Buy Hindalco; target of Rs 550: Motilal Oswal

Motilal Oswal's research report on Hindalco

Hindalco (HNDL) plans to incur a capex of USD4.4b over the next five years for several projects, including FRP capacity expansion in USA, upstream expansion at Utkal, special alumina business capacities and downstream aluminum capacities, among others. Over USD3b of capex is allocated to the USA region. About 80% of the organic growth capex in India (USD1.1b) will be allocated to the downstream business. HNDL expects Novelis’s EBITDA/t to touch USD525 by 4QFY24. We believe HNDL is adding downstream capacities at the right time to capture the robust growth opportunities. Despite near-term headwinds due to a slowdown in China and its impact on non-ferrous prices, the long-term outlook remains positive.

Outlook

We reiterate our BUY rating on the stock with our SOTP-based TP of INR550