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Informist, Monday, Oct. 21, 2024

By Rajesh Gajra

MUMBAI – Higher aluminium and alumina prices in the September quarter, as compared with the year-ago quarter, are likely to save the earnings blues for the largest aluminium manufacturer in India Hindalco Industries Ltd. as volume growth was elusive. Stable cost structure, partly hedged positions against fall in aluminium prices, and other operating levers are seen as aiding on-year operating profit growth for the company in Jul-Sept.

The bottom-line growth is seen mirroring the operating profit performance. Sequentially, however, Hindalco would not have had the price benefit since aluminium prices slipped downwards in Jul-Sept compared with Apr-Jun.

The flagship metals company of the Aditya Birla group is expected to report consolidated net profit of INR 33.34 billion, up 52% on year and 8.5% on quarter, according to an average of estimates from eight brokerages. These estimates range from a low of INR 30.39 billion to a high of INR 36.25 billion.

Hindalco's revenue for the September quarter is seen at INR 562 billion, up 3.8% on year and down 1.4% on quarter, with the estimates ranging from a low of INR 538.79 billion to a high of INR 578.03 billion. The earnings before interest, tax, depreciation, and amortisation are estimated to be INR 70.19 billion, ranging from a low of INR 65.50 billion to a high of INR 73.90 billion.

Hindalco manufactures copper apart from aluminium, and its aluminium facilities are in India and in the US and other overseas units operated by its US-based wholly-owned subsidiary Novelis. In the September quarter, the sales volume from domestic units are estimated to be 335,000 tonnes, down 0.9% on year and up 2% on quarter, by brokerage Kotak Securities' Institutional Equities Research. But brokerage Axis Securities estimates the India aluminium volume to have been higher, 345,000 tonnes, up 2.1% on year and 2.7% on quarter.

Hindalco's copper sales are seen declining on year by at least three brokerages, Nuvama Wealth Management, Kotak Institutional Equities, and Axis Securities. All the three brokerages expect copper volume to be nearly 120,000 tonnes, down around 11% on year. Sequentially, the three brokerages expect copper sales volume growth to have been flat to 0.8%.

With respect to Novelis, aluminium shipment volume in Jul-Sept is seen partially affected by the end-of-June severe Rhone river flooding which hit production at its factory in Sierre, Switzerland, during the September quarter. Kotak Institutional Equities expects Novelis' shipments to have to risen 3% on year and 1.1% on quarter to 961,000 tonnes, while Axis Securities believes it to have declined 0.3% to 930,000 tonnes.

Brokerage Kotak Institutional Equities estimates Hindalco's EBITDA from its India aluminium and alumina operations to jump up 48% on year led primarily by rise in prices of the two metals and decline 3.6% on quarter due to lower aluminium prices. The brokerage expects a worsening in the EBITDA performance of the company's copper segment. It estimates copper segment EBITDA to fall 5% on year and 23% on quarter "led by resilient TcRcs (copper concentrate treatment and refining charges) and high sequential base."

Hindalco will detail its Jul-Sept earnings on Nov. 11 while its subsidiary Novelis will disclose its earnings a few days prior to Nov. 11. Analysts will be monitoring domestic demand in aluminium and copper and the volume trajectory in Novelis. Updates on the flood-affected Swiss factory will be sought.

On Monday, shares of Hindalco closed at INR 739.60, down 1.8%, on the National Stock Exchange.

Following are the Jul-Sept consolidated earnings estimates of Hindalco based on estimates from eight brokerages: 

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Akul Nishant Akhoury

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