The impact can easily be seen in the second quarter results. For the July-September 1999 period, the company has managed to record a sales of Rs 515.7 crore which was up by 15 per cent from Rs 445.6 crore achieved in the corresponding period in the previous year. Over its immediate quarter (April-June 1999), sales have shown a 7.79 per cent growth.

On the front of profit margins, there has been an impressive growth. During the first quarter, OPM stood at 44.56 per cent. This has further improved to 45.97 per cent during the second quarter.

Rising portion of value-added sales besides improving realisations on account of a jump in demand for the white metal is responsible for higher profit margins. Aluminium prices have risen in the international markets which has provided the company with an opportunity to raise its selling prices in the domestic market.

As for the net profit, the rise has been higher mainly due to a drop in interest burden. During the second quarter, interest burden was Rs 14.9 crore as against Rs 22.7 crore in the corresponding period, and Rs 17.2 crore in the first quarter. Net profit during the second quarter stood at Rs 161.3 crore.

For future, the outlook is positive as demand for aluminium has been rising. As for aluminium prices, even if a sharp rise does not take place from the current level, players like Hindalco will have nothing to worry as the proportion of its value added sales have been rising. As such, even in the case a lower aluminium prices which is unlikely, the volume growth would keep profits at higher levels. The company has commissioned its 3 lakh aluminium alloy wheel plant at Silvassa last month. This should also help. From the stock market point of view, the scrip's performance has been encouraging. The stock has a good support at Rs 800. Below this level, the short-term outlook may weaken. On the upper side, it has a minor resistance at Rs 1,005, and after this level, it should face a resistance around Rs 1,200.

For medium-term investors, expectation of a bonus issue or a buy back would be fair especially when the company is doing extremely well, and the prospects for the medium term are also bright. The company has a book value of Rs 437 and the last time it issued a bonus was in 1996. As for discountings, on the latest earnings, the earnings per share stands at Rs 80 (annualised) which gives the scrip a price multiple of just 10. While this discounting may be fair for a commodity stock, Hindalco which is one of lowest cost producers in the world, certainly deserves a better discounting.

Deepak Singh Tanwar