Shares of Hindalco Industries fell 4 per cent in Wednesday’s trade, taking its fall to the second straight day. The scrip fell 3.86 per cent to hit a low of Rs 461.60. At this price, the scrip was still up 49 per cent over its 52-week low of Rs 309, hit on June 20, 2022. The stock has an average target price of Rs 513.67, as per publicly available data with Trendlyne, which suggests a potential 10 per cent upside on the counter.
Kotak Institutional Equities has a ‘Buy’ rating on this stock with a target of Rs 525. JM Financial sees the stock at Rs 530.
Jefferies, which upgraded Hindalco to ‘Buy’ on December 30, said said Novelis’ near-term outlook has deteriorated amid a weakening macros, but medium term outlook remains strong. Jefferies said Novelis is benefiting from the structural shift to aluminium from steel in autos, and from plastics and glass in beverage cans.
India aluminium Ebitda per tonne should improve as aluminium price seems to have bottomed while Hindalco’s production cost dips, Jefferies said adding that it likes Hindalco’s higher exposure to downstream business that has resulted in a significantly lower Ebitda volatility for Hindalco when compared with Tata Steel and Jindal Steel.
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In its base case target of Rs 600, Jefferies sees Novelis’s Ebitda per tonne of $480-500 in FY23-25E. It sees LME aluminium price at $2,490 per tonne, $2,350 per tonne and $2,350 per tonne over FY23-25E.
Ebitda, it said, should fall from Rs 28,700 crore in FY22 to Rs 25,400 crore, Rs 25,800 crore, Rs 27,400 crore in FY23, FY24 and FY25. Its price target of Rs 600 is based on September 2024 EV/Ebitda of 7 times for Novelis and 5 times for India.
Earlier in a December 22 note, JM Financial had noted that aluminium prices have jumped from recent lows on hopes of improved demand from China amidst easing Covid norms.
Increased smelter curtailments across Europe on account of the energy crisis and multi-year low LME inventory at 481 KT will likely support aluminium prices going forward, it noted.
“Aluminium market (ex-China) is expected to remain in deficit (Norsk forecast) during 2023 fuelled by smelter curtailments despite expectations of recession led demand headwinds while China is expected to move to surplus given a higher rate of production inside China. Novelis continues to be relatively well placed despite fears of recession as 60 per cent of Novelis’ business comes from can body, which is likely to have a resilient demand outlook,” JM Financial noted.
