Motilal Oswal's research report on Hindalco
The management sees strong demand for aluminum from major segments like Beverage Can, Automotive Body Sheet, Specialties, and Aerospace. The supply disruption in aluminum will deepen the deficit and result in higher LME prices through FY23 and FY24. HNDL announced a strong growth capex pipeline of USD7.9b (including optional capex) over the next five years in both Novelis and its parent entity to deploy the strong cash flow expected in both companies. It expects to deploy ~75% of the FCF (post sustenance capex and working capital).
We raise our FY22/FY23 EBITDA estimate by 2.4%/6.6%, led by a 0.6%/10% increase in LME aluminum prices and raise our SoTP-based TP to INR750/share (from INR700 earlier). The key risk to our call is a slowdown in China, resulting in a correction in aluminum prices.