Hindalco Industries (HINDAL) 82

(1)

November 17, 2015

Result Update

Challenging times ahead…..

• Hindalco reported a steady performance for Q2FY16 wherein topline,

EBITDA and PAT came in above our estimate. Ramping up of

greenfield aluminium projects (Mahan and Aditya reaching 100% and

60% capacity utilisation levels, respectively) led to

better-than-expected sales volume, which subsequently resulted in topline beat

• Topline for the quarter was at | 8924.6 crore, up 4.3% YoY and 4.1%

QoQ, and above our estimate of | 7581.0 crore

• EBITDA came in at | 602.8 crore, down 32.8% YoY and 31.3% QoQ

and above our estimate of | 575.6 crore. The EBITDA margin was at

6.8% (our estimate: 7.6%). EBITDA margins came in subdued due to

muted LME aluminium prices and premium

• Other income for the quarter came in at | 417.5 crore, up 86.9% YoY

and 114.8% QoQ and above our estimate of | 200.0 crore. Higher

other income for the quarter was partly due to certain non-recurring

items amounting to | 119 crore and partly due to dividend from

subsidiaries

• Aided by healthy other income, ensuing PAT came in at | 103.3 crore

(our estimate of loss at PAT level of | 132.8 crore)

Production at inflection point for domestic operations

Hindalco is a metal major with business interests in copper smelting and

aluminium manufacturing domestically. On the domestic aluminium

business front, the company has expanded its aluminium (primary metal)

production capacity from 560 KT currently to 1278 KT. Subsequently, we

expect domestic aluminium metal sales to grow at 19.2% CAGR in

FY15-17E. However, we expect margins to be adversely impacted by muted

aluminium prices on the LME and subdued premiums.

Novelis: Metal price lag impact likely to moderate, going forward

In the last few quarters, the operational performance of Novelis has been

hit by metal pricing lag impact. Even during Q2FY16 Novelis performance

was adversely impacted by ~US$54 million due to metal pricing lag.

Going forward, even as the metal price lag impact is expected in Q3FY16,

the quantum is likely to be moderate compared to the earlier couple of

quarters. Improving Mid-west premium is expected to bring in benefits

from Q3FY16, thereby reducing the impact.

Steady performance; maintain HOLD…

Hindalco reported a steady Q2FY16 performance. Standalone operational

performance was driven by improved volumes while the Novelis

performance was driven by higher share of auto in the overall product

mix. Going forward, we expect operating margins of domestic operations

to remain under pressure on account of subdued aluminium prices and

likely increase in operating costs (especially power and fuel costs). We

have valued Hindalco on an SOTP basis, thereby arriving at a target price

of | 75. We maintain our HOLD recommendation on the stock.

Rating matrix

Rating : Hold Target : | 75 Target Period : 12 months Potential Upside : -8%

What’s Changed?

Target Changed from | 85 to | 75 EPS FY16E Changed from | 3.4 to | 3.5 EPS FY17E Changed from | 9.2 to | 9.0 Rating Unchanged

Quarterly Performance (Standalone)

Q2FY16 Q2FY15 YoY (%) Q1FY16 QoQ (%)

Revenue 8,924.6 8,554.3 4.3 8,575.3 4.1 EBITDA 602.8 897.0 -32.8 877.3 -31.3 EBITDA (%) 6.8 10.5 -373 bps 10.2 -348 bps Rep. PAT 103.3 78.8 31.0 107.2 -3.6

Key Financials (Cons)

| Crore FY14 FY15 FY16E FY17E

Net Sales 87695.5 104281.1 103730.6 116084.0 EBITDA 8286.3 8944.6 7820.8 10270.6 Adj Net Profit 2175.0 2794.3 721.4 1860.7 EPS (|) 10.5 13.5 3.5 9.0

Valuation summary

FY14 FY15 FY16E FY17E

P/E 7.8 6.1 23.5 9.1 Target P/E 7.1 9.6 21.5 8.3 EV / EBITDA 8.3 8.1 9.5 7.1 P/BV 0.4 0.4 0.4 0.4 RoNW 5.4 2.2 1.9 4.6 RoCE 4.5 5.0 3.4 5.3

Stock data

Stock Data

Face value | 1

Price performance (%)

Return % 1M 3M 6M 12M Hindustan Zinc -9.5 -16.9 -17.9 -9.0 Sesa-Sterlite -29.9 -52.6 -51.3 -63.3 Hindalco Ind -14.9 -32.0 -40.9 -49.6

Research Analyst

Dewang Sanghavi [email protected]

(2)

Variance analysis

Q2FY16 Q2FY16E Q2FY15 YoY (%) Q1FY16 QoQ (%) Comments

Total Operating Income 8,924.6 7,581.0 8,554.3 4.3 8,575.3 4.1 Topline came in better than our estimate

Other Income 417.5 200.0 223.4 86.9 194.4 114.8 Other income came in notably higher than our estimate Total Manufacturing Expense 8,321.8 7,005.4 7,657.3 8.7 7,697.9 8.1

EBITDA 602.8 575.6 897.0 -32.8 877.3 -31.3 EBITDA came in marginally higher than our estimate EBITDA Margin (%) 6.8 7.6 10.5 -373 bps 10.2 -348 bps

Depreciation 295.8 303.8 196.0 50.9 332.0 -10.9 Depreciation charge came in marginally lower than our estimate Interest 616.0 625.0 385.7 59.7 601.7 2.4 Interest expense came in broadly in line with our estimate Exceptional item 0.0 0.0 431.2 NA 0.0 NA

PBT 108.6 -153.2 107.4 1.1 138.1 -21.4 Tax Outgo 5.3 -20.4 28.6 -81.4 30.9 -82.8

PAT 103.3 -132.8 78.8 31.0 107.2 -3.6 Aided by other income , reported PAT came in higher than our estimate

Key Metrics

Total Copper sales (tonne) 100000 100000 96000 4.2 98000 2.0 In line with our estimate Total Aluminium sales (tonne) 269000 270000 187000 43.9 249000 8.0 Broadly in line with our estimate Novelis, Rolled Product Shipments (Kt) 788 782 765 3.0 768 2.6 Broadly in line with our estimate

Novelis, EBITDA/tonne (US$/tonne) 231 200 320 -27.8 174 32.8 EBITDA/tonne for Novelis came in better than our estimate

Source: Company, ICICIdirect.com Research

Change in estimates

(| Crore) Old New % Change Old New % Change Comments

Revenue 102,731.4 103,730.6 1.0 113,218.2 116,084.0 2.5 Boradly maintained topline estimate

EBITDA 8,314.1 7,820.8 -5.9 10,314.2 10,270.6 -0.4 Revised downward EBITDA estimate, due to muted LME Aluminium prices EBITDA Margin (%) 8.1 7.5 -55 bps 9.1 8.8 -26 bps Revised downward EBITDA estimate

PAT 955.7 721.4 -24.5 1,891.2 1,860.7 -1.6 Revised downward PAT estimates EPS (|) 4.6 3.5 -24.5 9.2 9.0 -1.6

FY16E FY17E

Assumptions

FY15 FY16E FY17E FY16E FY17E

Total Copper Production (Kt) 387 417 430 417 430 Maintained estimates Total Aluminium Production (Kt) 809 1,051 1,150 1,051 1,150 Maintained estimates Novelis, Rolled Product Shipments (Kt) 3,050 3,256 3,419 3,256 3,419 Maintained estimates

Novelis, EBITDA/tonne (US$/tonne) 288 210 250 250 275 Downward revised estimates for FY16E and FY17E LME Aluminium (US$/tonne) 1,891 1,700 1,700 1,700 1,700 Maintained estimates

LME Copper (US$/tonne) 6568 5750 6000 5750 6000 Maintained estimates USD: INR 61 65 65 63 63 Revised upwards

Comments Current Earlier

(3)

ICICI Securities Ltd

Company Analysis

Hindalco is a metal major with business interests in copper smelting &

aluminium manufacturing domestically. The company is also a leading

aluminium converter globally through subsidiary Novelis. HIL also owns

51% of Aditya Birla Minerals (ABML, Australia).

Aluminium business leads way; capacity expansion - key growth driver

The company is currently in the midst of an ambitious capacity expansion

plan wherein it is planning to expand its aluminium capacity to 1.3 MTPA

(0.56 MTPA currently) and alumina capacity to 3.0 MTPA (1.5 MTPA

currently). Aluminium capacity expansion is being carried out through

two greenfield projects viz. Mahan and Aditya while alumina capacity

expansion is being carried out through the Utkal alumina refinery.

Exhibit 1: Alumina production

1355 1319 1631 2240 2552 2750 0 500 1000 1500 2000 2500 3000 3500

FY12 FY13 FY14 FY15E FY16E FY17E

KT

Exhibit 2: Aluminium (primary metal) production

574 541 594 809 1051 1150 0 200 400 600 800 1000 1200 1400

KT

During Q2FY16, greenfield projects continued to ramp up with Mahan and

Aditya clocking utilisation of 100% and 60%, respectively. On the back of

a satisfactory ramp up of new facilities, we expect aluminium production

to grow at a CAGR of 19.2%, going forward, in FY15-17E.

Key highlights of Hindalco conference call

Utkal refinery generated an EBITDA of | 240 crore during the quarter

compared to FY15 EBITDA of | 240 crore. The healthy performance of

Utkal was driven by economies of scale and operating leverage. Long

distance conveyor is now ready in Utkal and would bring down the cost

forward for transportation and freight. It produced 338 KTE of alumina in

Q2FY16, of which 25% was exported while the remainder is being sold to

Aditya/Mahan at market prices. The management expects the refinery to

continue to operate in the lowest cost decile.

Mahan currently has all 360 pots in production while Aditya is close to

60% capacity with 214 pots in operation as on September 2015. The

company has also idled 40% of the old pots in Hirakud to optimise the

portfolio. Mahan has also started the production of wire rods and billets.

Debt refinancing has been a good deal for Hindalco, with extension of

tenures of Aditya and Utkal project loans by five to seven years without

any major change in debt covenants and no increase in spreads. The

company is focusing on cash conservation, Hence, capex is expected to

be minimal in range of | 1250 crore per annum for FY16 and FY17 each

split between | 750 crore for existing operations and | 500 crore for the

greenfield facilities.

(4)

Stable copper business; Tc/Rc likely to remain firm

Hindalco’s copper business is predominantly that of a convertor and is

largely insulated from copper prices. As Hindalco operates custom

smelting operations, profits from this part of the business do not really

depend on copper prices but on variables such as treatment & refining

charges earned and realisations on the sale of by-products.

Exhibit 3: Copper production trend

330 ₃₁₆ 330 387 417 430 0 100 200 300 400 500

KT

Copper cathode production

Exhibit 4: Copper division topline and EBIT trend

17556 17306 17849 20451 18545 22144 768 938 1627 802 1516 1346 15000 16000 17000 18000 19000 20000 21000 22000 23000

| C ror e 0 200 400 600 800 1000 1200 1400 1600 1800 | C ro re Topline (LHS) EBIT (RHS)

Novelis performance

Novelis, the overseas rolled products manufacturing subsidiary of

Hindalco Industries, reported a healthy set of Q2FY16 numbers. Total

rolled product shipments came in at 788 KT, marginally higher than our

expectation of 782 KT. Revenues for the quarter were at US$2.48 billion

compared to US$2.83 billion in Q2FY15, down 12.3% YoY. Adjusted

EBITDA for the company stood at US$182 million. FRP adjusted EBITDA/

tonne, thus improved from US$174 to US$231. Excluding US$54 million

negative metals price lag the EBITDA and EBITDA/ tonne could have been

US$236 million and US$299/tonne, respectively. The ensuing reported net

loss for the quarter was at US$13 million

.

During the quarter, despite the

metal pricing lag impact, on a sequential basis Novelis was able to report

an improved performance due to increased contribution of the auto

segment in the overall product mix.

Exhibit 5: Novelis rolled product shipments

283 8 2786 289 5 3050 3256 3419 2500 2750 3000 3250 3500 3750

FY12 FY13 FY14 FY15 FY16E FY17E

Tonne

(i

n K

t)

Sales Volume (Rolled Products)

Exhibit 6: Novelis topline, EBITDA & EBITDA/tonne trend

11063 9806 11147 10529 11282 9812 330 336 289 288 210 250 0 2000 4000 6000 8000 10000 12000 14000 16000

FY12 FY13 FY14 FY15 FY16E FY17E

US $ Mi llion 0 100 200 300 400 500 US $/ to nn e Sales (LHS) EBITDA/tonne (RHS)

(5)

ICICI Securities Ltd

Key highlights of Novelis conference call

Going forward, the company has maintained positive FCF guidance for

FY16 while registering US$140 million of FCF during the quarter. FCF

generation could largely be attributed to an improvement in working

capital requirements that are expected to sustain over the balance part of

the year.

For FY16, Novelis expects to incur capex to the tune of US$400 million. Of

this, US$180 million is expected to be maintenance capex while the

balance US$250 million would be deployed in existing projects. The

company has already incurred capex of US$204 million in H1FY16.

Deleveraging - The company has a long term target for debt/ EBITDA at

4x in the next 18-24 months

Novelis is in the process of commissioning two most recently constructed

automotive lines in the US and Germany

During the quarter, shipments of automotive products increased 59%

YoY and 6% QoQ.

(6)

Outlook and valuation

Hindalco reported a steady Q2FY16 performance. The standalone

operational performance was driven by improved volumes while the

Novelis performance was driven by higher share of auto in the overall

product mix. Going forward, we expect operating margins of domestic

operations to remain under pressure on account of subdued aluminium

prices and likely increase in operating costs (especially power and fuel

costs). With regards to international operations, on account of muted

Aluminium prices and premium we have downgraded EBITDA/tonne

estimate of Novelis for FY16E to US$210/tonne (from US$250/tonne

earlier) and for FY17E to US$250/tonne (from US$275/tonne earlier). We

have valued Hindalco on an SOTP basis, thereby arriving at a target price

of | 75. We maintain our HOLD recommendation on the stock.

Exhibit 7 : Target price calculation

Particulars Value Multiple Enterprise Value

Indian copper business EBITDA (FY17E, | crore) 1832 5.5 10073 Australian copper business EBITDA (FY17E, | crore) 231 5.5 1271 Indian aluminium business EBITDA (FY17E, | crore) (incl Utkal

Alumina) 2652 6.5 17240

Novelis EBITDA (FY17E, | crore) 5556 7.0 38889 Total enterprise value (| crore), A 67474 FY17E gross debt (| crore), B 69058 FY17E cash & cash equivalent (| crore), C 12720 FY17E net debt (| crore), D=B-C 56338 FY17E minority interest (| crore), E 808 Value of investments (quoted, at 25% discount), F 5185 Implied Equity Value, Market Cap (| Crore), H=A-D-E+F+G 15513

No.of shares, I 206.5

Implied target price (|), H/I 75

Exhibit 8 : Valuation matrix

Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE (| cr) (%) (|) (%) (x) (x) (%) (%)

FY14 87695.5 -0.9 10.5 -10.9 7.8 8.3 5.4 4.5 FY15 104281.1 18.9 13.5 28.5 9.3 8.1 2.2 5.0 FY16E 103730.6 -0.5 3.5 -74.2 23.5 9.5 1.9 3.4 FY17E 116084.0 11.9 9.0 157.9 9.1 7.1 4.6 5.3

(7)

ICICI Securities Ltd

Company snapshot

0 50 100 150 200 250 300 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Target Price: 75

Source: Bloomberg, Company, ICICIdirect.com Research

Key events

Date/Year Event

2000 Acquisition of a controlling stake in Indian Aluminium Company (Indal, capacity 43000 TPA of primary aluminium metal along with copper smelter) 2002 Acquisition of Indo Gulf Corporation's copper business (Birla Copper, capacity 150,000 TPA)

2003 Acquisition of Mt Gordon & Nifty copper mines through ABML, brownfield expansion of aluminium smelter at Renukoot raising capacity to 345000 TPA 2004 Copper smelter expansion, capacity raised to 250000 TPA

2005 MoUs signed with state governments of Odisha and Jharkhand to set up greenfield alumina refining, smelting and power plants; commissioned copper III expansion, taking total capacity of copper smelter to 500000 TPA

2006 Comes out with a right issue amounting to | 2226.6 crore; enters into JV with Essar Power (MP) to develop and operate coal mines in Mahan, Madhya Pradesh; company splits shares in ratio of 1:10

2007 In May 2007, Novelis becomes a Hindalco subsidiary with the completion of acquisition process. The transaction makes Hindalco the world's largest aluminium rolling company and one of the largest producers of primary aluminium in Asia; acquisition of Alcan's 45% stake in Utkal Alumina project makes Hindalco the 100% project owner

2008 Comes out with rights issue: raises | 4426 crore for re-financing bridge loan taken for Novelis acquisition; Hindalco Alex Aerospace (HAAL) facility becomes operational and produces largest aluminium billet of 42 inch diameter

2009 Raises US$600 million through QIP route for projects

2011 Refinances Novelis debt amounting to US$4 billion; achieves financial closure of two projects through debt financing -Utkal Alumina for | 4906 crore and Mahan Aluminium for | 7875 crore

2013 Promoter infuses capital into the company by way of conversion of warrants (@| 143/share), of total | 2150 crore Source: Company, ICICIdirect.com Research

Top 10 Shareholders

Shareholding Pattern

Rank Name Latest Filing Date % O/S Position (m) Change (m)

1 Aditya Birla Group 30-Sep-15 33.14 684.3 0.0 2 LIC Nomura Mutual Fund Asset Management Company Ltd. 30-Sep-15 14.60 301.5 73.4 3 Life Insurance Corporation of India 15-Apr-15 11.33 233.9 233.9 4 Dimensional Fund Advisors, L.P. 31-Aug-15 1.73 35.7 0.8 5 Skagen AS 30-Sep-15 1.45 30.0 0.0 6 BlackRock Institutional Trust Company, N.A. 31-Oct-15 1.35 27.8 1.1 7 Umang Commercial Co., Ltd. 30-Sep-15 1.32 27.3 0.0 8 Bajaj Allianz Life Insurance Company Limited 30-Sep-15 1.27 26.3 -1.6 9 GIC Private Limited 30-Sep-15 1.21 25.0 25.0 10 ICICI Prudential Asset Management Co. Ltd. 30-Sep-15 1.20 24.8 6.5

(in %) Sep-14 Dec-14 Mar-15 Jun-15 Sep-15

Promoter 37.0 37.0 37.0 37.0 37.0 FII 29.5 28.9 27.8 24.9 21.5 DII 11.9 12.7 13.6 16.3 18.0 Others 21.7 21.4 21.6 21.9 23.6

Source: Reuters, ICICIdirect.com Research

Recent Activity

Investor name Value Shares Investor name Value Shares

Life Insurance Corporation of India 473.60m 233.93m Franklin Advisers, Inc. -35.29m -20.06m LIC Nomura Mutual Fund Asset Management Company L 79.34m 73.41m GMO LLC -13.44m -5.00m GIC Private Limited 27.06m 25.04m Eastspring Investments (Singapore) Limited -10.37m -4.92m ICICI Prudential Asset Management Co. Ltd. 6.99m 6.46m The Boston Company Asset Management, LLC -5.56m -2.68m Birla Sun Life Asset Management Company Ltd. 1.48m 1.37m Nomura Asset Management Co., Ltd. -4.25m -2.58m

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Financial summary

Profit and loss statement

| Crore

(Year-end March) FY14 FY15 FY16E FY17E

Net Sales 87695.5 104281.1 103730.6 116084.0 Other Operating Income 0.0 0.0 0.0 0.0 Total Operating Income 87695.5 104281.1 103730.6 116084.0 Growth (%) (0.8) 18.9 -0.5 11.9 Total Operating Expenditure 79409.2 95336.5 95909.9 105813.4 EBITDA 8286.3 8944.6 7820.8 10270.6 Growth (%) 5.7 7.9 -12.6 31.3 Depreciation 3552.8 3590.6 4120.4 4420.4 Interest 2701.6 4178.4 4316.1 4488.8 Other Income 1017.2 1104.7 1204.5 790.0 Exceptional Item 396.0 1940.1 0.0 0.0 PBT 2653.1 340.2 588.7 2151.4 Total Tax 524.9 256.4 117.7 537.9 PAT 2128.2 83.9 471.0 1613.6 Growth (%) -10.9 -96.1 461.7 242.6 Minorities, Associates etc 46.8 770.4 250.5 247.2 Rep PAT after Assoc., MI 2175.0 854.2 721.4 1860.7 Adj PAT after Assoc., MI 2175.0 2794.3 721.4 1860.7 Growth (%) -28.1 28.5 -74.2 157.9 Adj EPS (|) 10.5 13.5 3.5 9.0

Cash flow statement

| Crore

Profit after Tax 2175.0 854.2 721.4 1860.7 Add: Depreciation 3552.8 3590.6 4120.4 4420.4 Add: Interest 2701.6 4178.4 4316.1 4488.8 (Inc)/dec in Current Assets -3308.6 -2681.8 -2598.6 -4566.0 Inc/(dec) in CL and Prov. 6122.1 4118.1 126.4 5146.6 CF from operating activities 11242.9 10059.4 6685.9 11350.5 (Inc)/dec in Investments -360.1 614.7 150.0 150.0 (Inc)/dec in Fixed Assets -16013.0 -5437.6 -4000.0 -5000.0 Others -464.3 -1349.7 -680.4 -183.7 CF from investing activities -16837.4 -6172.6 -4530.4 -5033.7 Issue/(Buy back) of Equity 15.0 0.0 0.0 0.0 Inc/(dec) in loan funds 6442.3 3709.8 2000.0 0.0 Interest Paid -2701.6 -4178.4 -4316.1 -4488.8 Dividend paid & dividend tax -241.6 -241.6 -241.6 -241.6 Inc/(dec) in Share Cap 3862.0 -2883.5 106.8 0.0 Others -535.7 -5.6 0.0 0.0 CF from financing activities 6840.4 -3599.3 -2450.9 -4730.4 Net Cash flow 1245.8 287.6 -295.4 1586.5 Opening Cash 3775.5 5021.3 5308.9 5013.5 Closing Cash 5021.3 5308.9 5013.5 6600.0

Balance sheet

| Crore

Liabilities

Equity Share Capital 206.5 206.5 206.5 206.5 Reserve and Surplus 40392.8 38122.0 38708.6 40327.8 Total Shareholders funds 40604.9 38328.5 38915.1 40534.2 Total Debt 63348.4 67058.2 69058.2 69058.2 Deferred Tax Liability 3188.9 3948.1 3948.1 3948.1 Minority Interest & Others 2938.8 1771.1 1695.4 1622.9 Total Liabilities 110081.0 111105.9 113616.8 115163.5 Assets

Gross Block 87669.2 100606.8 109877.8 117877.8 Less: Acc Depreciation 24777.3 28367.8 32488.2 36908.7 Net Block 62891.9 72239.0 77389.5 80969.1 CWIP 21331.1 13831.1 8560.1 5560.1 Investments 12961.1 12346.3 12196.3 12046.3 Inventory 16694.3 18451.1 19893.5 21626.6 Debtors 9234.8 9186.4 10231.0 12085.5 Loans and Advances 6994.5 7573.0 7779.8 8125.9 Other Current Assets 2086.2 2481.0 2385.8 3018.2 Cash 5021.3 5308.9 5013.5 6600.0 Total Current Assets 40031.0 43000.5 45303.6 51456.1 Current Liabilities 20362.6 23814.3 23303.9 27033.3 Provisions 7552.2 8218.6 8855.5 10272.6 Current Liabilities & Prov 27914.8 32032.9 32159.3 37305.9 Net Current Assets 12116.2 10967.6 13144.3 14150.2 others 780.7 1722.0 2326.5 2437.7 Application of Funds 110081.0 111105.9 113616.8 115163.5

Key ratios

Per share data (|)

Adj EPS 10.5 13.5 3.5 9.0 Cash EPS 27.7 30.9 23.4 30.4 BV 196.7 185.6 188.5 196.3

DPS 1.0 1.0 1.0 1.0

Cash Per Share 24.3 25.7 24.3 32.0 Operating Ratios (%)

EBITDA Margin 9.4 8.6 7.5 8.8 PBT / Total Operating income 3.0 0.3 0.6 1.9 Adj PAT Margin 2.5 2.7 0.7 1.6 Inventory days 69 65 70 68 Debtor days 38 32 36 38 Creditor days 85 83 82 85 Return Ratios (%) Adj RoE 5.4 2.2 1.9 4.6 Adj RoCE 4.5 5.0 3.4 5.3 RoIC 6.1 6.3 4.0 6.0 Valuation Ratios (x) P/E 7.8 6.1 23.5 9.1 EV / EBITDA 8.3 8.1 9.5 7.1 EV / Net Sales 0.8 0.7 0.7 0.6 Market Cap / Sales 0.2 0.2 0.2 0.1 Price to Book Value 0.4 0.4 0.4 0.4 Solvency Ratios

Debt/EBITDA 7.6 7.5 8.8 6.7 Debt / Equity 1.6 1.7 1.8 1.7 Current Ratio 1.4 1.3 1.4 1.4 Quick Ratio 0.8 0.8 0.8 0.8

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ICICI Securities Ltd

ICICIdirect.com coverage universe (Metals & Mining)

CMP M Cap

(|) TP (|) Rating (| Cr) FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E

Coal India 334 400 Buy 210966 21.7 23.0 27.0 15.4 14.5 12.4 9.1 8.8 6.8 34.7 35.4 39.4 34.7 35.4 39.4 Hindalco Industries 82 75 Hold 16933 13.5 3.5 9.0 6.1 23.5 9.1 8.1 9.5 7.1 5.0 3.4 5.3 2.2 1.9 4.6 Hindustan Zinc 146 170 Hold 61727 19.4 18.4 18.9 8.3 8.7 8.5 5.0 4.9 4.4 15.6 13.1 12.3 18.9 16.2 15.2 JSW Steel 879 950 Hold 21245 76.3 38.8 78.8 11.9 23.3 11.5 5.8 7.4 5.9 10.3 7.4 9.5 8.0 3.9 7.5 NMDC 92 100 Hold 36478 16.2 10.3 11.0 6.1 9.5 8.9 2.6 4.7 5.4 23.6 13.3 13.8 19.9 12.1 12.3 SAIL 47 40 Sell 19413 5.1 -4.9 2.8 9.3 NA 16.6 10.1 104.0 7.9 4.0 -2.3 4.3 4.9 -4.7 2.8 Vedanta 91 100 Hold 26982 19.8 13.0 20.0 5.3 8.1 5.2 4.5 5.3 4.1 11.3 8.5 10.8 10.9 6.9 9.9 Tata Steel 216 200 Hold 20982 NM 4.4 19.7 NM 48.8 11.0 7.4 8.9 6.4 5.8 4.0 6.4 0.0 1.2 5.2

ROCE(%) Company

EV/EBITDA (x)

EPS (|) P/E (x) ROE(%)

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RATING RATIONALE

ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns

ratings to its stocks according to their notional target price vs. current market price and then categorises them

as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional

target price is defined as the analysts' valuation for a stock.

Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;

Buy: >10%/15% for large caps/midcaps, respectively;

Hold: Up to +/-10%;

Sell: -10% or more;

Pankaj Pandey

Head – Research

[email protected]

ICICIdirect.com Research Desk,

ICICI Securities Limited,

1st Floor, Akruti Trade Centre,

Road No 7, MIDC,

Andheri (East)

Mumbai – 400 093

[email protected]

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ICICI Securities Ltd

ANALYST CERTIFICATION

We /I, Dewang Sanghavi, MBA (FIN) research analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.

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