Buy Hindalco; target of Rs 770: Motilal Oswal

Motilal Oswal's research report on Hindalco

HNDL and its subsidiary, Novelis, are investing ~USD10b in growth projects to significantly boost capacities. In India, HNDL is expanding its aluminum upstream (Aditya smelter 180 KT, alumina refinery 850 KT), downstream (FRP-170 KT, battery enclosures etc), and copper capacities (smelter 300 KT and recycling 50KT), with a total of USD5.2b currently under execution. Novelis is adding ~800KT globally, including USD4.1b in the Bay Minette facility (600 KT) and debottlenecking (175 KT), targeting completion by FY27 to meet rising demand in beverage packaging and automotive sectors. The company is also aggressively expanding its VAP portfolios to capitalize on emerging trends.

Outlook

Novelis has already secured long-term contracts from marquee customers for Bay Minette, ensuring future revenue visibility. With a larger scale and operational efficiency, margins are expected to expand over the medium to long term. We reiterate our BUY rating on HNDL with SOTP-based valuation, arriving at a TP of INR770.