Hindalco shares gain despite US-arm Novelis' weak Q3 business update; CLSA maintains 'outperform'

Hindalco shares have slipped nearly 15 percent in the last three months.

Shares of Hindalco Industries, a key player within the Aditya Birla Group, gained as much as 2 percent to Rs 597 in morning trade on Thursday, January 9, following a preliminary update from its wholly-owned subsidiary, Novelis, for the third quarter of FY25.

Novelis, a 100 percent downstream subsidiary of Hindalco, expects its adjusted Earnings Before Interest, Tax, Depreciation, and Amortisation (EBITDA) to range between $360 million and $370 million. This marks a decline from the $454 million reported in the same period last year. Shipments are projected to be between 900,000 and 910,000 tonnes, in line with the 910,000 tonnes recorded a year ago.

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However, EBITDA per tonne is anticipated to drop to $400–$407, compared to $499 last year. The dip in performance is attributed to higher scrap prices and an unfavourable product mix during the quarter.

Looking ahead, Novelis management expects a recovery in the fourth quarter, forecasting an EBITDA per tonne rebound to $480–$490, mirroring the levels achieved in the second quarter.

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Despite this, international brokerage CLSA holds an 'outperform' rating on Hindalco with a target price of Rs 800 per share. While the weakness in Novelis was partly anticipated due to the ongoing correction in scrap spreads, CLSA believes the recent decline in Hindalco’s stock price more than accounts for this stress.

Despite challenges, Hindalco’s domestic operations remain robust, supported by resilient aluminium prices and a low-cost structure. CLSA remains optimistic about Novelis' profitability, expecting improvements as volumes pick up, even in a weak-spread environment.

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Novelis Inc. reported a fall in net income for the July-September quarter. The US-based aluminium producer posted an 18 percent decline in net income to $128 million in the September quarter of 2024-25. The decline comes as a result of a $61 million charge associated with the production interruptions at its Sierre plant, along with higher restructuring and impairment expenses and lower operating performance.

At about 9:50 am, the shares of Hindalco were trading at Rs 592, higher by 1 percent from the last closing price on the NSE. Hindalco shares have slipped nearly 19 percent in the last three months.