construction & fee income of Rs 923 crore, the company's consolidated revenue grew to Rs 1,370 crore up by 9.2 per cent on year on year basis. Ebitda however grew by 29.9 per cent to Rs 453 crore and margins at 33 per cent have improved by 462 basis points due to high portion of fee income and toll revenue. Besides, the company reported Q2FY13 consolidated net profit of Rs 116 crore, which was mostly in line with estimates, helped by high fee income Rs 208 crore from newly won projects. The brokerage also said that company has order backlog of Rs 10,880 crore and shows the revenue visibility for next two years. Management is confident to achieve the order inflow matching with previous year as NHAI's awarding activities will catch pace in second half FY13E. Assign a 'Buy'.
K R Choksey