Hindalco Industries (CMP: Rs145)
Mkt Cap: Rs278bn; US$6.
Novelis has reported adjusted EBITDA of US$199m for Q3FY10, higher than our estimate of US$167m. The positive surprise underscores demand traction in a large portion of Novelis's product segments – reflected in improving business confidence by key clients (Rexam, Crown, Ball, etc). With loss making price-ceiling and derivative contracts behind, we expect significant improvement in Novelis's operating cash flows going forward. Given improving business fundamentals and better than expected run-rate on cost savings, we upgrade our FY10 and FY11 operational EBITDA estimates for Novelis by 4.6% and 5.3% respectively. We maintain our positive stance on Hindalco given the emerging visibility on strong volume growth in India, operational turnaround of Novelis, improving balance sheet health on the back of recent fund raising and higher cash flows. We maintain our Outperformer rating on Hindalco with a revised 12-month price target of Rs195 per share—an upside of 34% from the current market price.
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Management lies in dropping the last alphabet: manage – men. still better, drop one more alphabet: manage – me.
Samir Kumar Shah.
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