Hindalco May Outperform On Aluminium Price Tailwinds, Says HSBC — Check Revised Target Price

Shares of Hindalco Industries are back in focus after HSBC Global Investment Research reiterated its Buy rating and raised its target price, citing growing upside risks to earnings and valuation as global aluminium markets tighten. HSBC raised its target price on Hindalco to Rs 1,060 from Rs 1,040, implying a potential upside of about 17% from current levels.

The brokerage said that at prevailing spot LME aluminium prices and USD/INR levels, Hindalco’s earnings could materially surprise to the upside over the next two financial years, even though its estimates are already among the most optimistic on the street.

According to HSBC, if aluminium prices and currency assumptions remain near current levels, Hindalco’s FY27 and FY28 earnings per share could be 22% and 20% higher, respectively, than its base forecasts. The brokerage noted that aluminium prices have risen faster than its earlier assumptions, improving profitability expectations for both Hindalco’s upstream operations and its US-based subsidiary Novelis.

A key pillar of HSBC’s bullish view is increasing visibility on structural tightness in global aluminium supply. The brokerage highlighted resilient demand in China despite the year-end slowdown, alongside constraints on output due to China’s effective capacity cap. Overseas supply additions remain limited, while recent confirmation that South32’s Mozal smelter will halt production from March is expected to further tighten the market.

HSBC argued that aluminium supply constraints are increasingly policy- and infrastructure-driven, making them difficult to resolve quickly even at higher prices.

As investor conviction around aluminium tightness strengthens, the brokerage sees scope for valuation multiples to expand. Hindalco is currently valued at a blended EV/EBITDA multiple of 6.8x, slightly above its long-term average, but HSBC believes this premium is justified in the current cycle.

On the subsidiary front, HSBC expects Novelis’ earnings to stabilise from the first quarter of FY27, after being impacted by two fire-related disruptions in recent quarters. While near-term earnings may remain volatile, the brokerage said the market is likely to start pricing in benefits from Novelis’ $5 billion investment pipeline, which is expected to deliver steady-state EBITDA of about $600 million over time.

HSBC added that Hindalco has underperformed global aluminium peers over the past year, a gap it expects to narrow as aluminium fundamentals improve and earnings visibility strengthens.