Aluminium and copper major Hindalco Industries is likely to report strong earnings growth in the quarter ended March 2021, backed by Novelis and Aleris performance. Both are expected to contribute majorly to operating performance of the company, experts feel.
According to brokerages, the Aditya Birla Group company is expected to report more than 100 percent growth in Q4 profit with strong double digit growth in EBITDA and revenue, compared to year-ago period.
Novelis Inc, the world leader in aluminum rolling and recycling, already reported its quarterly earnings on May 12, saying the net income (profit) attributable to its common shareholder of $176 million in the fourth quarter of fiscal year 2021 grew by 179 percent YoY.
"Net sales increased 33 percent over the prior year to $3.6 billion for the fourth quarter of fiscal 2021, primarily driven by a 21 percent increase in shipments, favourable product mix and higher average aluminum prices," said Novelis in its filing.
"Total flat rolled product shipments increased to 983 kilotonnes, mainly reflecting the addition of the acquired Aleris business and record automotive and beverage can shipments, as well as continued strong demand for building and construction and other specialty flat rolled aluminum products," it added.
Novelis' adjusted EBITDA increased 32 percent to $505 million in the fourth quarter of fiscal 2021 YoY due to higher organic volume, favourable metal benefits, and a $60 million positive EBITDA contribution from the acquired Aleris business.
On the domestic operations front, the operating performance is expected to be supported by higher commodity prices in the international markets with strong aluminium business, but copper is likely to see the impact of lower volumes due to maintenance shutdown during quarter.
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"We estimate India EBITDA (standalone + Utkal) to rise 36 percent YoY or 12 percent QoQ on higher commodity prices and higher volumes in aluminum (up 4 percent YoY and 3 percent QoQ) offset by lower volumes in copper (down 2 percent YoY, and up 16 percent QoQ)," said Kotak Institutional Equities which sees 116 percent year-on-year growth in Hindalco's Q4 profit, 33 percent rise in revenue, and 36 percent growth in EBITDA.
Kotak expects aluminum EBITDA (including Utkal) to increase 12 percent QoQ and 55 percent YoY due to higher volumes and higher aluminum prices. In case of copper, the brokerage sees EBITDA declining 24 percent YoY and rising 14 percent QoQ, impacted by lower volumes offset by higher copper prices.
ICICI Direct, too, expects Hindalco's domestic operations (standalone operations + Utkal) topline to increase 33 percent YoY and 17 percent QoQ. "Topline could have been higher but was restricted due to hedging around 58 percent of volume at lower LME price ($1716 per tonne)," said the brokerage, adding EBITDA growth is likely to come in at 18 percent YoY and 13 percent QoQ.
In case of volumes front, ICICI Direct expects Hindalco to report aluminium sales volume of around 3,25,000 tonnes (3,14,000 in Q4FY20 and 3,15,000 in Q3FY21) and copper sales of around 85,000 tonnes (73,000 tonnes in Q3FY21 and 86,000 tonnes in Q4FY20).
"We expect Hindalco to report aluminium volumes at 3,24,000 tonnes and copper volumes at 76,000 tonnes for the March quarter," said Motilal Oswal which sees 104 percent YoY growth in profit and 18.3 percent increase in topline.