Hindalco Jumps As Analysts Reiterate 'Buy' After Unit Novelis Posts Record Q1
Here's what brokerages have to say about Novelis' June-quarter performance and its potential implications for parent Hindalco.
Shares of Hindalco Industries Ltd. rose after its U.S. arm’s operating performance beat analysts’ estimates in the quarter ended June.
Novelis Corp. saw its net income rise to $307 million in the April-June 2022 period compared with $303 million a year ago.
Sales jumped 32% over the year earlier to $5.1 billion.
Adjusted Ebitda rose 1% to a record $561 million.
Adjusted Ebitda per tonne rose to a record $583 from $570 a year ago.
Novelis is embarking on a five-year, transformative organic growth period to strengthen its position in the market, Birla Group’s flagship aluminium maker said in an exchange filing. It identified more than $4.5 billion worth of potential investment opportunities.
Shares of Hindalco gained 4.5%, the most in this week so far in intraday trade, before closing with 2% gains in a volatile market.
The trading volume was 1.5 times the 30-day average, when markets closed on Thursday.
Hindalco will report its earnings for June quarter on Aug. 10. The company beat EPS estimates for past eight fiscals, according to Bloomberg data.
The Relative Strength Index was 71, suggesting the stock may be overbought.
Of the 25 analysts tracking Hindalco, 23 maintain a 'buy' and one each suggests a 'hold' and a 'sell', according to Bloomberg data.
The average of the 12-month consensus price target implies a 20% upside.
Eight analysts reiterated 'buy' in the last two days, while one retained 'hold' on the stock.
Here's what brokerages have to say about Novelis' June-quarter performance and its potential implications for parent Hindalco.
Motilal Oswal
Reiterates 'buy', raises target price to Rs 490, an implied return of 18.29%.
Rise in semiconductor supplies aided Novelis' North America performance as well as the overall beat in adjusted Ebitda.
Novelis' Ebitda guidance may be conservative even after the hike in Ebitda per tonne guidance.
Management expects working capital release for rest of the year as LME aluminum has corrected.
Marginally raises FY23 estimates for Novelis, given the strong Q1 performance.
Novelis continues to enjoy strong leadership position in secondary aluminum business.
Kotak Institutional Equities
Reiterates 'buy', raises target prices to Rs 550 from Rs 540, an implied return of 27.85%.
Novelis' Ebitda beat was aided by a sharp margin recovery in North America.
Concerns around economic growth slowdown in the West and its impact on Novelis are overblown.
Expects Novelis to recover from this phase of high cost inflation due to tight end-use market.
Expects Novelis' strong earnings to aid in compensating for the contraction in Indian aluminum spreads.
JM Financial
Reiterates 'buy' with a target price of Rs 515, an implied upside of 24.32%.
High product pricing, pass-through of higher cost to customers, favourable product mix (automotive and aerospace shipping) aided Novelis' adjusted Ebitda.
Novelis is set to witness stable demand for sustainable aluminum solutions.
Identifies Hindalco as a preferred play in the metal space.
