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Systematix Report
Domestic brokerage Systematix has revised its FY27/FY28 Ebitda estimates on Hindalco Industries Ltd. upward by 14%/7%, primarily driven by improved assumptions for aluminium downstream margins, higher commodity price assumptions, and a gradual recovery in Novelis margins and shipments.
The brokerage assumes London Metal Exchange aluminium prices of $3,050/3,100 per ton for FY27/FY28, translating into a FY26-FY28E revenue/Ebitda/PAT CAGR OF 14%/19%/28%.
Systematix expects Novelis's Ebitda/tonne to gradually recover to $466/t by FY28, supported by its cost savings target of $350 million to $400 million over FY26- FY28. However, Novelis continues to operate at a significantly weaker unadjusted Ebitda margin with limited near-term visibility on normalised profitability as major tailwinds entail from higher aluminium prices.
Additionally, Bay Minette project is likely to see an elongated commissioning and ramp-up timelines, with full utilisation expected only over 18-24 months post commercialisation.
The brokerage values Hindalco on an SOTP basis, assigning 5.5x EV/Ebitda Novelis, 7x to India upstream aluminium, and 6.5x each to the aluminium downstream and copper businesses.
Systematix' valuation also incorporates the elevated consolidated net debt of Rs 684bn as of FY26 amid peak capex intensity.
The brokerage maintains Hold on Hindalco with a revised target price of Rs 1,111/share Maintains Hold.
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