Motilal Oswal maintains its positive stance on Hindalco Industries, as the recent correction, driven by declining London Metal Exchange prices and supply normalisation, appears largely priced in, while the long-term growth outlook remains intact. This correction offers an attractive risk-reward opportunity in a diversified play spanning India's integrated aluminum business with a premium value-added product portfolio, global aluminum recycling through Novelis, and the domestic copper growth opportunity.
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Motilal Oswal Report
Domestic brokerage firm Motilal Oswal maintains its positive stance on Hindalco Industries Ltd., as the recent correction, driven by declining London Metal Exchange prices and supply normalisation, appears largely priced in, while the long-term growth outlook remains intact.
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This correction offers an attractive risk-reward opportunity in a diversified play spanning India's integrated aluminum business with a premium value-added product portfolio, global aluminum recycling through Novelis, and the domestic copper growth opportunity.
Hindalco offers strong earnings growth visibility, driven by aggressive capacity expansion, downstream integration, structural cost savings, and Novelis' operational recovery, positioning the company for a structural earnings inflection and balance sheet deleveraging. Net debt/Ebitda is expected to decline to below ~1.5 times from 1.95x in Q1 FY27, with execution and Novelis' recovery remaining the key monitorables.
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Currently, the stock trades at 5.4x EV/Ebitda and 1.3x P/B on FY28 estimates.
The brokerage reiterates its Buy rating on Hindalco with an SOTP-based target price of Rs 1,170 on FY28E.
Execution delays, LME price correction, increase in scrap prices, and changes in global policies, are the key risks to the brokerage's call.
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