Buy Hindalco; target of Rs 600: Motilal Oswal

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Motilal Oswal's research report on Hindalco

Novelis reported a weak financial performance in 3QFY23, missing our estimates. The performance was affected by lower shipments due to beverage packaging destocking and a weak macro scenario. Revenue/adj. EBITDA/APAT declined by 12%/32%/39% QoQ to USD4,021m/ USD341m/USD145m. Revenue was in line with our estimate, while Adj. EBTIDA/APAT significantly missed our estimates of USD427m/USD175m.  EBITDA was affected by lower volumes, higher operating costs and negative forex impact of USD18m. EBITDA/t at USD376/t (-31% YoY/-26% QoQ) was below our estimate of USD427/t. Shipments stood at 908kt (-2% YoY/-8% QoQ), 9% below our estimate of 1,000kt.

Outlook

Our SoTP-based TP for Hindalco works out to INR600. The stock is trading at 5.3x/3.8x our FY23E/24E EV/EBITDA and 1.3x FY24E P/B. Maintain BUY.

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Hindalco - 08 -02 - 2023 - moti