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Hindalco Q2 profit jumps nine times, but not just due to high aluminium margins

by 5paisa Research Team 12/11/2021

Hindalco Industries Ltd on Friday reported a staggering jump of 783%, or 8.8 times, in second-quarter profit from a year earlier, thanks in part to higher sales and a decade-high margin on its India aluminium business.

The copper and aluminium arm of Aditya Birla Group posted a consolidated profit after tax of Rs 3,417 crore for the three months through September 2021, up from just Rs 387 crore during the same quarter last year. 

On a sequential basis, net profit was up 23% from Rs 2,787 crore in the April-June quarter.

The company said profit climbed because of favourable macroeconomic environment, improved product mix, higher sales volumes and better operational efficiencies. Higher margins in its aluminium business helped, too.

Hindalco’s North American aluminium unit Novelis achieved an adjusted EBITDA per ton of $571 in the second quarter, up 165 from $493 a year earlier. Its India aluminium division’s EBITDA margin reached more than a decade high of 42%, Hindalco said.

But these weren’t the only reasons for the sharp jump in net profit. The bottom line received a boost also because the year-earlier quarter had recorded a loss of Rs 1,398 crore on the sale of assets in the US.

Hindalco unit Novelist had sold its automotive aluminium body sheet plant in the US to private equity firm American Industrial Partners for net cash of about $171 million, roughly half the asset’s book value, to receive anti-trust approval for a $2.8 billion deal to acquire Aleris. This loss had dragged down Hindalco’s consolidated profit in the July-September quarter of 2020. And the absence of any such loss this year boosted the bottom line.

As a result, profit after tax from continuing operations rose 92% to Rs 3,427 crore from Rs 1,785 crore a year earlier.

Hindalco Q2: Other highlights

1) Consolidated revenue jumped 53% to Rs 47,665 crore from Rs 31,237 crore a year earlier.

2) Record quarterly EBITDA at Rs 8,048 crore, up 56% YoY from Rs 5,171 crore.

3) Adjusted EBITDA for Novelis was up 22% to $553 million on higher volume and favourable product mix.

4) EBITDA for India copper unit rose 45.4% to Rs 352 crore.

5) India aluminium unit records EBITDA of Rs 3,247 crore, up 173% YoY.

6) India aluminium revenue up 63% YoY to Rs 7,812 crore on higher global prices and sales.

7) Net debt falls to at Rs 48,011 crore from Rs 58,001 crore.

Hindalco management commentary

Hindalco managing director Satish Pai said that the company reported “standout performances” across all business segments and that the record-breaking numbers were “an affirmation of our fully integrated business model, which powers our performance in both upstream and downstream markets.”

Pai also said that the company’s Indian aluminium business achieved an EBITDA margin of 42%, which was close to the global record. 

He further said that the copper business “delivered the highest-ever quarterly sales in Q2, with both smelters running optimally” to meet robust market demand.

Novelis achieved a record EBITDA per ton “driven by higher volumes and favourable metal prices,” Pai said. 

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This TVS Group stock witnesses a Cup Pattern Breakout!

This TVS Group stock witnesses a Cup Pattern Breakout!
by 5paisa Research Team 12/11/2021

Sundaram Clayton Limited (SCL) is part of the USD 8.5 billion TVS group, one of the largest auto components manufacturing and distributing groups in India. SCL is a leading supplier of aluminium die castings to the automotive and non-automotive sectors. Over the years, the company has built strategic partnerships with global OE/Tier one. 

With the robust manufacturing driven by TQM, TPM, Lean practices and investments in state-of-the-art technologies, SCL is poised to serve the future needs of the industry in light metal castings. 

Interestingly, the stock had gained over 3% on Friday and for the week the stock zoomed 13% and if these amazing returns don’t excite you, certainly the YTD basis gains would leave you awestruck as the stock has shot up 65% on a YTD basis. 

The stock has caught the eyes of investors and traders on Friday as it witnessed a breakout of a stage 2b Cup Pattern. The breakout of the 16-weeks long Cup Pattern is accompanied by higher-than-average volumes. The 50-weeks average volume for the stock stands around 57,500 while the current week volume is twice the 50-weeks average volume highlighting larger participation in the direction of the trend. Furthermore, the stock is trading above its 10, 30 and 40-week moving average and they are in the desired sequence. This structure indicates that the stock is in a clear uptrend. The weekly MACD is pointing northward while sustaining above its nine periods average thus validating positive bias in the stock. 

The stock is clearly in an uptrend and the trend strength is extremely high. The Average Directional Index (ADX), which shows trend strength, is as high as 41.65 on a weekly chart. Generally, above 25 levels is considered as a strong trend. In both time frames, the stock is meeting the criteria. Furthermore, +DMI is trending up and it is also above the 25-mark. 

We expect the stock to maintain positive bias and extend its up-move towards levels of Rs 5,815 level in the medium to long term as it is the measuring implication of depth of the cup pattern.   

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Zerodha have made Nitin Kamath and Nikhil Kamath billionaires in a decade

Zerodha have made Nitin Kamath and Nikhil Kamath billionaires in a decade
by 5paisa Research Team 12/11/2021

The Kamath brothers are now richer than India's richest individual investor Rakesh Jhunjhunwala.

Zerodha's Nithin Kamath and his family have seen their fortunes rise 51% to Rs 25,600 crore in the last one year. This period saw a record number of retail investors opening trading accounts to get into equity investment. Kamath family is now the 63rd richest in India, according to the IIFL Wealth Hurun India Rich List 2021.

The Kamath brothers are richer than India's richest individual investor Rakesh Jhunjhunwala, whose fortunes were last counted at Rs 22,300 crore, the rich list suggests. Kamath's younger brother Nikhil Kamath is worth Rs 11,000 crore.

The Secret Formula of Zerodha’s Success

Bangalore based discount broking firm, Zerodha was founded in 2010 by the Kamath brothers that provide trading services at discounted brokerage fees and a user-friendly interface with reliability.

It is indeed a fact that there is no shortcut to success. However, Nithin Kamath, when founded this discount broking firm, decided to provide technology-efficient and cost-efficient services to its customers. He observed that there is a huge lag between the commissions charged by the other brokerage firms and the amount of money received by the customers.

In addition to that, the technology that was used was too old and Nithin felt the need to introduce a smart platform that enables users to trade online comfortably. He thought of providing services at a low cost where the idea of charging low commission clicked into his mind.

He also wanted to attract more young customers who are often hesitant to enter into trading due to high commission charges. With this aim, he started his firm and today it has become the biggest discount broking firm. He believes if we do not depend too much on foreign capital and invest in our own companies, the day is not far when India will become an economically strong country.

Surprisingly, the firm hardly spent any money on advertising or marketing. They do not run any advertisements. The founder believes in ‘the word of mouth is your true marketing’. Thus, with a very low operating cost Zerodha was able to capture a large number of customers.

Interestingly, trading is provided free of cost at his stockbroking firm if the period of holding for shares is longer than a day. They make money by charging a flat fee of Rs 20 for futures, options, and intraday trading. 

Zerodha is a boon for current generation investors, and we are definitely grateful to the Kamath brothers and their team behind it. 

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ONGC Q2 profit surges 6.6 times on tax writeback, higher crude prices

by 5paisa Research Team 12/11/2021

State-run Oil & Natural Gas Corp reported a sharp jump in its net profit for the second quarter of this fiscal year, as it benefited from higher crude oil prices and adopted a lower tax structure.

Standalone net profit for the July-September period rose 6.6 times, or 565%, to Rs 18,348 crore from Rs 2,758 crore a year earlier, the state-run explorer said Friday. Profit exceeded analysts’ estimates of around Rs 6,300-6,400 crore.

Gross revenue climbed 44% to Rs 24,353 crore from Rs 16,916 crore.

ONGC said its operating margin expanded to 48.17% in the second quarter from 32.78% a year ago thanks to an increase in global crude oil prices.

The company’s realization on crude oil increased about 70% to $69-71 per barrel from around $41 per barrel a year earlier. This offset a 3.8% fall in total crude oil output to 5.471 million metric tonnes from 5.686 MMT a year earlier.

ONGC Q2: Other highlights

1) ONGC board approved interim dividend of 110%, which means Rs 5.50 on each equity share of Rs 5.

2) The total dividend payout on this account will be Rs 6,919 crore.

3) Consolidated gross revenue for Q2 rises 465 to Rs 1,22,029 crore from Rs 83,619 crore a year earlier.

4) Consolidated net profit Rs 18,749 crore, up 230% from Rs 5,675 crore a year earlier.

5) Total gas production fell 7% on year to 5.467 billion cubic metres from 5.88 billion cubic metres.

Lower output, lower tax

ONGC said production of crude oil and gas declined mainly due to restrictive conditions created by cyclone Tauktae and due to the impact of Covid-19. A delay in mobilization of Mobile Offshore Production Unit Sagar Samrat to WO-16 Cluster project also impacted production from this field, ONGC said.

ONGC also said that, during the quarter, it has decided to opt for lower tax regime with effect from 2020-21. Accordingly, it recognized provision for tax expenses and re-measured its net deferred tax liabilities.

The net impact due to availing the option has resulted in a decrease in deferred tax by Rs 8,541 crore and decrease in current tax by Rs 1,304 crore, the company said.

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Grasim Q2 profit nearly triples as revenue jumps, margins expand

by 5paisa Research Team 13/11/2021

Grasim Industries Ltd reported a 180% year-on-year rise in its second quarter standalone net profit, as demand for its products bounced back and earnings margins expanded on price hikes.

Standalone net profit after exceptional items jumped to Rs 979 crore for the three months through September from Rs 350 crore a year earlier.

Grasim, the holding company for the Aditya Birla Group’s textiles, chemicals, cement and financial services business, said standalone revenue from operations rose 67% to Rs 4,933 crore for the quarter ended September 30.

Operating profit shot up 87% to Rs 1,504 crore. This, the company said, was owing to better product realisation. 

The company's standalone EBITDA margin expanded to 27% for the second quarter from 19% a year earlier.

Grasim Q2: Other highlights

1) Consolidated EBITDA increased 19% from a year earlier to Rs 4,282 crore.

2) Consolidated profit after tax for the second quarter rose 41% YoY to Rs 1,359 crore.

3) UltraTech Cement’s revenue was Rs 12,017 crore, up 16% YoY.

4) Ultratech EBITDA rose 1% to Rs 2,855 crore, net profit increased to Rs 1,314 crore.

5) Revenue of Aditya Birla Capital Ltd grew 22% to Rs 5,593 crore, consolidated profit grew 43% to Rs 377 crore.

6) Operating profit for viscose staple fibre (VSF) business rose 201% on a year-on-year basis to Rs 514 crore.

Grasim commentary 

The company said prices of both caustic soda and VSF recovered during the second quarter. It also hedged a 51.7% increase in total expenses by passing most of it on to the customer. 

Caustic soda prices in India recovered from multi-quarter lows supported by recovery in demand, tightness in supply led by production losses and higher export sales driven by better export realisation, it said.

Grasim said the gap between prices of cotton and VSF increased to record levels, in the wake of a surge in cotton prices. This, the company said, was a positive signal for VSF prices going forward. 

Demand for textile products in India bounced back with the onset of the festive season, phased reopening of schools and offices, and increased sourcing of textile from India by global brands as a part of the China-plus-one strategy.

The demand momentum picked up in the second quarter and continued thereafter across all businesses. Backed by strong demand, realisation and volumes have improved in key businesses, offsetting the cost increase, it said. 

The company said its operations and revenue were marginally impacted on account of disruption in economic activity due to Covid-19. “The management believes that [the] impact is short term and temporary in nature and there is no significant impact on recoverability of carrying value of its assets and future operations,” it added.

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KNR Constructions slips by more than 2% after posting Q2FY22 results

KNR Constructions slips by more than 2% after posting Q2FY22 results
by 5paisa Research Team 13/11/2021

The performance during the quarter was affected by a rise in the cost of materials consumed, constructions cost and tax expenses.

The company’s share price declined from Rs 292.1 on Thursday to Rs 285.3 on Friday, when the Q2FY22 results were announced, marking a decline of 2.33%.

KNR Constructions Limited, an infrastructure project development company, is engaged in engineering, procurement and construction (EPC) contracts, as well as build-operate-transfer (BOT) projects across various sectors, such as construction and maintenance of roads, highways, flyovers and bridges.

The results of Q2FY22, which were reported yesterday, were not so impressive.

During the quarter, on a consolidated basis, the company’s net revenue grew by 28.38% YoY to Rs 842 crore. The PBIDT (ex OI) increased by 3.75% to Rs 177.52 crore, while the corresponding margin contracted by 489 bps YoY to 22.42%. This contraction was driven by a rise in expenses, particularly in the cost of materials consumed and the cost of construction. Furthermore, owing to a 123% increase in tax expenses, the PAT declined by 54.71% YoY to Rs 70.27 crore. Similarly, the PAT margin contracted by 1531 bps YoY to 8.35%.

Key developments during the quarter

The company bagged a project on HAM basis from NHAI worth Rs 1041.5 crore. With this, the total order book of the company (as of 30 September 2021) stood at Rs 6,511.3 crore. In addition to this, the company’s shareholders gave a nod for the sale of a 100% stake in 3 material subsidiaries namely KNR Shankarampet Projects Private Limited, KNR Srirangam Infra Private Limited and KNR Tirumala Limited Infra Private Limited to Cube Highways and Infrastructure III Pte Limited.

Post the results announcements, India Ratings, a credit rating agency, upgraded the company’s credit rating for the long-term facilities from IND AA- to IND AA, with the outlook being stable while the short-term rating of IND A1+ remained unchanged.

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