Also the long-drawn ramp-up process is underway in commissioning a new copper smelter. Analysts expect the copper business to bounce back in the fourth quarter as TC/RC margins improve. They predict 13.3 per cent growth in sales and modest bottomline growth in coming quarters.
PSU major, Nalco achieved quarterly net profit of Rs 283 crore as compared to Rs 275.5 crore in corresponding previous quarter. Net sales increased by 7.2 per cent to Rs 1047 crore. Power & fuel and raw material costs increased significantly.
The company has been buying coal at high costs for its power needs, according to analysts. The same is expected to go down in future. The company has also embarked upon an expansion plan to raise production volumes for which it would invest Rs 4100 crore.
Overall, analysts find that the broad contours of the aluminium and copper industry in the country are in place. There is good export demand and the existing low per capita consumption in the country leaves a huge untapped potential.
Most Indian companies have captive mines and captive power plants. This makes them cost competitive in the international market. India has the 6th largest bauxite reserves in the world and the cost of production if about $900-1100 per tonne, against about $1250 abroad, according to Prasad.
Prices of alumina, the intermediate stage, are also less in India, as compared to countries like China, by about 30 per cent. Moreover, the entry barriers for any new entrants are very high.
At an annualised EPS of Rs 12, Hindalco trades at a P/E of 10.4x. According to analysts the stock trades at 7.8x FY06E and 6.8x FY07E. Nalco trades at 10.7x at an EPS of Rs 17.6.
According to analyst estimates the stock trades at 7x FY06E. Madras Aluminium trades at a trailing P/E of 12.1x on an EPS of Rs 16.7.
