Hindalco Industries Limited is an Indian national aluminium and copper manufacturing company. The company is a subsidiary and the flagship company of the Aditya Birla Group. The company has their headquarters at Mumbai and was incorporated in 1958. It is mainly engaged in the production of Aluminium and Copper. It is also engaged in the manufacturing of aluminium sheet, extrusion and light gauge products for use in packaging markets like beverage and food, cans and foil products, and many other metal products.
The company has yearly sales of US$25 billion and provides employment to about 20,000 people. It is listed in the Forbes Global 2000 at the 895th rank. Its market capitalisation by the end of December 2022 was US$13 billion. Hindalco is amongst the world’s largest aluminium rolling companies and one of the biggest producers of primary aluminium in Asia.
Quarterly Growth Walkthrough
The quarterly performance of Hindalco in H2FY23 has been a shock at Rs 2205 which is a major slump of 35 percent Year-on-Year in the net profit crore from Rs 3417 crore.
Novelis (International segment)
Novelis is a subsidiary of Hindalco Industries Limited producing aluminium sheets for automotive purposes and beverage cans. It operates an integrated network of technically advanced rolling and recycling facilities across North America, South America, Europe and Asia.
During the second quarter, the pricing of products has increased, the company had an appreciative product range, and expensive cost of aluminium has aided Novelis with a growth in revenues. The net debt of Novelis as of 30th September 2022 was at $4.6 billion. Net debts have increased by $107 million quarter on quarter.
India (National segment)
Revenues from operations were reported at Rs 18,963 crore which is a growth of 9 percent as compared to the same quarter in the last year. EBITDA has slumped to Rs 2,091 in the second quarter from Rs 3,602 crore in the year ago quarter. The net profit has fallen down drastically by 49 percent to Rs 921 which was at Rs 1,815 in the year ago quarter
Aluminium Upstream
The upstream sector produces primary Aluminium from raw materials via bauxite mining. Production and shipment have both remained unchanged quarter on quarter however, realisation was higher by 20 percent. The EBITDA has come down due to higher production cost and an adverse macro structure.
Aluminium downstream
The downstream sector comprises of processing of Aluminium into semi-finished Aluminium goods such as rods, bars, castings, forging, and other metallic products. Revenues have surged with the support of higher volumes and expensive pricing. The EBITDA has improved with the aid of better pricing which has been slightly hedged with expenses from heavy conversions.
Copper
Volumes were slightly higher but lower pricing in copper has led to a decline in revenues quarter on quarter.
Long term panorama
Aluminium prices will most probably remain steady in the price range of $2200-2300 per tonne considering the demand-supply scenario remains liquid. The European smelters are down, and aluminium inventories are currently at a 15-year low. Currently, the company has hedged about 30 percent of the offtake at $2500 for FY23 and 5 percent at $3000 per tonne for FY24. The management has advised on a lower cost of production for aluminium by around 2-5 percent for the December quarter through the support of additional coal supply from Coal India.
The copper segment has a high probability to report a sturdy EBITDA greater than Rs 400-500 crore per quarter.
Considering Novelis, the unwavering inflation leads to higher energy and freight prices due to higher cost, which evokes a slip in margin guidance for H2FY23. The short-term problem of $75-125 per tonne for the December quarter against its feasible range of $525 per tonne is most likely remain unturned, which might affect the performance of H2FY23. Novelis hopes for a minor cost pass-through to lower the pressure on behalf of contract resets from the March ’23 quarter. However, the recovery in margins is likely to be slow and might take some months to revitalize. The growth in volume might be about 3 percent for H2FY23 versus an unchanged growth of H1FY23 as the demand for beverage cans is steady but the automotive and aerospace segment are suffering with restrained demand.
Hindalco faces a few short-term pressures on profitability. The operationalisation of captive coal mines in India from FY25 will cause lower cost and zero dependence on Coal India for supplies for the India aluminium business
Technical Analysis
Hindalco stock price had a major correction this year and the price retraced down to Rs 308.95 at its 61.8% retracement level and bounced back up. The price remains bullish steadily. However, the growth in the recent rally is weak in spite of Hindalco being in the NIFTY50 list as compared to the major NIFTY stocks. The price is above the 200-day moving average and MFI is at 70 points which marks the stock as expensive. Investors having a long-term consideration may accumulate at the 50% retracement level and average their quantities on corrections.
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