Hindalco Ltd. shares are surging in trade on Tuesday in the wake of a recent upgrade from JPMorgan. The stock is trading with gains of more than 3.5% at around Rs 960, near the intraday high of Rs 964.
The sharp upmove is a result of positive investor feedback towards JPMorgan's recent note on Hindalco, where the brokerage upgraded its stance on the counter from 'neutral' to 'overweight' due to the rising aluminium prices. The target price for Hindalco has been hiked to Rs 1,125 from Rs 875, marking a 28.57% upside from Monday's closing price.
This comes in the wake of potentially longer disruptions at Al Taweelah and Alba. JPMorgan expects that a ramp-up, when eventually feasible, could be a significantly longer process of up to around 9 to more than 12 months for smelters of this size.
Additionally, ex-China aluminium markets should tighten sharply. Aluminium prices could quickly touch $4,000/mt and above before eventually settling to a demand-driven unwind. The commodity prices should also help address recent debt concerns and valuations of these companies.
While JPMorgan expects Hindalco to show muted quarter-on-quarter growth in Q4, its Ebitda is expected to increase 62% on a YoY basis and 22% on a sequential basis. The brokerage also believes the worst is likely behind for its US arm, Novelis, whereas India business tailwinds should ease debt concerns.
ALSO READ: Hindalco Upgraded To 'Overweight' By JPMorgan, Courtesy High Aluminium Prices — Check Target Price
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