Hindalco Q1 Review: Motilal Oswal Maintains 'Buy' Citing Strong Long-Term Fundamentals, Compelling Valuations
Hindalco rides strong domestic tailwinds; muted Novelis outlook dampened by U.S. tariff headwinds, adds Motilal Oswal.
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(Photo: Hindalco Industries Ltd.'s manufacturing plant in Hirakud. Source: Company website)
Novelis' earnings outlook is expected to remain soft in Q2, led by the tariff implications, but is guided to rebound in H2, driven by its mitigation plans. Additionally, we anticipate that strong domestic earnings will manage to offset the muted Novelis profitability for FY26.
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Motilal Oswal Report
Hindalco Industries Ltd. posted a decent consolidated performance in Q1 FY26. The earnings growth was primarily driven by favorable pricing. Going forward, while near-term costs could increase in the Indian business with higher coal prices and lower captive linkage, the medium to long-term outlook remains robust.
Capex plans are progressing well, and no slippages are expected in terms of the commissioning timeline.
Novelis' earnings outlook is expected to remain soft in Q2, led by the tariff implications, but is guided to rebound in H2, driven by its mitigation plans. Additionally, we anticipate that strong domestic earnings will manage to offset the muted Novelis profitability for FY26.
The ongoing capex in Novelis will establish Hindalco as the global leader in the beverage can and automotive FRP segments. Moreover, the commissioning of Bay Minette will reduce the import dependency and free up other US capacities for high-margin products.
At current market price, the stock trades at 5.3x EV/Ebitda and 1.2x P/B on FY27E.
We largely retain our estimates and reiterate our Buy rating on Hindalco with an SoTP-based target price of Rs 790.
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