ICICI Securities's research report on Hindalco Industries
Hindalco (HNDL)’s Q2FY26 EBITDA, at INR 89.7bn, was 5% better than our estimates driven by Novelis’ stronger performance, while HNDL’s domestic business aligned with our estimates. Q2 marked a further increase in Novelis’ capex to USD 5bn, from 4.1bn, and an announcement of Phase II of the Aditya aluminium smelter (193Kte). Net debt also expanded to INR 414bn vs. INR 343bn QoQ. HNDL hedged 31%/49% of Q3/Q4 aluminium prices at USD 2,700/te and USD 2,760/te, respectively; thus, limiting gains. Also, Novelis is expected to report slower performance in Q3FY25. Uncertainty in Novelis and higher-for-longer capex are expected inflate debt further.
Outlook
We believe, most of the positives are already priced in. Hence, on balance, we maintain our REDUCE rating and target price of INR 765 (6.5x Novelis and 6x domestic business FY28E EV/EBITDA).
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