Credit Suisse has upgraded Hindalco Industries to oUTPERFORM with the following note,
Can makers such as Ball, Rexam and Crown consolidated the industry in the early 2000s and pushed through price increases to beverage companies. Can sheet
suppliers such as Novelis and Alcoa are in a similar phase now and, as a first step in pricing power, have eliminated fixed price ceiling contracts and
are pushing through increases in conversion margins to beverage companies. Novelis’ customers have suggested that can sheet suppliers have been successful in increasing conversion prices in a few contracts.
Novelis’ 3Q10 annualised EBITDA of US$700 mn can exceed US$900 mn as: 1) the full impact of margin expansion in beverage cans is realised; 2) volumes in ex. can divisions pick up – North American aluminium orders (excluding can stock) increased 17% YoY in the March 2010 quarter; and 3) FY11 capacity rises 3-4% (120 kt) from de-bottlenecking.
Hindalco is expected to Report an EPS of RS 14.26 for FY11.
