Hold Hindalco Industries: target of Rs 720: ICICI Securities

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26 Aug, 2025 12:21

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Novelis’ (Hindalco’s 100% subsidiary) Q1FY26 (adj.) EBITDA of USD 416mn (and ~USD 432/te) has missed consensus estimates (~USD 445–450/te), mainly on account of: 1) negative tariff impact of USD 28mn; and 2) change in product mix. Management`s new estimate pegs the scrap imports cost escalating – due to the 50% tariff – to USD 60mn vs. USD 40mn earlier at 25% duty. However, commentary indicated that the performance is nearing its bottom with Q2 likely to be similar to Q1. Net debt increased to USD 5.6bn (vs. USD 5.2bn in Q4FY25); management targets ~3.5x max net leverage through the cycle (except for one-offs). We re-initiate coverage on the stock with a HOLD rating and an SoTP-based target price of INR 720 (6.5x FY27E EV/EBITDA for Novelis and 6x for the domestic business).

We re-initiate coverage on the stock with a HOLD rating and an SoTP-based target price of INR 720 based on 6.5x FY27E EV/EBITDA for Novelis and 6x for domestic business (near to long term mean multiple).

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