Buy Hindalco; target of Rs 900: Emkay Global Financial

Emkay Global Financial' research report on Hindalco

We see aluminium prices going from strength to strength which should benefit Hindalco’s India business meaningfully, along with its industry-leading cost curve. Meanwhile, Novelis’s profitability has likely bottomed out, per our scrap spread workings; we expect margins to reset to normalized levels of ~USD480/t by FY28E. From a market perspective, after the ‘commodity supercycle’ sunset around 2012, if there was ever a time to own industrial metals, it is now, as we believe supply restraint alongside the macro tailwind of weak DXY provides an optimal position of strength (read: Grinding higher). To add to it, HNDL is relatively better placed among global peers to benefit from the improving dynamics. Firm aluminium prices should also help in adding duration visibility to earnings, resulting in a valuation re-rating.

Outlook

We upgrade Hindalco to BUY from Reduce, with an increased TP of Rs900 (Rs650 earlier). After the flatlined stock performance in the past 12M, we see HNDL doing well from here.

For all recommendations report, click here