Hindalco Gets 'Buy' Call From Citi As Headwinds Priced In, Positioned For Upside

Hindalco Industries Ltd. received a fresh 'buy' rating on its stock from Citi as headwinds such as weakening scrap spreads, tempered EV demand growth, alumina price correction and implications of potential US tariffs are seen to be priced in.

The company has underperformed domestic non-ferrous, global aluminium producers and London Metal Exchange prices over the last six months, the brokerage said.

The Hindalco share price has corrected by over 18% from its lifetime high recorded on Oct. 1 last year.

But now, the Aditya Birla Group company has tailwinds from likely higher aluminium prices in the second half of the current financial year and subsidiary Novelis Inc.'s efforts to diversify scrap inputs.

Citi projects aluminium prices to average at $2,640 per tonne in 2025 as US tariff hikes and restrictive monetary policy delay manufacturing and hamper cyclical aluminium demand.

The brokerage said in the long term, India business costs should fall with alumina expansion, captive coal and Novelis' profitability with the under-construction recycling plant at Bay Minette in the US.

Alumina is key component for aluminium production and lower alumina prices stand positive for Hindalco. Prices are expected to average $575 in 2025 compared to current $635.

Novelis, engaged in aluminum rolled products and recycling, should be able to contain its net debt to three times its operating profit despite aggressive capex.

"Hindalco is our top India metals pick," Citi said, after resuming coverage at 'buy' with target price of Rs 725 on the stock, a potential 17.2% upside over Monday's closing of Rs 618.5.

Twenty-four out of the 29 analysts tracking Hindalco Industries have a 'buy' rating on the stock, and five suggest a 'sell', according to Bloomberg data. The average of 12-month analyst price target of Rs 745 implies a potential upside of 20%.

Hindalco is due to release its third quarter financial results on Feb. 13.