Buy Hindalco; target of Rs 500: Motilal Oswal

Motilal Oswal's research report on Hindalco

Novelis (HNDL)’s 4QFY23 revenue was down 9% YoY but up 5% QoQ at USD4.4b (8% above our estimate) driven by improved product mix and increased product pricing offset by lower volumes. Adjusted EBITDA was down 6% YoY but up 18% QoQ at USD403m (11% below estimate). The miss was due to less favorable metal benefits from recycling, higher energy cost, inflationary pressure and lower volumes. EBITDA/t was flat YoY but up 15% QoQ at USD431 during the quarter. APAT dipped 13% YoY but up 36% QoQ at USD197m, which was 20% above our estimate of USD164m, supported by lower tax outgo.

Outlook

We remain confident on the long-term opportunities and considering its leadership in both beverage can and automotive markets, we reiterate our BUY rating on HNDL with an SoTP-based TP of INR500. The stock is trading at 4.8x FY24E EV/EBITDA and 1.4x FY24E P/B.

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