Friday, July 22, 2011

Hindalco - Buy


Hindalco Industries Ltd., a Aditya Birla group company, is the largest aluminum producer in India and one of the world's largest aluminium rolling companies. It is also one of the biggest producers of primary aluminium in Asia.

The company has captive bauxite mines, that source around 70 per cent of its requirements for its 1.5 mtpa (million tonne per annum) alumina refinery, and its 0.54 mtpa smelting capacity.

The company also produces copper and its copper smelting capacity is the largest in Asia. Hindalco's products include standard and speciality grade aluminas and hydrates, aluminium ingots, billets, wire rods, flat rolled products, extrusions, foil, alloy wheels copper cathodes, continuous cast copper rods along with other by-products, including gold, silver and DAP (Di Ammonium Phosphate) fertilisers. On a consolidated basis, Hindalco is a global player operating through its global subsidiary Novelis (global leader in aluminium rolled products and aluminum beverage can recycling) which has 32 plants in 11 countries.

Hindalco has been performing well since the last four quarters on standalone as well as on consolidated basis. It has reported good growth in net sales and profits in the last 4 quarters as a result of better price realisation and rising demand in domestic markets. Also, on a consolidated basis, Novelis recently witnessed a turnaround and has significantly contributed to the rapid growth of Hindalco in FY11.

Novelis continues to enjoy pricing power in the developed markets due to recovery in demand and has been able to increase product prices continuously this year. However, the rise in sales realisation has not been fully converted in net profit mainly because of higher coal (a key raw material) prices. A slight dampener to the company's copper business was planned shutdown of 3 weeks in one of its smelters. With the buoyant demand from domestic and global market, we can expect the growth to continue in coming quarters as well.

Hindalco is the industry leader with a strong global and domestic presence in aluminum and copper segments and is one of the world's largest aluminium rolling companies. To strengthen its position further, the company is planning to enhance its refining capacity from 1.7 million tons at present to 6.15 million tons by 2015.

The demand for aluminium and copper is expected to grow rapidly in the coming years. Hindalco is the largest player in the above segments and with its expansion plans it is likely to benefit the most from the rise in demand for aluminum and copper.

After touching a 52 week high of 250 the stock has been falling. Has good support around 160 levels, where we can buy for a target of 240 holding of 3-4 months. Scrip has been languishing and has in fact gave -ve returns during the last 6 months.

Time SpanPriceChange%Change
Today177.30-2.05-1.14
Week177.451.901.07
Month168.2511.106.59
Three Months220.25-40.90-18.56
Six Months234.65-55.30-23.56
One Year152.7026.65

17.45

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Ingenious Investor
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