Buy Hindalco; target of Rs 550: Motilal Oswal

Motilal Oswal's research report on Hindalco

Novelis (HNDL)’s 1QFY24 revenue was down 20% YoY to USD4.1b. However, revenue was 10% above our estimate of USD3.7b due to improved product mix, higher product pricing and improved automotive shipments, partially offset by lower beverage can shipments and lower LME. Adjusted EBITDA was down 25% YoY at USD421m (in line with our estimate of USD410m) while EBITDA/t stood at USD479 (USD34/t above our estimate of USD445/t). The improvement in EBITDA/t was due to higher price/mix improvement and forex gains. APAT dipped 41% YoY to USD166m, which was 11% above our estimate of USD149m in 1QFY24. Shipments stood at 879kt (down 9% YoY), in line with our estimate of 921kt.

Outlook

We reiterate our BUY rating on HNDL with an SoTP-based TP of INR550. The stock is trading at 5.3x FY25E EV/EBITDA and 1.2x FY25E P/B.