Incorporated in 1958, Hindalco Industries Ltd. is a flagship company of the Aditya Birla Group. The Co and its subsidiaries are primarily 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, can and foil products, etc.
Hindalco is active in several business segments which are:
Aluminium: Hindalco ranks among the global top five aluminium producers based on shipments and is an integrated producer with a low-cost base and a strong presence across the value chain.
Copper: The Company copper division operates one of the largest single location customs copper smelters in the world. Hindalco produces copper cathodes, continuous cast copper rods in various sizes.
Chemicals: Hindalco is also engaged in the manufacturing of Calcined alumina (used in grinding media, wear-resistant ceramic components, etc.) and Alumina hydrates (used in the manufacture of water treatment chemicals like aluminium sulphate, zeolite, etc.)
Manufacturing facilities
The company has a manufacturing capacity to produce 1,300 KTPA of aluminium and 2,900 KTPA of alumina. It also has a custom smelter with copper cathode capacity (including recycling) of 421 KTPA in Dahej, Gujarat. They have a global footprint with 13 plants across North America, Europe and Asia.The Company has approved a downstream Flat Rolled Project (FRP) at its existing facilities at Hirakud and Aditya. The total investment for the project is approx Rs. 3,000 Cr for a production capacity of 170 KTPA of FRP products.
Subsidiary
Novelis is a subsidiary of Hindalco, producing automotive and beverage can sheets. It operates an integrated network of technically advanced rolling and recycling facilities across North America, South America, Europe and Asia.
The Company has acquired Hydro’s aluminium extrusions business in India for an enterprise value of Rs 247 Cr. Hydro’s plant has a 15,000-ton aluminium extrusions capacity and is integrated with advanced value-added capabilities for surface finishing and fabrication.
Hindalco has set a target to achieve 200 MW of renewable energy capacity by FY25. The Company has several projects aggregating to ~69MW under implementation.
Hindalco Results: Key Highlights of Q1FY23 Results
- Hindalco reported a 4% QoQ increase in its consolidated revenues for Q1FY23 to Rs 58,018 On a YoY basis, it witnessed a growth of 40%.
- Its expenses for the quarter were up by 2% QoQ and 39%
- The net profit increased 7% QoQ and 27%
- The earnings per share (EPS) of Hindalco stood at 5 during Q1FY23.
- All-time high quarterly consolidated EBITDA at Rs 8,640 crore, up 27% YoY
- Consolidated net debt to EBITDA at a strong 1.40x as of June 30, 2022 vs 2.36x as of June 30, 2021
- They reported a 47.7% in consolidated profit after tax (PAT) at Rs 4,119 crore for Q1FY23, on the back of strong operational
- The company’s revenue from the copper business in the first quarter increased by 48 per cent to Rs 10,529 crore mainly on account of higher global prices of copper and higher
Hindalco results driven by Novelis
Hindalco Industries Limited, the Aditya Birla Group metals flagship, reported its highest Net Profit in Q1FY23, surpassing its record performance in Q4FY22. The Company’s consolidated PAT peaked to an all-time high of Rs 4,119 crore, a 48% growth YoY, and 7% sequentially despite rising costs and inflationary pressures.
Hindalco results were driven by an excellent performance by Novelis, and a robust performance by Aluminium Downstream and Copper businesses, supported by operational efficiencies and higher volumes.
Novelis reported its best-ever quarterly EBITDA and EBITDA per ton, primarily due to higher product pricing, favourable product mix and recycling benefits.Hindalco reported an all-time high EBITDA of Rs.640 crore in Q1 FY23, up 27% YoY. The excellent results were driven by better macros, robust performance of Aluminium Downstream and Copper businesses along with better operating efficiencies.
Consolidated revenue for the first quarter stood at Rs 58,018 crore (vs Rs 41,358 crore), up 40% YoY. Consolidated PAT in Q1 FY23 was at a record Rs 4,119 crore up from Rs 2,787 crore in Q1 FY22, a jump of 48% YoY. Consolidated Net Debt to EBITDA remained strong at 1.40x on June 30, 2022 compared to 2.36x on June 30, 2021
Business Segment Performance in Q1 FY23 Novelis
Novelis reported its best ever quarterly adjusted EBITDA of $561 million (vs $555 million), up 1% YoY, primarily due to higher product pricing, favourable product mix and higher recycling benefits. Novelis reported record adjusted EBITDA per ton of $583 in Q1 FY23, compared to $570 in the prior year quarter.
Novelis’ Net Income from continuing operations in Q1 FY23 was $307 million, up 1% YoY, mainly driven by underlying Adjusted EBITDA, unrealized derivative gains, and a lower tax provision in the current year. Revenue was at $5.1 billion (vs $3.9 billion), up 32% YoY, driven by higher global aluminium prices. Total shipments of flat rolled products (FRPs) were at 962 Kt vs 973 Kt in Q1 FY22, marginally lower due to supply chain constraints.
Aluminium
Aluminium Upstream EBITDA stood at Rs 3,272 crore in Q1FY23, compared with Rs 2,317 crore for Q1FY22, an increase of 41% YoY, primarily due to favourable macros, higher volumes, better operational efficiencies, partially offset by higher input costs. Upstream EBITDA margins were at 38% and continue to be the best in the industry. Upstream revenue was Rs 8,699 crore in Q1 FY23 vs Rs 6,151 crore in the prior year period. Third party shipments of primary aluminium stood at 333 Kt (325 Kt), up 2% YoY in Q1FY23.
Aluminium Downstream EBITDA stood at Rs. 158 crore in Q1FY23, compared with Rs 39 crore for Q1FY22, an increase of 305% YoY, primarily due to better pricing of downstream products. EBITDA per ton for Aluminium Downstream stood at $261 vs $64 in Q1 FY22, an increase of 306% YoY. Downstream revenue was Rs 2,740 crore in Q1 FY23 vs Rs 2,293 crore in the prior year period. Sales of downstream aluminium stood at 78 Kt vs 82 Kt in Q1 FY23.
Copper
EBITDA for the business was at a record Rs 565 crore in Q1FY23 compared to Rs 261 crore in Q1 FY22, up 116% YoY, on the back of higher domestic sales, better operational efficiencies and improved by-product margins. Revenue from the Copper Business was Rs 10,529 crore this quarter, up 48% YoY, primarily due to higher global prices of copper and higher volumes.
Business Updates & Recognition
- Additional 350 Kt expansion at Utkal Alumina in
- Novelis’ ~$3.4 billion of strategic capital investment projects have
- Hindalco signed an MoU with Phinergy, a leading Israel-based pioneer in metal-air battery technology, and IOC Phinergy Private Limited (IOP), for R&D and pilot production of aluminium plates for Aluminium-Air
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Hindalco Industries ltd Share Price: Technical Analysis
Hindalco’s share price has been on a rollercoaster ride from mid-March till this month.The decline of price from then has hit lowest level in mid-June and from there has been a bounce back in the share price. Now the stock has crossed its first resistance level, but the volume is not that significant to confirm the upward momentum.
The next resistance can be seen at 465-475 range and if it can be surpassed due to the impressive financial performance of the company, the share price of Hindalco can be back to the price range which it was six months back. The current price is above the 100 and 50 days EMA. From a short term perspective, the technicals show a bullish indication.The RSI currently shows a sign of overbuying where a retracement can be expected soon.
Our view
With impressive financial performances as well as operational efficiencies in Hindalco in Q1FY23, the company has a future in the industrial sector as a leader of the segment. Leaving the major chunk of risk of the operational cost to the macros as it deals in metal, the company is vulnerable to uncertainty of decreasing PAT if the prices fluctuate due to several geopolitical tensions.
Novelis being the hero subsidiary and driving force of Hindalco ltd has been showing strong support to the parent company in India which can be seen in the consolidated PAT and revenue of Q1FY23. Even though the company is performing well in its niche segment, the share price needs to sustain above current levels for next few weeks before giving an entry signal on the charts.
About the Author
Ketan Sonalkar (SEBI Rgn No INA000011255)
Ketan Sonalkar is a certified SEBI registered investment advisor and head of research at Univest. He is one of the finest financial trainers, with a track record of having trained more than 2000 people in offline and online models. He serves as a consultant advisor to leading fintech and financial data firms. He has over 15 years of working experience in the finance field. He runs Advisory Services for Direct Equities and Personal Finance Transformation.
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