Hindalco Industries (HINDAL) |...
Transcript of Hindalco Industries (HINDAL) |...
May 31, 2017
ICICI Securities Ltd | Retail Equity Research
Result Update
In line performance, de-leveraging augurs well
Hindalco reported a healthy set of Q4FY17 numbers wherein the
topline came in higher than our estimate on the back of better-than-
expected copper sales volume while EBITDA and PAT were broadly in
line with our estimates. Gross revenues were at | 11747.1 crore. After
adjusting for excise, net revenues was at | 11026.1 crore, up 18.4%
QoQ, 27.4% YoY and higher than our estimate of | 9909.3 crore
The aluminium segment reported sales of ~328000 tonne, a tad lower
than our estimate of ~330000 tonne. Copper sales came in at ~114000
tonne, higher than our estimate of ~100000 tonne. The aluminium
segment reported revenues of | 5547.9 crore, up 9.4% YoY while
copper revenues came in at | 6202 crore, up 47.9% YoY
Reported EBITDA was at | 1347.2 crore (up 13.7% QoQ, 14.4% YoY),
broadly in line with our estimate of | 1386.7 crore. Reported EBITDA
margin was at 12.2%
Ensuing reported PAT was at | 502.8 crore (up 25.3% YoY, 57.0%
QoQ) in line with our estimate of | 501.6 crore
De-leveraging to strengthen balance sheet…
The management continues to focus on its strategic initiative of
deleveraging the balance sheet. During FY17, the company prepaid long
term loan amounting to | 1031 crore. Furthermore, the company in April
2017 prepaid debt to the tune of | 4505 crore, aided by QIP. Total
repayment of | 5536 crore till date has resulted in significant
improvement in consolidated net debt/EBITDA of 3.74x as on March 31,
2017 from 6.29x in the prior year. In the balance part of FY18, the
company chalked out debt repayment plan of ~| 2200 crore (paid largely
through internal accruals). Also, the capex is estimated to be nominal to
the tune of ~| 1000 crore for Indian operations. Thus, going forward,
deleveraging coupled with low capex is likely to impart strength to the
balance sheet in the medium term, which augurs well for the company.
Novelis reports strong performance in Q4FY17…
Novelis’ Q4FY17 numbers were above our estimates wherein healthy
growth in auto shipments (up 26% YoY) aided the performance. Total flat
rolled product (FRP) shipments came in at 789 KT, up 1 KT YoY, higher
than our estimate of 775 KT. The company reported an adjusted EBITDA
of US$292 million up 5% YoY (our estimate: US$271 million). The
EBITDA/tonne came in at US$370/tonne, higher than our estimate of
US$350/tonne. Going forward, we have modelled EBITDA/tonne
US$375/tonne for FY18E and US$400 for FY19E.
Balance sheet to strengthen, going forward; upgrade to BUY…
Hindalco continued to deliver a steady performance in Q4FY17, marked
by higher volumes and realisations from both aluminium and copper
segment. Further, a strong performance of Novelis driven by increased
automotive shipments remained a highlight for the quarter and year. We
value Hindalco on an SOTP basis, thereby arriving at a target price of
| 225. We upgrade the stock from HOLD to BUY recommendation. The
deleveraging of the balance sheet coupled with low capex augurs well for
the company.
Rating matrix
Rating : Buy
Target : | 225
Target Period : 12 Months
Potential Upside : 13%
What’s Changed?
Target Changed from | 180 to | 225
EPS FY18E Changed from | 17.3 to | 18.2
EPS FY19E Changed from | 22.2 to | 23.5
Rating Changed from Hold to Buy
Quarterly Performance (Standalone)
Q4FY17 Q4FY16 YoY (%) Q3FY16 QoQ (%)
Revenue 11,026.1 8,654.4 27.4 9,313.6 18.4
Adj. EBITDA 1,347.2 1,177.6 14.4 1,185.3 13.7
EBITDA (%) 12.2 13.6 -139 bps 12.7 -51 bps
Rep. PAT 502.8 401.3 25.3 320.2 57.0
Key Financials (Cons)
| Crore FY16E FY17E FY18E FY19E
Net Sales 100053.8 100183.8 118473.8 128194.0
EBITDA 8724.0 12435.9 13325.4 14647.3
Rep Net Profit 263.3 1881.8 4058.5 5225.7
EPS (|) 1.3 8.4 18.2 23.5
Valuation summary
FY16E FY17E FY18E FY19E
P/E 156.8 23.7 11.0 8.5
Target P/E 176.8 26.7 12.4 9.6
EV / EBITDA 11.1 7.6 6.8 5.7
P/BV 1.1 0.9 0.8 0.8
RoNW 0.7 4.1 8.1 9.5
RoCE 4.3 6.9 7.4 8.6
Stock data
Stock Data
Market Capitalization | 45400 crore
Total Debt (FY17 P) | 69611 crore
Cash and Cash equivalents (FY17 P) | 17213 crore
EV | 97798 crore
52 week H/L (|) 210 / 98
Equity capital | 222.72 crore
Face value | 1
Price performance (%)
Return % 1M 3M 6M 12M
Hindustan Zinc -9.2 -13.8 -6.0 54.2
Vedanta 0.6 -5.5 6.5 130.0
Hindalco Ind 1.9 10.2 15.6 97.3
Research Analyst
Dewang Sanghavi
Akshay Kadam
Hindalco Industries (HINDAL) | 200
ICICI Securities Ltd | Retail Equity Research Page 2
Variance analysis
Q4FY17 Q4FY17E Q4FY16 YoY (%) Q3FY16 QoQ (%) Comments
Total Operating Income 11,026.1 9,909.3 8,654.4 27.4 9,313.6 18.4 The topline came in above our estimates
Other Income 222.6 296.3 209.5 6.2 220.0 1.2 Other income came in lower than our estimates
Total Manufacturing Expense 9,678.9 8,522.5 7,476.8 29.5 8,128.3 19.1
Adjusted EBITDA 1,347.2 1,386.7 1,177.6 14.4 1,185.3 13.7 EBITDA came broadly in line with our estimates
Adjusted EBITDA Margin (%) 12.2 14.0 13.6 -139 bps 12.7 -51 bps
Depreciation 541.1 387.0 340.5 58.9 358.0 51.2
Interest 380.2 579.4 573.6 -33.7 587.9 -35.3
Exceptional item - - - - 0.2 -100.0
PBT 648.5 716.6 473.1 37.1 459.2 41.2
Tax Outgo 145.7 215.0 71.8 102.9 139.0 4.8
PAT 502.8 501.6 401.3 25.3 320.2 57.0 PAT came in line with our estimates
Key Metrics
Total Copper sales (tonne) 114,000 100,000 97,000 17.5 97,000 17.5 Copper sales were significantly higher than our estimates
Total Aluminium sales (tonne) 328,000 330,100 328,600 -0.2 310,000 5.8 Aluminium sales were marginally lower than our estimates
Novelis, Rolled Product Shipments (Kt) 789 775 788 0.1 750 5.2 Novelis shipments came in higher than our estimates
Novelis, EBITDA/tonne (US$/tonne) 370 350 335 10.4 340 8.8 Novelis EBITDA/t came in higher than our estimates
Source: Company, ICICIdirect.com Research
Change in estimates
(| Crore) New Old % Change New Old % Change
Revenue 100,183.8 118,473.8 114,532.1 3.4 128,194.0 121,742.0 5.3 Upward revised estimates on all parameters for both years
EBITDA 12,435.9 13,325.4 12,996.1 2.5 14,647.3 14,101.3 3.9
EBITDA Margin (%) 12.4 11.2 11.3 -10 bps 11.4 11.6 -16 bps
PAT 1,881.8 4,058.5 3,579.5 13.4 5,225.7 4,590.4 13.8
EPS (|) 8.4 18.2 17.3 5.3 23.5 22.2 5.7
FY17 P
FY18E FY19E
Source: Company, ICICIdirect.com Research
Assumptions
FY17 FY18E FY19E FY18E FY19E
Total Copper Production (Kt) 376 397 397 397 397 Maintained estimates
Total Aluminium Production (Kt) 1,266 1,271 1,284 1,168 1,176 Maintained estimates
Novelis, Rolled Product Shipments (Kt) 3,067 3,214 3,535 3,214 3,535 Maintained estimates
Novelis, EBITDA/tonne (US$/tonne) 354 375 400 375 400 Maintained estimates
LME Aluminium (US$/tonne) 1,688 1,900 1,900 1,800 1,700 Upward revised LME estimates
LME Copper (US$/tonne) 5157 6250 6500 6250 6500 Maintained LME estimates
US$: INR 67 65 65 66 67
Comments
Current Earlier
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 3
Company Analysis
Hindalco is a metal major with business interests in copper smelting &
aluminium manufacturing domestically. The company is also a leading
aluminium converter globally through subsidiary Novelis.
Aluminium business leads way…
On the domestic front, Hindalco has expanded its aluminium capacity to
1.3 MTPA (from 0.56 MTPA earlier) and alumina capacity to 3.0 MTPA
(from 1.5 MTPA earlier). Aluminium capacity expansion was carried out
through two greenfield projects viz. Mahan and Aditya while alumina
capacity expansion through the Utkal alumina refinery. With all the three
projects (Utkal, Mahan and Aditya) operating at optimum capacity, the
company enjoyed economies of scale during Q4FY17. We expect alumina
production to gradually increase to 2.98 MT while aluminium production
is expected to increase to 1.28 MT.
Exhibit 1: Alumina production
1631
2240
26802886 2951 2981
0
500
1000
1500
2000
2500
3000
3500
FY14 FY15 FY16 FY17 FY18E FY19E
KT
Source: Company, ICICIdirect.com Research
Exhibit 2: Aluminium (primary metal) production
594
809
1133
1266 1271 1284
0
200
400
600
800
1000
1200
1400
FY14 FY15 FY16 FY17 FY18E FY19E
KT
Source: Company, ICICIdirect.com Research
Copper segment surprises positively in terms of volumes for Q4FY17…
The copper segment reported a significant improvement in performance
during Q4FY17 driven by improvement in demand scenario on the back
of lower imports of copper and higher by-products realisation (sulphuric
acid and di-ammonium phosphate). During the quarter, cathode
production volumes increased 18% QoQ at 111 KT while the CC rod
production was up 6 KT to 38 KT. The company reported a segmental
EBITDA of | 497 crore up 23% YoY.
Exhibit 3: Copper production trend
330
386 388 376397 397
0
50
100
150
200
250
300
350
400
450
FY14 FY15 FY16 FY17 FY18E FY19E
KT
Copper production
Source: Company, ICICIdirect.com Research
Exhibit 4: Copper division topline and EBIT trend
20451
18362
19408
16398
17342
1516
1467 1456
1294
1369
0
200
400
600
800
1000
1200
1400
1600
12000
13000
14000
15000
16000
17000
18000
19000
20000
21000
FY15 FY16 FY17 FY18E FY19E
| c
rore
| c
rore
Topline (LHS) EBIT (RHS)
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 4
Novelis performance
For the quarter, Novelis’ total shipments of rolled aluminium products
stood at 789 kilotonne (KT) up 1 Kt YoY (our estimate: 775 KT). Sales
came in at US$2.6 billion, up 9% YoY, driven by higher automotive
shipments, which increased 26% YoY during the quarter.
Adjusted EBITDA for Q4FY17 increased to US$292 million, up 5% from
the prior year period. The metal lag impact during the quarter was
negligible as local market premium volatility reduced. The EBITDA during
the quarter was supported by higher automotive shipments, productivity
gains and lower metal cost. The resulting EBITDA/tonne was at
US$370/tonne, higher than our estimate of US$350/tonne.
Novelis reported net income attributable to our common shareholder of
US$47 million for Q4FY17, compared to a net income of US$29 million in
the prior year period. Excluding tax-effected special items in both periods,
Q4FY17 net income was at $73 million from $50 million in the prior year.
Exhibit 5: Novelis rolled product shipments
2895
3101
3123
3067 3
214
3535
2400
2600
2800
3000
3200
3400
3600
FY14 FY15 FY16 FY17E FY18E FY19E
KT
Source: Company, ICICIdirect.com Research
Exhibit 6: Novelis EBITDA/tonne trend
289 288
229
354375
400
0
50
100
150
200
250
300
350
400
450
FY14 FY15 FY16E FY17E FY18E FY19E
US
$ M
illion
EBITDA/tonne
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 5
Key conference call highlights (Hindalco)
Aluminium segment
The alumina production (including Utkal) during the quarter was up
1% YoY to 709 KT. The same for full year rose 8% YoY to 2886 KT
Metal production for the quarter was at 317 KT, up 3% YoY, while that
for the full year came in at 1266 KT, up 12% YoY
The value added production including wire rods increased 6% YoY in
Q4FY17 to 125 KT. FY17 production was at 481 KT, up 14% YoY
Aluminium facilities have ramped up and are operating at designed
capacities
During the year, the aluminium segment reported a strong
performance on account of steady plant operations, higher volumes,
supportive macro factors and lower input costs. However, input costs
(crude derivatives) started hardening in Q4FY17
Revenues from the segment for Q4FY17 were at | 5548 crore, up 9%
YoY. For full year FY17, revenues increased 9% to | 19986 crore. The
aluminium segment reported an EBITDA of | 918 crore for Q4FY17.
For the full year, same was at | 3473 crore, up 73% YoY
Utkal refinery during the year reported a strong performance on the
back of stable operations. During FY17, international alumina prices
were relatively lower impacting EBITDA. However, lower alumina
prices are favourable for Hindalco as it results in lower input cost. The
full year FY17 EBITDA of Utkal was at | 672 crore, down 6% YoY
During FY17, LME prices were up 6% YoY to US$1688/tonne while
the premium (MJP) was down ~21% YoY to US$95/tonne. The rupee
during the year depreciated ~2% to | 67.1/US$
Copper Segment
Total cathode production during the quarter was at 111 KT, up 19%
YoY. For full year FY17, cathode production was at 376 KT, down 3%
YoY
The CC rods production during the quarter was at 38 KT, down 3%
YoY. For FY17, the same was down 5% to 150 KT
DAP production during Q4FY17 was at 62 KT, down 10% YoY. For the
full year, the same was at 301 KT, down 7% YoY
Cathode and DAP production during the year was primarily impacted
by planned shutdown while CC rod production was lower on account
of subdued demand in the domestic market
Revenues from the copper segment reported a healthy increased
both for Q4FY17 as well as for FY17. The revenues for the quarter
were up 48% YoY to | 6202 crore while for FY17 the same was at
| 19408 crore. The healthy revenue increase is attributable to higher
overall realisations. For Q4FY17, the copper segment reported an
EBITDA of | 497 crore, up 29% YoY. For full year FY17, copper
EBITDA was marginally down ~1% YoY to | 1456 crore
Mine disruption in Chile and export ban from Indonesia impacted the
concentrate supply in H2FY17 thereby impacting the Tc/Rc
ICICI Securities Ltd | Retail Equity Research Page 6
Others
The company raised US$500 million though qualified institutional
placement (QIP). The proceeds from the QIP were largely used in
prepaying debt
The company continues to focus on deleveraging the balance sheet;
the company during the full year FY17 prepaid | 1031 crore of debt. In
April 2017 the company further repaid | 4505 crore. The total
repayments till date were at | 5536 crore. This is likely to result in
reduction in interest costs
The company during the year refinanced US$4.3 billion long term
debt of Novelis, which resulted cash interest reduction of US$79
million
The coal security during the year improved to two-third of the annual
coal requirement for the aluminium business enabling an adequate
visibility on the power cost to the company. The Gare Palma IV/4 and
IV/5 coal mines reached their peak capacity; the Kauthautia mines
also commenced operations useful for the Mahaan smelter
Over a medium term horizon, the management aims to double the
value added aluminium capacity from 300 KT currently to 600 KT
For Indian operations, the management maintained the capex
guidance for FY18 @ | 1000 crore
The company is looking at repayment of | 2200 crore of debt in the
balance part of FY18 broadly through internal accruals
The company exported ~40-50% of its domestic production during
FY17; going forward the company intends to sell more domestically
Hindalco’s hedging strategy of the company remains defensive and
not speculative. Normally 30-40% of volumes on an annual basis is
the hedged proportion, which company does not want to exceed.
However, on a quarterly basis, this may increase to 50%
For India operations, including Utkal, gross debt was | 32000 crore
with | 13000 crore of treasury as of FY17. At Novelis, gross debt was
US$4.9 billion while available treasury was US$600 million as of FY17
ICICI Securities Ltd | Retail Equity Research Page 7
Conference call highlights (Novelis)
FY17 Highlights
The net income increased to US$45 million from net loss of US$38
million year ago
o Excluding tax-effected special items in both years, net income
increased 78% from US$131 million to US$233 million
The adjusted EBITDA (excl. metal price lag) up 13% YoY to US$1085
million
o Metal price lag impact in FY17 minimised to negative US$31
million compared to negative US$172 million in FY16
The FRP shipments during the year were down 2% to 3067 kilo tonne
o Automotive shipments during the year increased to 18% of
total shipments from that of 15% in the previous year
o The sales during FY17 down 3% to US$9.6 billion
The free cash flow during the year increased to US$361 from US$160
million in FY16
o The FCF increase was driven by higher adjusted EBITDA,
completion of strategic capex, refinancing driven interest
savings, partly offset by higher working capital due to rising
aluminium prices
The net debt to EBITDA ratio now below 4x one year earlier than
anticipated
Q4FY17 Highlights
The net income increased to US$47 million from that of US$29 million
in the corresponding quarter of the previous year
The adjusted EBITDA during the quarter came in at US$292 million up
5% YoY
o The metal price lag impact was negligible as local market
premium volatility reduced
The sales during the quarter was up 9% YoY to US$2.6 billion
The FRP shipments during the quarter stood at 789 kilo tonne up 1 KT
YoY
o The automotive shipments during the quarter were up 26%
YoY
o During Q4FY17, the company achieved auto shipments exit
rate of 20% of shipments
Liquidity position during the quarter stood at US$1.3 billion
Other Highlights
Novelis has entered into a joint venture with Kobe Steel. The JV will
be named Ulsan Aluminium and will be formed by Novelis selling
50% of its ownership stake in Ulsan facility in South Korea to Kobe for
US$315 million. The transaction related to the JV is expected to be
completed by September 2017 subject to customary closing
conditions
o The cash from the Ulsan transaction to further deleverage
balance sheet for the time being, the management continues
to evaluate opportunities to deploy the same
ICICI Securities Ltd | Retail Equity Research Page 8
The management has guided an overall/aggregate EBITDA/tonne
guidance of US$350-360/tonne for FY18
The management indicated the Free Cash Flow (FCF) generation to be
at or above FY17 level for FY18.
The management said there has been no discussion on dividend part
with the parent as such, and that the focus remains on strengthening
the balance sheet and deleveraging. The management is looking for
right opportunities to deploy the FCF
The management indicated that post refinancing the debt repayment
now stands in the year 2022, and that there are no debt repayment
plans in the near term
The company during the year benefited from hedges to the tune of
~US$50 million
The FRP shipments in FY18 are expected to be higher compared to
FY17 and will be driven by higher mix of auto volumes
The capex run rate for FY18 and FY19 is around ~US$250 million
The reduction in interest cost for FY18 and FY19 to be ~US$245-250
million (cash interest)
ICICI Securities Ltd | Retail Equity Research Page 9
Outlook and valuation
Hindalco continued to deliver a steady performance in Q4FY17, marked
by higher volumes and realisations from both aluminium and copper
segment. Further, a strong performance of Novelis driven by increased
automotive shipments remained a highlight for the quarter and year. We
have valued Hindalco on an SOTP basis, thereby arriving at a target price
of | 225. We have upgraded the stock from HOLD to BUY
recommendation. The deleveraging of the balance sheet coupled with
low capex augurs well for the company.
Exhibit 7 : Valuation matrix
Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE
(| cr) (%) (|) (%) (x) (x) (%) (%)
FY15 104281.1 18.9 4.1 -60.7 9.3 10.8 2.2 5.0
FY16E 100053.8 -4.1 1.3 -69.2 159.2 11.1 0.7 4.3
FY17E 100183.8 0.1 9.1 614.6 22.3 7.6 4.1 6.9
FY18E 118473.8 18.3 19.7 115.7 10.3 6.8 8.1 7.4
FY19E 128194.0 8.2 23.5 19.4 8.5 5.7 9.5 8.6
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 10
Recommendation history vs. consensus estimate
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
50
100
150
200
250
300
May-17Mar-17Jan-17Oct-16Aug-16May-16Mar-16Dec-15Oct-15Aug-15May-15
(%
)(|)
Price Idirect target Consensus Target Mean % Consensus with BUY
Source: Bloomberg, Company, ICICIdirect.com Research
Key events
Date/Year Event
2004 Copper smelter expansion, capacity raised to 250000 TPA
2005 MoUs signed with state governments of Odisha and Jharkhand to set up greenfield alumina refining, smelting and power plants; commissioned copper III expansion,
taking total capacity of copper smelter to 500000 TPA
2006 Comes out with a right issue amounting to | 2226.6 crore; enters into JV with Essar Power (MP) to develop and operate coal mines in Mahan, Madhya Pradesh;
company splits shares in ratio of 1:10
2007 In May 2007, Novelis becomes a Hindalco subsidiary with the completion of acquisition process. The transaction makes Hindalco the world's largest aluminium
rolling company and one of the largest producers of primary aluminium in Asia; acquisition of Alcan's 45% stake in Utkal Alumina project makes Hindalco the 100%
project owner
2008 Comes out with rights issue: raises | 4426 crore for re-financing bridge loan taken for Novelis acquisition; Hindalco Alex Aerospace (HAAL) facility becomes
operational and produces largest aluminium billet of 42 inch diameter
2009 Raises US$600 million through QIP route for projects
2011 Refinances Novelis debt amounting to US$4 billion; achieves financial closure of two projects through debt financing -Utkal Alumina for | 4906 crore and Mahan
Aluminium for | 7875 crore
2013 Promoter infuses capital into the company by way of conversion of warrants (@| 143/share), of total | 2150 crore
2015 Utkal Alumina International Limited (100% subsidairy) made a total investment over |7500 crore in its Alumina plant at Rayagada, Odisha having capacity of 1.5
million tonne per annum (MTPA)
2016 Hindalco may have to halt mining at its biggest bauxite reserve at Baphlimali mine, as the part of the land was recently deemed forest requiring the company to
obtain new permit latest by March 9 this year
Source: Company, ICICIdirect.com Research
Top 10 Shareholders Shareholding Pattern
Rank Name Latest Filing Date % O/S Position Change
1 Aditya Birla Group 31-Mar-2017 30.5 684.3M 0
2 LIC Mutual Fund Asset Management Company Ltd. 31-Mar-2017 9.2 205.5M -30.7M
3 Birla Sun Life Asset Management Company Ltd. 30-Apr-2017 1.7 39.1M -0.7M
4 BlackRock Institutional Trust Company, N.A. 30-Apr-2017 1.5 33.8M 3.0M
5 Bajaj Allianz Life Insurance Company Limited 31-Mar-2017 1.4 31.4M 4.8M
6 Dimensional Fund Advisors, L.P. 31-Mar-2017 1.4 31.3M 0
7 Umang Commercial Co., Ltd. 31-Mar-2017 1.2 27.3M 0
8 The Vanguard Group, Inc. 31-Mar-2017 1.1 25.7M 0.1M
9 ICICI Prudential Asset Management Co. Ltd. 30-Apr-2017 1.0 21.6M 0.1M
10 Birla Institute of Technology & Science 31-Mar-2017 1.0 21.6M 0
Source: Reuters, ICICIdirect.com Research
(in %) Mar-16 Jun-16 Sep-16 Dec-16 Mar-17
Promoter 37.7 37.7 37.7 37.7 34.7
FII 19.5 22.3 25.4 25.5 27.5
DII 19.0 17.7 15.8 15.9 17.8
Others 23.8 22.3 21.1 20.9 20.0
Recent Activity
Investor name Value Shares Investor name Value Shares
FIL Investment Management (Hong Kong) Limited 25.2M 8.4M LIC Mutual Fund Asset Management Company Ltd. -92.2M -30.7M
Bajaj Allianz Life Insurance Company Limited 14.4M 4.8M HDFC Asset Management Co., Ltd. -21.0M -6.8M
Franklin Templeton Asset Management (India) Pvt. Ltd. 14.3M 4.6M Norges Bank Investment Management (NBIM) -10.8M -4.7M
Lyxor Asset Management 13.3M 4.3M L&T Investment Management Limited -2.8M -1.0M
FIL Investment Management (Singapore) Ltd. 8.7M 3.1M Old Mutual Global Investors (UK) Limited -2.6M -0.9M
Buys Sells
Source: Reuters, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 11
Financial summary (Cons.)
Profit and loss statement | Crore
(Year-end March) FY16 FY17 P FY18E FY19E
Net Sales 100053.8 100183.8 118473.8 128194.0
Other Operating Income 0.0 0.0 0.0 0.0
Total Operating Income 100053.8 100183.8 118473.8 128194.0
Growth (%) -4.1 0.1 18.3 8.2
Total Operating Expenditure 91329.8 87747.9 105148.5 113546.7
EBITDA 8724.0 12435.9 13325.4 14647.3
Growth (%) -2.5 42.5 7.2 9.9
Depreciation 4196.1 4457.2 4878.5 4938.5
Interest 5046.7 5742.4 4103.7 4046.3
Other Income 1211.3 1111.0 948.0 1185.0
Exceptional Item 171.1 32.8 0.0 0.0
PBT 521.4 3314.4 5291.2 6847.5
Total Tax 514.8 1432.6 1322.8 1711.9
PAT 6.6 1881.8 3968.4 5135.6
Growth (%) -92.2 NM 110.9 29.4
Minorities, Associates etc 256.7 0.0 90.1 90.1
Rep PAT after Assoc., MI 263.3 1881.8 4058.5 5225.7
Adj PAT after Assoc., MI 434.4 1881.8 4058.5 5225.7
Growth (%) -84.5 333.2 115.7 28.8
Adj EPS (|) 1.3 8.4 18.2 23.5s
Source: Company, ICICIdirect.com Research
Cash flow statement | Crore
(Year-end March) FY16 FY17 P FY18E FY19E
Profit after Tax 263.3 1881.8 4058.5 5225.7
Add: Depreciation 4196.1 4457.2 4878.5 4938.5
Add: Interest 5046.7 5742.4 4103.7 4046.3
(Inc)/dec in Current Assets 2595.4 590.0 -8707.6 -4394.2
Inc/(dec) in CL and Prov. -1513.6 -3619.6 4909.6 5068.3
CF from operating activities 10588.0 9051.9 9242.7 14884.6
(Inc)/dec in Investments -1977.5 -833.6 150.0 150.0
(Inc)/dec in Fixed Assets -3420.1 -5663.9 -1000.1 -3000.0
Others -1416.4 -724.9 -315.7 -209.9
CF from investing activities -6814.1 -7222.4 -1165.7 -3059.9
Issue/(Buy back) of Equity 0.0 16.2 0.0 0.0
Inc/(dec) in loan funds 10.6 2542.1 -4500.0 -6500.0
Interest Paid -5046.7 -5742.4 -4103.7 -4046.3
Dividend paid & dividend tax -241.6 -241.6 -241.6 -241.6
Inc/(dec) in Share Cap 289.6 5762.6 0.0 0.0
Others 0.0 0.0 0.0 0.0
CF from financing activities -4988.1 2336.9 -8845.3 -10787.9
Net Cash flow -1214.2 4166.4 -768.3 1036.8
Opening Cash 5308.9 4094.8 8261.2 7492.9
Closing Cash 4094.8 8261.2 7492.9 8529.7
Source: Company, ICICIdirect.com Research
Balance sheet | Crore
(Year-end March) FY16 FY17 P FY18E FY19E
Liabilities
Equity Share Capital 206.5 222.7 222.7 222.7
Reserve and Surplus 38433.3 45836.1 49653.0 54637.2
Total Shareholders funds 38639.8 46058.8 49875.7 54859.9
Total Debt 67068.7 69610.8 65110.8 58610.8
Deferred Tax Liability 3330.3 2866.6 2866.6 2866.6
Minority Interest & Others 1409.6 1074.5 984.4 894.3
Total Liabilities 110448.5 119610.7 118837.5 117231.6
Assets
Gross Block 109297.9 121708.0 121961.9 123461.9
Less: Acc Depreciation 32564.0 37021.2 41899.7 46838.2
Net Block 76733.9 84686.8 80062.2 76623.7
CWIP 8560.1 1813.9 2560.1 4060.1
Investments 14323.9 15157.5 15007.5 14857.5
Inventory 16794.0 18291.4 21098.1 22829.1
Debtors 8199.5 8274.8 10386.7 10536.5
Loans and Advances 6350.0 3240.8 8530.1 10588.8
Other Current Assets 3752.6 4699.2 3198.8 3653.5
Cash 4094.8 8261.2 7492.9 8529.7
Total Current Assets 39190.9 42767.3 50706.6 56137.6
Current Liabilities 21306.4 21256.9 22721.0 26341.2
Provisions 9213.0 5642.9 9088.4 10536.5
Current Liabilities & Prov 30519.3 26899.8 31809.4 36877.7
Net Current Assets 8671.6 15867.5 18897.2 19259.9
others 2159.0 2085.1 2310.6 2430.4
Application of Funds 110448.5 119610.7 118837.5 117231.6
Source: Company, ICICIdirect.com Research
Key ratios
(Year-end March) FY16 FY17 P FY18E FY19E
Per share data (|)
Reported EPS 1.3 8.4 18.2 23.5
Cash EPS 22.4 28.5 40.1 45.6
BV 187.1 206.8 223.9 246.3
DPS 1.0 1.0 1.0 1.0
Cash Per Share 19.8 37.1 33.6 38.3
Operating Ratios (%)
EBITDA Margin 8.7 12.4 11.2 11.4
PBT / Total Operating income 0.5 3.3 4.5 5.3
Adj PAT Margin 0.4 1.9 3.4 4.1
Inventory days 61 67 65 65
Debtor days 30 30 32 30
Creditor days 78 77 70 75
Return Ratios (%)
Adj RoE 0.7 4.1 8.1 9.5
Adj RoCE 4.3 6.9 7.4 8.6
RoIC 5.0 7.9 8.4 8.9
Valuation Ratios (x)
P/E 156.8 23.7 11.0 8.5
EV / EBITDA 11.1 7.6 6.8 5.7
EV / Net Sales 1.0 0.9 0.8 0.7
Market Cap / Sales 0.4 0.4 0.4 0.3
Price to Book Value 1.1 1.0 0.9 0.8
Solvency Ratios
Net Debt/EBITDA 5.6 3.7 3.2 2.4
Debt / Equity 1.7 1.5 1.3 1.1
Current Ratio 1.3 1.6 1.6 1.5
Quick Ratio 0.7 0.9 0.9 0.9
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 12
ICICIdirect.com coverage universe (Metals & Mining)
CMP M Cap
(|) TP (|) Rating (| Cr) FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E
Coal India 268 365 Buy 166172 16.1 19.6 22.4 18.6 15.3 13.4 9.8 8.0 6.6 36.9 51.5 62.1 36.1 48.6 56.3
Hindalco 200 225 Hold 44540 8.4 18.2 23.5 23.7 11.0 8.5 7.6 6.8 5.7 6.9 7.4 8.6 4.1 8.1 9.5
Hindustan Zinc 243 300 Buy 102773 19.7 23.9 25.5 13.8 11.3 10.6 9.3 7.3 6.1 26.9 33.2 30.3 27.0 27.0 24.3
JSW Steel 190 215 Buy 45927 14.3 18.8 20.8 13.5 10.2 9.3 7.2 6.7 6.3 13.3 14.5 14.5 15.3 17.4 16.4
SAIL 58 60 Hold 24101 -5.9 -0.6 6.2 NA NA 10.1 62.6 13.6 6.6 -2.0 2.1 7.0 -6.5 -0.7 7.3
Vedanta 242 260 Hold 71753 15.1 30.5 34.4 9.3 16.3 15.9 4.8 4.1 3.6 12.1 14.2 14.8 9.3 16.3 15.9
Tata Steel 484 550 Buy 143506 42.2 47.0 64.2 11.5 10.3 7.5 7.4 7.2 6.0 9.4 9.4 11.1 10.8 13.8 16.2
ROE(%)ROCE(%)
Company
EV/EBITDA (x)EPS (|) P/E (x)
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 13
RATING RATIONALE
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ratings to its stocks according to their notional target price vs. current market price and then categorises them
as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional
target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;
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ICICIdirect.com Research Desk,
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ICICI Securities Ltd | Retail Equity Research Page 14
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