Target: ₹739
CMP: ₹683.90
Hindalco Industries is the metals flagship company of Aditya Birla Group. It is one of the largest primary producers of Aluminium in Asia. Hindalco operates under three segments – low-cost vertically-integrated Aluminum segment (1.3 mt); world’s largest rolling and recycling Novelis operations (4 mt rolling and 2.5 mt recycling facility); and custom copper smelting (0.42 mt copper cathodes capacity).
In Q2FY25, upstream Aluminum cost of production is expected to remain flat or increase only slightly by 1 per cent quarter on quarter. International coal prices continue to remain soft, which will keep the e-auction premiums softer; LME Aluminium prices have also found support from the firm Alumina prices. The impending Fed rate cuts will also be supportive for base metal prices. Consumption season in China is coinciding with the Fed rate cuts and higher Alumina prices supporting LME Aluminium prices, which along with the softer coal prices will dive better smelter spreads for Hindalco.
The company’s expansion projects such as the 600-kt Bay Minette (by H2CY26), Copper Inner Grooved Tubes and Aluminium downstream projects (end of FY25-26), will lead to increase in the EBITDA/tonne from FY27, as the projects get commissioned and start contributing fully from FY27.
With the upstream smelters in the first quartile of the cost curve and capex focus on the downstream assets at both India and Novelis, the capital allocation looks well-placed.
We recommend a BUY rating on the stock with a near-term TP of ₹739/share, implying an upside of 10 per cent from the CMP.