Hold Hindalco Industries target of Rs 75: ICICI direct

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26 Aug, 2025 12:21

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ICICI direct’s research report on Hindalco IndustriesHindalco reported a steady performance for Q2FY16 wherein topline, EBITDA and PAT came in above our estimate. Ramping up of greenfield  aluminum projects (Mahan and Aditya reaching 100% and 60% capacity utilisation levels, respectively) led to better-than expected sales volume, which subsequently resulted in topline beat.  Topline for the quarter was at Rs.8924.6 crore, up 4.3% YoY and 4.1% QoQ, and above our estimate of Rs.7581.0 crore.  EBITDA came in at Rs.602.8 crore, down 32.8% YoY and 31.3% QoQ and above our estimate of Rs.575.6 crore. The EBITDA margin was at 6.8% (our estimate: 7.6%). EBITDA margins came in subdued due to muted LME aluminium prices and premium.  Other income for the quarter came in at Rs.417.5 crore, up 86.9% YoY and 114.8% QoQ and above our estimate of Rs.200.0 crore. Higher other income for the quarter was partly due to certain non-recurring items amounting to Rs.119 crore and partly due to dividend from subsidiaries. Aided by healthy other income, ensuing PAT came in at Rs.103.3 crore.Outlook and valuationHindalco reported a steady Q2FY16 performance. The standalone operational performance was driven by improved volumes while the Novelis performance was driven by higher share of auto in the overall product mix. Going forward, we expect operating margins of domestic operations to remain under pressure on account of subdued aluminium prices and likely increase in operating costs (especially power and fuel costs). With regards to international operations, on account of muted Aluminium prices and premium we have downgraded EBITDA/tone estimate of Novelis for FY16E to US$210/tonne (from US$250/tone earlier) and for FY17E to US$250/tonne (from US$275/tonne earlier). We have valued Hindalco on an SOTP basis, thereby arriving at a target price of Rs.75. We maintain our HOLD recommendation on the stock.

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