Buy Hindalco Industries; target of Rs 325: Edelweiss Securities

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26 Aug, 2025 12:21

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Edelweiss Securities' research report onHindalco Industries

Novelis’ Q3FY18 adjusted EBITDA of USD304mn (up 21%YoY) came 6% ahead of our estimate led by: 1) strong shipment growth, up 6%YoY at 796mt; 2) refined product mix with auto shipment growth of 12% YoY; and 3) better operating efficiencies resulting in raw material spread increasing to a record level of USD 552/t. Going ahead, we remain upbeat on the company’s prospects as: 1) focus on downstream products is likely to further improve spreads; 2) FY18E free cash flow is expected to be

USD400mn; and 3) balance sheet has sufficient headroom to enable the company to pursue growth opportunities. We maintain ‘BUY’ with an unchanged TP of INR325, implying an exit multiple of ~7.0x FY20E EBITDA, in line with global peers’ average.

We are upbeat on Novelis due to its extended focus on margin accretive value-added segments for future growth that will help maintain its current quarterly run rate of USD250mn plus EBITDA. Improvement in leverage ratios is an additional sweetener. Maintain ‘BUY/SO’ with TP of INR325, implying ~7.0x FY20E EBITDA

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