Buy Hindalco; target of Rs 1110: Motilal Oswal

Buy

Motilal Oswal's research report on Hindalco

We met with CFO and Head of Investor Relations of Hindalco (HNDL) to discuss the industry/business outlook as well as the company’s expansion roadmap, raw material sourcing strategy and key challenges. Key highlights of the interaction: Management expects domestic demand (across Asia) to remain robust and outpace the modest growth expectation of ~2-4% CAGR globally, broadly driven by renewable & electrification, infra spending, packaging and auto/EV adoption. The impact of the ongoing conflict in the Middle East is largely limited to rising energy (coal) costs. Management noted that ~75% of energy is fulfilled via coal linkages and the rest via e-auction; therefore, the rise in coal e-auction prices can increase its energy costs. HNDL’s cost mix stands as ~40% coal, ~35% alumina and 25% others (incl. caustic soda and petcoke/CP coke, etc.). As a mitigation strategy, HNDL targets to be 100% captive by FY33 via three captive mines (Chakla – 1HFY27, Bandha - FY27 and Meenakshi - FY29), resulting in ~USD200/t in direct cost savings. Management plans to expand value-added product offerings (both copper and aluminum), with an aim of cushioning the margins and achieving higher downstream EBITDA in India over the medium term. HNDL highlighted that Aditya FRP and battery enclosure facility is currently ramping up, while it is expecting the commissioning of the IGT, battery foil and AC fin.

Outlook

HNDL’s Indian operation has been nearly net debt free, while its consolidated net debt-to-EBITDA ratio stood at 1.7x as of Dec’25, mainly attributed to Novelis Bay Minette expansion. We reiterate our BUY rating on HNDL with our SoTP-based TP of INR1,110, premised on our Sep’27 estimates.

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Hindalco - 1703026 - moti