Accumulate Hindalco Industries; target of Rs 762: Prabhudas Lilladher

Prabhudas Lilladher's research report on Hindalco Industries

Hindalco Industries (HNDL) delivered in-line cons operating performance aided by lower operating costs in India aluminium business and copper. Aluminium cost of production declined 3% QoQ on higher linkage coal from NCL while improving product mix at downstream business aided EBITDA/t. Mgmt. guided similar inch up in Q2 costs and consistent improvement in downstream volumes aided by commercial commencement of Aditya FRP. Coal supply from captive Chakla/Bandha mines is expected to start from Mar’26/Mar’27 respectively. Novelis Q1 was weak on higher scrap prices, unfavorable product mix and tariff impact despite stable volumes. Adverse impact of ~USD60m/quarter is expected due to inter-region movement, as Novelis imports Can sheet from S. Korea/ Brazil (~170kt, 50% tariff as per section 232 Vs 10% earlier which used to get exempted). Also, Canada supports US (90kt) for Auto sheets. We believe Novelis’ 9MFY26 to be impacted due to the tariffs and weak macro, however as mgmt. is taking mitigation initiatives along with higher MJP and stable scrap prices, EBITDA should improve gradually.

Outlook

We increase our FY26/27E cons EBITDA estimates by 6%/4% respectively as we factor in tad higher AL prices of USD2,487/USD2,537 and strong by-product prices for FY26E/27E. At CMP, the stock is trading at EV of 5.6x/5.2x FY26/27E EBITDA. Maintain ‘Accumulate’ rating with revised TP of Rs762 (earlier Rs738), valuing Novelis at 6.5x & standalone ops at 5.5x EV of Mar’27E EBITDA.

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