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ICICI Securities Report
Hindalco Industries Ltd.'s Novelis reported in-line Q2 FY22 with flat adjusted Ebitda QoQ at $553 million (up 22% YoY).
Novelis has benefitted from the extended product cycle (cans, autos) further helped by Aleris acquisition coinciding with specialties (margins) taking support of strong building and construction markets as well as higher scrap London Metal Exchange spreads.
Latin American Ebitda/tonne has also seen secular increase over past three to four years driven by a weak currency.
The key question is, with a strong underlying product cycle and stripping off additional levers (scrap-LME spreads, currency driven secular uptrend in Latin America Ebitda/tonne) does the management guidance of $500/tonne Ebitda looks reasonable.
We believe the guidance is on the higher side.
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