Sell Hindalco; target of Rs 600: Emkay Global Financial

Emkay Global Financial's research report on Hindalco

We had recently initiated coverage on Hindalco indicating that the stock is pricing in all the positives and a part of that optimism was around Novelis in the lead up to its IPO, which was later called off. We were not convinced with its steep EBITDA/t improvement trajectory in the medium term and in playing the Bay Minette capex cycle. With the company now withdrawing its EBITDA/t guidance over concerns surrounding ‘accelerating’ tightening of scrap spreads with liberalization of scrap import by China, we think it creates a near-term overhang for the stock. We cut Novelis’s EBITDA/t estimate to USD477 from USD501 (previous guidance of USD525) for FY25. We think the pain on scrap spreads could endure for 2-4 quarters at least.

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