While aluminium prices are likely to remain volatile, Hindalco’s continued efforts on cost control and downstream expansion should sustain profitability. The set-up of the Dumri mine will further improve coal security, while ramp-up at Utkal Alumina (where costs are half, compared to the company’s Renukoot or Muri plants), too, will help.
The performance of the copper segment continued to be muted, with subdued sale volumes due to operational issues, and Ebitda down 48 per cent YoY. Domestic copper market growth, too, was moderate at 2 per cent, highlighted Hindalco.
Outlook remains subdued as the treatment and refinancing charges for calendar year 2020 have settled at 15.9 cents per pound — 23 per cent lower YoY. Though some support to profitability will come from lower input costs and rising sales of value-added products, the overall near-term outlook remains soft.
Overall, Hindalco’s standalone Q3 revenues came in at Rs 10,230 crore, and profit before tax profit at Rs 318 crore, ahead of Rs 10,207 crore and Rs 291 crore, estimated by Motilal Oswal Securities.
While challenges persist, Hindalco’s low-cost integrated domestic operations make it less vulnerable, compared to peers. More importantly, Novelis, which is a converter of aluminium metal into value-added products, continues to clock strong performance, thereby supporting Hindalco.
Novelis is now contributing more than half to Hindalco’s consolidated Ebitda, and the management continues to guide for sustainable Ebitda per tonne of over $400 ($430 in Q3, absolute Ebitda was up 7 per cent YoY).
The acquisition of Aleris is in the final stages. Also, its new automotive finishing plant in Kentucky is in the commissioning process.
Analysts at Motilal Oswal have retained their ‘buy’ rating on the Hindalco
stock trading at attractive valuations and maintaining forward estimates.
Reacting to the results, the stock closed 0.13 per cent up on Wednesday.