Indiabulls Securities Ltd has maintained a ‘Hold’ rating on Hindalco Industries stock with a long term target of Rs 250.

Hindalco is now making cautious efforts to develop its market share, perk up its business, regulates its asset quality and lay more stress on customer service to improve its profile and combat rising competition.

According to Indiabulls, investors who have already purchased the stock can go long with the intention of making a big profit.

On the other hand, interested investors can purchase the stock on declines with a strict stop loss of Rs 125.

Any decline in the stock price in line with the broad market can be used as an opportunity to take fresh exposure

Current EPS and PE Ratio stood at 18.94 and 7.47 respectively. The share price has seen a 52-week high of Rs 223.30 and a low of Rs 132.50 on BSE.

Hindalco Industries reported a substantial rise in standalone net profit for the quarter ended March 2008, beating analysts` estimate by a wide margin. During the quarter, the profit of the company jumped 49.31% to Rs 10,770 million from Rs 7,213 million in the same quarter previous year. The analysts surveyed by Bloomberg forecasted Rs 6,427.61 million in earnings.
The company posted earnings of Rs 8.78 a share during the quarter, registering 25.43% growth over prior year period. The analysts had estimated Rs 5.66 a share.

However, the financials of the company also include contribution of Indian Aluminium Company, a subsidiary of the company, which was amalgamated with the company with effect from Apr. 1, 2007. Therefore, the figures of current quarter and year ended Mar. 31, 2008, are not comparable with those of the corresponding previous periods, the company said.    

Net sales for the quarter went up 5.50% over previous year period to Rs 50,102 million as against Rs 47,388.42 million forecasted by analysts. Total income for the quarter climbed 5.79% to Rs 51,544 million compared with the prior year period.

The company’s directors, at its meeting held on Jun. 20, 2008, recommended 185% dividend aggregating to Rs 2,269 million. Together with the corporate dividend tax of Rs 386 million, the total payout works out to Rs 2,655 million.

Hindalco also plans to lift up Rs 50 billion or USD 1.1 billion through a rights issue in the ratio of 1:3 implying an issue price of Rs 115-120 per share for refinancing bridge debt for Novelis acquisition. While the rights issue pricing is at a 25% discount to CMP, the equity dilution is sizable. The rights issue proceeds are expected to bring down interest expenses immediately and eliminate the long term funding uncertainty, the broking house said.