Hindalco Industries Ltd. share price target

Recommendation: We downgrade Hindalco from BUY to HOLD on weak Novelis numbers.

Novelis’ Q3FY23 adjusted-EBITDA of US$341mn (down 33% YoY) missed our estimates due to cost headwinds, tight spreads and lower than expected shipments. Key takeaways: 1) destocking in beverage can market adversely hit shipments; 2) there was an unfavourable cost impact of US$238mn due to high energy prices and inflation.

We recommend a BUY rating on the stock with a target price of Rs 502/share, implying an upside of 10% from the CMP.

We maintain our BUY rating on the stock on the back of the above-mentioned tailwinds. We value the stock at 12MF EV/EBITDA multiple of 5.0x for Indian business and 6.0x for the Novelis operations on FY24 EBITDA estimates to arrive at a TP of Rs 515/share (from Rs 490/share). Our TP implies an upsid

Hindalco’s (HNDL) Q2FY23 EBITDA at Rs53.6bn (down 30% YoY) was impacted by lower LME aluminium (Al) price and significant cost headwinds.

Novelis’ Q2FY23 EBITDA (adj.) of US$506mn (down 8% YoY) was impacted by cost headwinds, despite growth in shipments.