Hindalco Industries Ltd. share price target

Novelis reported lower-than-expected adjusted EBITDA of US$431mn (down 15% YoY). While one-off expenses of US$70mn were fairly guided, operational cost increase (North American operations in particular) led to a 6% EBITDA disappointment. Outlook commentary suggested that Q1FY23E adjusted EBITDA will return to US$500+ as one-time operational cost incidence is behind the company.

expansion, Novelis' Rolling and Recycling capacity would increase by 45%/50% to 5.8mnt/3.9mnt by FY27e. In India, ~60% of capex would be spent on 180kt brownfield Aluminium (AL) smelter, 1mnt greenfield Alumina refinery and development of recently acquired coal mines in Odisha. Novelis posted sharp expansion in margins over last one year. However, we see significant headwinds to its margins and volumes due to abnormal AL prices, narrowing scrap spreads and elevated cost pressures. We also believe that restricted supplies from Russia and high AL prices would result...

The management sees strong growth for major downstream aluminum business segments where Novelis operates. The Flat Rolled Products (FRP) business is likely to clock 4% CAGR over FY22-26....

Hindalco has unveiled a capex plan of ~US$8 billion over the next five years. This capex would be incurred in FY23E-27E. Of the total capex, ~US$4.5-4.8 billion would be incurred at Novelis while ~US$3.37 billion would be spent on the India business What should investors do? Hindalco's share price has given a return of 75% over...

The Russia Ukraine conflict has provided traction to global metal prices. During YTD CY22, a healthy rally has been witnessed in both ferrous and non-ferrous metals. During YTD CY22 (January 1-March 10, 2022), aluminium prices on the LME increased by ~21% to US$3409/tonne. On the ferrous front, during the above mentioned period, Chinese HRC export price increased by 13% YTDCY22 to US$855/tonne, domestic HRC price have increased by 9% YTDCY22 to | 69500/tonne and domestic CRC prices increased 16% YTDCY22 to | 80500/tonne. Going forward, we believe supply fears on the back of current geopolitical scenario...

Robust topline expansion led by volume growth During Q3FY22, Hindalco reported consolidated net sales of Rs. 50,272cr (+43.8% YoY, +5.5% QoQ) aided by strong volume growth in its aluminum and copper businesses. Aluminum business net revenue soared 55.7% YoY to Rs. 8,243cr (+5.5% QoQ) majorly impacted by higher aluminum prices. Aluminum metal sales were up 3.1% YoY to 325Kt, while aluminium VAP sales grew 7.5% YoY to 85kt owing to recovery in the domestic market. Copper business recorded sturdy 67.2% YoY gains to Rs. 10,255cr (+7.0% QoQ) due to higher realisations on sales of copper and by-products. Novelis...

20.63% to Rs 76.00 crore (accounting for 0.15% of total sales). Sales of Novelis segment has gone up 35.21% to Rs 32,396.00 crore (accounting for 63.56% of total sales). Inter-segment sales rose Rs 492.00 crore to Rs 698.00 crore. Operating profit margin has declined from 14.87% to 14.54%, leading to 40.67% rise in operating profit to Rs 7,312.00 crore. Raw material cost as a % of total sales (net of stock adjustments) increased from 56.76% to...

We maintain a BUY rating on the stock and revise our TP upwards at Rs 630 (SOTP based) from Rs 570, implying an upside of 15% from the CMP. We use a 12MF EV/EBITDA multiple of 5.5x for Indian business and 6.5x for the Novelis operations on FY24 EBITDA estimates.

Revenue from its India business (HNDL standalone + Utkal) grew 62% YoY and 6% QoQ to INR185b, a 9% beat on our estimate of INR169b, led by a 7%/12% beat in its aluminum/copper business. The copper business beat was driven by strong byproduct revenue. The beat in aluminum topline was on account of the strong premium over LME prices, which reflects a tight...

realisations in AL and Copper (CU) operations. Strong demand across the major segments), dearth of new capacities and restricted supplies from China (due to decarbonisation drive) would keep AL prices upbeat for a prolonged period. Both Indian and Novelis operations would be the key beneficiary of strength in AL prices. While, Novelis faced some transitory headwinds over last couple of quarters on account of supply chain disruption, chip shortage and energy crisis in Europe. We factor in EBITDA/t of US$535/t in Novelis for FY23 and FY24, led by continued...