Going ahead, while several uncertainties pertaining to tariffs, scrap spreads and end-market persist, ICICI Securities believes Novelis' Ebitda may remain above $500/tonne overall. Taking cognisance of the prevailing LME Al prices, and Novelis' profitability bottoming out, the brokerage raises its target price slightly to Rs 770 (earlier Rs 765) on an unchanged 6.3x FY27E Ebitda.
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ICICI Securities Report
Hindalco Industries Ltd.'s arm Novelis' Q4 FY25 Ebitda/tonne (adjusted) at $494 was the highest since Q1 FY25 largely on the back of positive operating leverage. Going ahead, management struck a cautious tone, tariff uncertainties still linger (though concerns are reducing) and elevated level of scrap prices seem to be structural.
On positive side, we expect higher recycling content and higher volumes as capacity bottlenecking projects ramp up in FY26. Taking cognisance of the prevailing LME Al prices, and Novelis' profitability bottoming out, we raise our target price slightly to Rs 770 (earlier Rs 765) on an unchanged 6.3x FY27E Ebitda.
Maintain Buy.
Key risks
Sharp drop in LME Al or metal premium.
Lower-than-expected spreads at Novelis.
Slower than expected ramp up of Indian downstream capacity.
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