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.
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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