Buy Hindalco Industries; target of Rs 215: Prabhudas Lilladher

Prabhudas Lilladher is bullish on Hindalco Industries has recommended buy rating on the stock with a target price of Rs 215 in its research report dated August 17, 2020.

Broker Research

August 18, 2020 / 12:47 IST

Prabhudas Lilladher's research report on Hindalco Industries

Hindalco (HNDL) reported Q1FY21 earnings in line with our expectation. Improvement in prices and lower cost of production (CoP) shall continue to support AL earnings. While, Copper (CU) operation’s earnings would remain under pressure in FY21e due to 23% reduction in Treatment/Refining charges (Tc/Rc) for CY20 at ¢15.9/lb, planned shutdowns and weak demand. Led by better visibility on profitability and synergies in Aleris, Novelis increased guidance on sustainable EBITDA margin to US$450-475/t from USD420-430/t. In domestic operations (with share reducing to 30% in consolidated EBITDA), HNDL sustained EBITDA at Rs50bn despite weak LME and unstable copper operations. Debt gearing have shoot up sharply to FY18 levels due to acquisition of Aleris.

Outlook

However, we expect it to comfortably fall below ~3x in a year’s time on the back of strong earnings profile of Novelis, stable domestic operations and divestment of Aleris’ Lewisport and Duffel plants. We reiterate BUY with TP of Rs215, EV/EBITDA of 5.5x FY22e.

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