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Buy Hindalco; target of Rs 490: Motilal Oswal

Motilal Oswal is bullish on Hindalco recommended buy rating on the stock with a target price of Rs 490 in its research report dated August 03, 2022.

August 05, 2022 / 10:08 PM IST
The research firm ICICI Securities believes earnings of apparel brands and retail companies under their coverage may surprise positively from Q3FY22E as the likely demand recovery may result in better than expected margin performance. Some of the costs savings achieved during pandemic may sustain and coupled with high operating leverage may lead to higher than pre-covid margins from Q3FY22E.  Stocks like Trent, V-Mart and Aditya Birla Fashion and Retail are the preferred picks backed by their strong and consistent track record of execution.

The research firm ICICI Securities believes earnings of apparel brands and retail companies under their coverage may surprise positively from Q3FY22E as the likely demand recovery may result in better than expected margin performance. Some of the costs savings achieved during pandemic may sustain and coupled with high operating leverage may lead to higher than pre-covid margins from Q3FY22E.  Stocks like Trent, V-Mart and Aditya Birla Fashion and Retail are the preferred picks backed by their strong and consistent track record of execution.

 
 
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Motilal Oswal's research report on Hindalco


Novelis reported a strong 1QFY23, with net sales/adjusted EBITDA/APAT at USD5b/USD561m/USD279m, up 11%/12%/+2% QoQ. With an improvement in semiconductor supplies, its North American performance drove the overall beat in adjusted EBITDA. Shipments in 1QFY23 were marginally lower at 962kt (down 3% QoQ, flat on a YoY basis). EBITDA/t stood at USD583 (up 12% YoY and 34% QoQ), higher than our estimate of USD501/t. The management highlighted that they have now hedged ~80%/50% of its FY23/FY24 energy needs in Europe, and is currently in a comfortable position to raise its profitability guidance further. Net debt, at USD4.5b, was marginally higher (by USD64m) on a QoQ basis. Leverage remains at a comfortable level of 2.2x.



Outlook


We marginally raise our SoTP-based TP for HNDL to INR490 from INR475. The stock is trading at n FY23E/FY24E EV/EBITDA of 5.3x/5.1x. The stock is available at 1.3x FY23E P/B, while offering an attractive RoE of 18%. We maintain our Buy rating.

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Hindalco - 040822 - moti

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first published: Aug 5, 2022 10:05 pm
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