Shares of aluminium producers came under pressure after LME aluminium prices plunged as much as 5% in the previous session. Reflecting the weakness in global metal prices, shares of Hindalco Industries and National Aluminium Company reacted negatively.
NALCO fell as much as 4.68% to Rs 364.45, while Hindalco fell as much as 4.33% to Rs 970 per share. As of 9:35 am, they have recovered slightly to trade 3.95% and 3.51% lower respectively.
Aluminum futures in the UK fell to $3,450 per tonne, hitting a two-month low amid expectations of the resumption of aluminum exports from the Persian Gulf.
Hindalco has risen over 10% year-to-date, while NALCO has risen over 16% in the same timeframe.
As per Bloomberg data, Hindalco industries has 11 buy calls, 14 hold calls, and seven sell calls, with an average upside potential of 17.1%. Meanwhile, NALCO has three buy calls, five hold calls, and six sell calls, with an average upside potential of 11.8%.
UBS had initiated coverage on India's metals and mining sector with a selective stance yesterday, arguing that while the industry is entering a period of strong earnings growth, valuations leave little room for error in several stocks.
The brokerage was most constructive on aluminium producers, citing favourable global demand-supply dynamics and operating leverage that it believes is not fully reflected in stock prices.
The brokerage initiated coverage on Hindalco with a Buy rating and a target price of Rs 1,325, implying nearly 30% upside from current levels. NALCO was also initiated with a Buy and a target price of Rs 460, offering potential upside of around 24%.
UBS expects aluminium prices to remain above $3,000 per tonne over FY27-FY29 as supply disruptions support the market. The brokerage believes integrated producers such as Hindalco and NALCO are well-positioned to translate higher aluminium prices into disproportionately stronger EBITDA growth.
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