Book Profit

We had recommended Hindalco Industries to our investors as our choice scrip in Issue No 19 dated August 31-September 13, 2009 at Rs 107. Our recommendation was backed by such compelling factors as the company’s strong financial performance in Q1FY10, better realisations, improved margins, expansion plans and the improving sales volume on account of the global economic recovery. Further, the expectation of a better performance from Novelis (a leader in aluminium rolling and recycling) was an added advantage. We had also mentioned about the expected increase in realisations and volumes in Q2FY10 and Q3FY10. After our recommendation the company performed according to our expectations by putting in a strong financial performance in 9MFY10.
While the aluminium prices moved up further to USD 2,200 per tonne (USD 1,600 per tonne in Q3FY09), the average realisation was around USD 2,000 per tonne. But the real boost came from the copper business wherein the realisation as well as volumes increased significantly. The company’s financial performance was according to our expectations. For 9MFY10 its topline was Rs 14,447.89 crore and bottomline was Rs 1,251.71 crore. Although the performance was not better on a YoY basis, its QoQ improvement was clearly visible. Now, going ahead, we expect the margins to decline in the coming quarters. Further, considering that the scrip has overshot the target price of Rs 135 way back, our recommendation is that investors should book profit at its current levels.