Target: ₹663
CMP: ₹530.60
We initiate coverage on Hindalco Industries with a bullish Buy rating based on its steadfast focus on downstream businesses for Aluminium and Copper, emphasis on cost optimisation projects to ensure global competitiveness, sustainably strong earnings outlook in the light of upcoming capex and a discernible bottoming out of global Aluminium prices.
We see Hindalco to be a strong Aluminium player in India in the upcoming years as well as globally. The company has been undertaking projects to expand its presence across the value chain for primary and secondary Aluminium as well as copper products. Just with steel, we see that the aluminium industry would undergo major shifts in its structure down the line and the countries having easy raw material accessibility will tend to benefit the most.
Hindalco is a backward integrated company when it comes to the sourcing of raw materials and with the upcoming coal mines, the company is expected to make themselves completely self-reliant on the primary aluminium manufacturing process.
Additionally, we see Novelis to play a huge role when it comes to capturing the global aluminium FRP market. The company is investing heavily in its Bay Minette recycling unit targeting the North American and European markets with a major emphasis on the global beverage can market.