Experts believe that Aditya Birla group Hindalco will benefit from its aluminium expansion plans, where it will spend around INR230bn ($4.9bn) over three years, low production cost at its new capacities and an expected turnaround at Novelis.
Sterlite is set to gain from Balco settlement and the Hindustan Zinc call option. The grant from Niyamgiri mining clearance would provide a further upside.
Hindalco's net revenue and profit during the first quarter increased by 33% and 11% year-on-year. However, Hindalco's Ebitda declined 4.3% quarter-on-quarter due to 3% sequential fall in prices of aluminium and copper at the LME. Ebitda margin stood at 15.5% in the quarter under review.
Morgan Stanley believes Hindalco's new projects can help it outperform its peers in volume growth. “In addition to project execution risk, we believe the company faces headwinds of higher leverage and tepid aluminium prices in short term,” Mr Vipul Prasad, an analyst with Morgan Stanley, said in his report.
Meanwhile, with the renewal of its long-term contracts, the risk in the Novelis's earnings has eased as there is a condition of price revision in the new contracts. Novelis is expanding its rolling capacity in Brazil at a cost of $300M.
Vedanta group's Sterlite reported 50% growth in its net profit and 29% rise in sales during Q1. Sterlite's aluminium production during Q1 declined 12.5% year-on-year to 63kt due to a complete ramp down of the Balco 1 smelter.
Sterlite's earnings are likely to be driven by volume growth in its zinc and aluminium businesses.
According to experts, base metal prices have declined 10-15% from their recent peak (of end FY10) on growing concerns of slowdown in China and continued headwinds from growth concerns in the EU. The production rate of base metals has increased substantially in recent months across the world.