Hold Hindalco Industries; target of Rs 148: ICICIdirect

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26 Aug, 2025 12:21

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ICICIdirect.com's report on Hindalco Industries

Novelis, the overseas rolled products manufacturing subsidiary of Hindalco Industries, has announced its Q3FY15 numbers. The total rolled product shipments for Q3FY15 came in at 757 KT, lower than our expectation of 785 KT. Revenue for the quarter under review stood at US$2.8 billion as compared to US$2.4 billion in Q3FY14, up 18% YoY. The EBITDA for the quarter stood at US$236 million with corresponding EBITDA/tonne at US$312/tonne (I-direct estimate: EBITDA of US$251 million, EBITDA/tonne US$320/tonne). The subsequent net income for the quarter stood at US$46 million.

Novelis expects to incur capex of US$525-550 million in FY15 (US$368 million already spent in 9MFY15). Free cash flow for Q3FY15 and 9MFY15 was negative US$12 million and negative US$297 million. Going forward, the management expects to generate positive free cash flow for FY15 on the back of a significant improvement in EBITDA and working capital flows in Q4FY15.

We believe Novelis’ performance will improve, going forward, on account of the increasing share of the high margin automotive segment in the total product mix. Going forward, an improvement in blended EBITDA/tonne is likely to be driven by increasing contribution of the auto sector coupled with an increase in recycling content. The management has maintained the guidance of auto share at ~25% of product portfolio from 9% in FY14. The beverage can segment is accordingly slated to reduce from 62% in FY14 to 50% in FY20. Repayment and replacement of existing fleet of F- 150 will remain a key monitorable, going forward. During Q3FY15, Novelis managed to achieve the target of 50% recycled content share. Novelis has a target to increase the recycled content in its products from 46% in FY14 to 50% in FY15 with the ultimate growth of 80% expected by FY20. We value the company on an SOTP basis and maintain our target price of Rs 148. We maintain our HOLD rating on the stock", says ICICIdirect.com research report.

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