Hindalco - Capacity Expansion To Drive Performance: Motilal Oswal

Motilal Oswal Report

Hindalco Industries Ltd.’s Indian operation is a net debt free vertical and the company’s consolidated net debt/Ebitda improved to 1.43 times (1.66 times in Q2 FY24).

Though the ongoing capex at Novelis would augment Hindalco as the global leader in beverage cans and automotive flat rolled products segments, any additional extension to the capex timeline or an increase in capex would exert further pressure on the company’s cash flow.

Its capex would be a key monitorable for any further cost revisions or delays.

Volume growth across geographies is expected to remain stable going forward. Hindaloc has already secured long-term contracts from marquee customers for the Bay Minette facility, offering Novelis future revenue visibility. The company expects Novelis to post Ebitda/tonne of $600 in the medium to long term.

We reiterate our 'Buy' rating on Hindalco with an SOTP-based target price of Rs 600. The stock is trading at 5.4 times FY26E enterprise value/Ebitda and 1.1 times FY26E price/book.

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