Novelis, a wholly owned subsidiary of Hindalco, reported a net profit of $12 million for the December quarter, down 95 percent on-year. Its adjusted EBITDA (earnings before interest, taxes, depreciation and amortisation) came in at $341 million, down 33 percent over the last year.
Net sales of the company decreased 3 percent to $4.2 billion for the third quarter, compared to $4.3 billion a year back, driven by lower average aluminum prices and a 2 percent decrease in total flat-rolled product shipments, said the company.
At 9:30am, Hindalco was quoting at Rs 433 on the National Stock Exchange, lower by 3.2 percent. This level is below its 50-day and 100-day simple moving averages (SMA) but above its 200-SMA.
"Our results were pressured by continued unprecedented inflationary headwinds, but were also further impacted by lower shipments, resulting from significantly larger-than-anticipated customer inventory reduction actions in the beverage packaging market,” Steve Fisher, President and CEO of Novelis Inc, said.
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What do brokerages feel about Hindalco after the disappointing show?
Jefferies
It has a 'buy' rating on the stock with a target of Rs 600 per share.
“Volumes and EBITDA per tonne fell, dragged by higher costs and inventory destocking in beverage cans,” the firm noted.
These headwinds might continue for a few more quarters but the management believes Q3 was trough margin quarter. “Expect EBITDA per tonne to improve in Q4,” it said.
CLSA
The brokerage house has a 'buy' rating on the stock with target price of Rs 580.
“New pricing clauses and softening costs should lead to a gradual recovery. We see profitability returning to steady state guidance only in the second half of FY24. Strong free cash flow generation and phased capex augur well for leverage,” it said.
Nuvama Wealth
The brokerage firm retains the 'buy' tag on the stock with the target price revised to Rs 506, from Rs 511 earlier.
“Near-term outlook is cautious and EBITDA per tonne could be $400-450 in the next two-three quarters,” it noted.
The firm has cut FY23/FY24 EBITDA for Hindalco by 4 percent/6 percent factoring in Novelis’ lower earnings.
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