Hindalco's Capacity Expansion To Drive Next Leg Of Growth, Says Motilal Oswal; Maintains 'Buy' Rating

With a larger scale and operational efficiency, margins are expected to expand over the medium to long term, says Motilal Oswal, maintaining 'Buy'

Novelis has already secured long-term contracts from marquee customers for Bay Minette, ensuring future revenue visibility.

(Photo: Hindalco Industries Ltd.'s manufacturing plant in Hirakud. Source: Company website)

Hindalco India’s capex plan involves Rs 450 billion investments to expand aluminum and copper capacities, with key projects like the Aditya Alumina Refinery, copper recycling plant, and smelter expansions set to drive growth. The company is strategically aligning these investments with resource security enhancements through coal mine acquisitions, while prioritizing value-added products and sustainability. By FY28-29, these expansions will position Hindalco as a leader in India’s aluminum and copper markets, capitalizing on strong domestic demand and operational efficiencies.

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Motilal Oswal Report

Hindalco Industries Ltd.’s Indian operations are net debt-free, and the consolidated net debt/Ebitda stood at 1.33 times as of Dec’24 versus 1.43x in Dec’23. The announced/ongoing expansion is set to position Hindalco as the global leader. Novelis has already secured long-term contracts from marquee customers for Bay Minette, ensuring future revenue visibility.

With a larger scale and operational efficiency, margins are expected to expand over the medium to long term. We reiterate our Buy rating on Hindalco with SOTP-based valuation, arriving at a target price of Rs 770. 

Key risks:

  1. Delays in capex to put pressure on cash flow;

  2. Rise in scrap prices impacting margins;

  3. US tariffs lead to demand and supply disruptions.

Click on the attachment to read the full report:

Motilal Oswal Hindalco Update.pdf
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