ICICIdirect.com is bearish on Hindalco Industries (HIL) and has recommended sell rating on the stock with a target price of Rs 160, in its research report dated August 18, 2014.
Hindalco Industries (HIL) reported a mixed set of Q1FY15 (standalone) numbers wherein operating income was higher than our estimate whereas EBITDA and PAT were lower than our estimates on account of high power and fuel and raw material costs
Total operating income came in at Rs 7996.1 crore, down 5.2% QoQ but up 37% YoY and above our estimate of Rs 7530.1 crore. The topline came in higher than our estimate on account of better than expected volumes
For standalone entity, copper production volumes were at ~96000 tonnes (up 41.2% YoY) and were better than our estimate of 88050 tonnes. Aluminium production volume came in at ~1,90,000 tonnes (up 36.7% YoY) and better than our estimate of 1,65,113 tonnes
EBITDA margins for the quarter stood at 9.4%, which was lower than our estimate of 11.5%. On account of subdued operating margins, standalone EBITDA was reported at Rs 748.4 crore, lower than our estimate of Rs 869.6 crore
The subsequent standalone PAT came in at Rs 327.5 crore, lower by 30.9% YoY and below our estimate of Rs 339.1 crore
The standalone business reported a subdued Q1FY15 operating performance due to higher operating costs (especially power, fuel). In the current challenging environment, high debt on its books (gross debt FY14: Rs 63348 crore) continues to weigh on valuations. The stock price rallied steeply in the last few months. At CMP, it is quoting at 7.2x FY16E EV/EBITDA. We have valued HIL on an SOTP basis, thereby arriving at a target price of Rs 160. We maintain our SELL rating on the stock", says ICICIdirect.com research report.
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