Hindalco: Lacking lustre

 Aluminium contributes 37 per cent to Hindalco's revenues while copper brings in the remaining 63 per cent. Revenues from the copper division grew 16 per cent in the March 2008 quarter with production of both copper cathode and cathode rods increasing.  As a result, the margin for the division also rose 50 basis points to 5.4 per cent. Nonetheless, globally copper concentrate remains in short supply and could pressure margins for the copper division. Hindalco is increasing capacity threefold to 1.5 million tonnes over the next two to three years and alumina refinery capacity being upped from 110,000 tonnes to 450,000 tonnes.  In FY08, Hindalco's aluminium production was up 8 per in FY08. At Rs 186, Hindalco trades at 16.3 times estimated consolidated (with Novelis) FY 09 earnings and should be a market performer. Nalco trades at 12.55 times estimated FY 09 earnings, while Sterlite Industries gets a discounting of 13.25 times estimated forward earnings.  Puravankara: Margins head south  

Revenues for real estate player, the Bangalore-based Puravankara Projects, grew a very poor 2.2 per cent sequentially to Rs 154 crore possibly because volumes and realisations have been somewhat under pressure.

The company, which focuses mainly on the residential segment, had seen a 6.7 per cent sequential growth in the December 2007 quarter and just over 17 per cent in the September 2007 quarter.

The management says most of the projects are in the early stages and hence revenues are still coming in. Typically revenues from sales of property are recognised on the basis of how much of the project has been completed.

However, analysts point out that of the ongoing project pipeline just under 62 per cent has been sold at the end of March compared with about 58.5 per cent at the end of December, indicating that sales may have slowed down.  Moreover, they can't understand why operating cash flows should be negative even though 90 per cent of the firm's exposure is to the residential segment.  Puravankara, together with partners, has launched projects covering about 18- 19 million sq ft across four cities in the south. The plan is to construct over 10,000 apartments which should bring in the bulk of the company's revenues over the period FY08-10.  Gross margins in the March quarter fell 250 basis points sequentially, dropping for the second successive quarter with the company finding it difficult to pass on higher input costs. The operating profit margin too dropped 350 basis points on the back of a fall of 320 basis point in the December quarter.  With Bangalore accounting for 50 per cent of its current pipeline, the company is somewhat vulnerable to slowing demand, given the slackening momentum in the IT and ITES sectors. Unless demand for housing picks up quickly, the company's growth could remain sluggish.