Hindalco Q2 Review — Systematix Maintains 'Hold' Citing Strong India Show But Persistent Novelis Headwinds

Hindalco’s strong domestic execution and domestic portfolio offer resilience but lingering challenges at Novelis keep risk-reward balanced, in the brokerage's view..NDTV Profit’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer NDTV Profit’s subscribers an opportunity to expand their understanding of companies, sectors and the economy..Systematix Report.We have revised Hindalco Industries Ltd.'s FY27 Ebitda estimates higher by 8%, based on a mix of assumptions pertaining to aluminium downstream margins, commodity price assumptions, partially offset by lower margins at Novelis. We introduce FY28E estimates assuming LME aluminium sustains at $2,700/tonne. We expect Novelis’s Ebitda/tonne to gradually recover to $507/tonne, supported by its cost savings target of $125 million – $330 million over FY27-FY28. We value Hindalco on SOTP basis, using segment-wise Ebitda estimates and assigning a multiple of five times each to Novelis and copper business segments, 5.5x to India upstream aluminium segment, and six times to the aluminium downstream segment. Our valuation incorporates current net debt of Rs 414 billion, compared to ~Rs 343 billion at the end of the previous quarter. We maintain Hold on Hindalco with a revised target price of Rs 840/share. We also provide a sensitivity table to LME aluminium prices. .Hindalco’s capacity expansion and growth story is supported by strong execution capabilities, value addition, and backward integration. However, strong India business performance continues to be offset by weakness at Novelis due to extraordinary events and negative trade tariff impact. Upward revision in project costs as the company approaches peak capex year increases earnings susceptibility to price and demand volatility due to higher levels of debt. Hindalco’s strong domestic execution and domestic portfolio offer resilience but lingering challenges at Novelis keep risk-reward balanced, in our view. We expect elevated capex and higher leverage to restrict free cash generation with notable improvement in leverage only possible with timely project execution and margin recovery at Novelis. Maintain HOLD..Click on the attachment to read the full report:.Indigo Paints Q2 Review: ICICI Securities Cuts Target Price Despite Maintaining 'Add' Rating — Here's Why.DISCLAIMERThis report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit..Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

Hindalco Q2 Review — Systematix Maintains 'Hold' Citing Strong India Show But Persistent Novelis Headwinds

Systematix maintains Hold on Hindalco, sees limited upside.

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