Vedanta, Hindalco, And Nalco's Earnings Now At Risk; Stocks Fall Over 6%
Indian aluminium stocks, like Hindalco Industries Ltd., Vedanta Ltd. and National Aluminium Co., fell as much as 9% intraday on Friday.
The fall was mainly due to chances of aluminium prices becoming higher in the short term, as Trump imposed extensive and high tariffs on the world.
Tariff Impact
While Trump's 26% tariff on India does not have a direct impact on the metal sector, the increased risk of a US or global slowdown stand as a negative for aluminium prices, and thereby, earnings and valuations of aluminium companies.
Potential Fall In Aluminium Prices
As per Emkay:
A US or global slowdown can lead to aluminium prices falling down to $2,300 per tonne.
A US or global recession can lead to aluminium prices falling down to $1,900 per tonne.
After a 1.8% intraday fall overnight, aluminium price stood at $2,420 per tonne on Friday.
What's The Ebitda Impact?
According to Emkay, in a scenario where aluminium prices fall to $2,300 per tonne, Nalco's Ebitda sensitivity stands at 28%. While for Vedanta and Hindalco, it stands at 25% and 20%, respectively.
A US or global slowdown could cause the share prices of Hindalco, Vedanta and Nalco to fall 29%, 34% and 26%, respectively, according to Emkay.
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