Moneycontrol
Jan 03, 2018 01:03 PM IST | Source: Moneycontrol.com

BoAML initiates Buy on Hindalco, sees 25% upside as earnings volatility to reduce

BoAML expects deleveraging to continue with 9 percent free cash flow yield and earnings volatility to reduce providing strong case for upward re-rating.

 
 
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Bank of America Merrill Lynch has initiated coverage with Buy rating on aluminium major Hindalco Industries and set a target price at Rs 340 per share, implying a 25 percent potential upside from Tuesday's closing price. The stock gain.ed 2.6 percent intraday Wednesday.

The Aditya Birla Group company is a combination of globally competitive upstream business and world-class downstream business, the research house said, adding it is uniquely positioned on cost leadership and technical expertise.

Its upstream cost positioning has been improved significantly with higher margins in downstream, BoAML said.

It expects deleveraging to continue with 9 percent free cash flow yield and earnings volatility to reduce providing strong case for upward re-rating.

The research house also expects Novelis to contribute more than 54 percent of EBITDA over FY18-20.

Not only BoAML, but also other research houses have been betting big on Novelis, the subsidiary based in Canada acquired in February 2007, as its contribution to Hindalco's earnings is expected to increase going ahead.

At 12:45 hours IST, the stock price was quoting at Rs 276.10, up 1.49 percent on the BSE.
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