Hindalco Industries Analysis

dividend

Pros

• Dividends paid are thoroughly covered by earnings (16.9x coverage).
• Dividends after 3 years are expected to be thoroughly covered by earnings (12.5x coverage).

Cons

• Dividends per share have fallen over the past 10 years.
• Dividends per share have been volatile in the past 10 years (annual drop of over 20%).
• Hindalco Industries's pays a lower dividend yield than the bottom 25% of dividend payers in India (0.76%).
• Hindalco Industries's dividend is below the markets top 25% of dividend payers in India (3.08%).

future

Pros

• Hindalco Industries's earnings growth is expected to exceed the low risk savings rate of 7.2%.
• Hindalco Industries's earnings are expected to increase by more than the low risk growth rate in 3 years time.
• An improvement in Hindalco Industries's performance (ROE) is expected over the next 3 years.

Cons

• Cash flow for Hindalco Industries is expected to decrease over the next 2 years.
• Hindalco Industries's earnings are expected to grow by 14% yearly, however this is not considered high growth (20% yearly).
• Hindalco Industries's earnings growth is positive but not above the India market average.
• Hindalco Industries's earnings are expected to decrease over the next year.
• Hindalco Industries's net income is expected to increase but not above the 50% threshold in 2 years time.
• Hindalco Industries is not expected to efficiently use shareholders’ funds in the future (Return on Equity less than 20%).
• Performance (ROE) is not expected to exceed the current IN Metals and Mining industry average.
• Hindalco Industries's revenue is expected to increase but not above the 50% threshold in 2 years time.
• Hindalco Industries's revenue is expected to grow by 5% yearly, however this is not considered high growth (20% yearly).
• Hindalco Industries's revenue growth is positive but not above the India market average.

health

Pros

• Hindalco Industries is able to meet its short term (1 year) commitments with its holdings of cash and other short term assets.
• Hindalco Industries is profitable, therefore cash runway is not a concern.
• Hindalco Industries is profitable, therefore cash runway is not a concern.
• Debt is covered by short term assets, assets are 1x debt.
• The level of debt compared to net worth has been reduced over the past 5 years (173.6% vs 115% today).

Cons

• Debt is not well covered by operating cash flow (18.9%, less than 20% of total debt).
• Hindalco Industries's long term commitments exceed its cash and other short term assets.
• Interest payments on debt are not well covered by earnings (EBIT is 2.2x annual interest expense, ideally 3x coverage).
• Hindalco Industries's level of debt (115%) compared to net worth is high (greater than 40%).
• High level of physical assets or inventory.

management

Pros

• The tenure for the Hindalco Industries board of directors is about average.
• The tenure for the Hindalco Industries management team is about average.

Cons

• Satish's remuneration is higher than average for companies of similar size in India.
• Satish's compensation has increased by more than 20% whilst company earnings have fallen more than 20% in the past year.

misc

Pros

Cons

• Hindalco Industries has significant price volatility in the past 3 months.

past

Pros

• Hindalco Industries has delivered over 20% year on year earnings growth in the past 5 years.

Cons

• Hindalco Industries's 1-year earnings growth is negative, it can't be compared to the 5-year average.
• Hindalco Industries used its assets less efficiently than the IN Metals and Mining industry average last year based on Return on Assets.
• Hindalco Industries's use of capital deteriorated last year versus 3 years ago (Return on Capital Employed).
• Hindalco Industries has not efficiently used shareholders’ funds last year (Return on Equity less than 20%).
• Hindalco Industries's 1-year earnings growth is negative, it can't be compared to the IN Metals and Mining industry average.

value

Pros

• Hindalco Industries is good value based on assets compared to the IN Metals and Mining industry average.
• Hindalco Industries is good value based on expected growth next year.
• Hindalco Industries is good value based on earnings compared to the India market.
• 500440 outperformed the Metals and Mining industry which returned -28.6% over the past year.
• BSE:500440 is up 25.8% outperforming the Metals and Mining industry which returned 7.5% over the past month.
• BSE:500440 is up 25.8% outperforming the market in India which returned 8% over the past month.

Cons

• Hindalco Industries's share price is above the future cash flow value, it's not available at a moderate discount (< 20%).
• Hindalco Industries's share price is above the future cash flow value, it's not available at a substantial discount (< 40%).
• Hindalco Industries is overvalued based on earnings compared to the IN Metals and Mining industry average.
• 500440 underperformed the Market in India which returned -14.5% over the past year.