Hindalco Industries share price declines 14% post Novelis Q3 results: Capex enhancement leads to disappointment

Hindalco Industries saw its stock price decline by 14% in morning trades on Tuesday post its US subsidiary Novelis declared its December quarter  performance.

While the financials were in line with the expectations its the Capex guidance and enhanced timeline that disappointed said analysts

Novelis’ 3QFY24 adjusted EBITDA came in line with our estimates, with demand outlook improving in America, whereas Europe and Asia remain under pressure, said analysts at Kotak Institutional Equities.

However the company has revised the capex outlay upward for its key growth project—greenfield expansion in North America—by 65% to $4.1  billion (around $2.5 billion earlier) and delayed the timeline by one year to end-FY2027.

The management has downgraded the return guidance from this project to ‘double digits’ from ‘midteens’ earlier, pointed kotak analysts. Cost inflation and delay do not impact our explicit earnings forecast until FY2026, but damage the growth, earnings and return prospects of the company from a 5-year perspective, said analysts at Kotak Institutional Equities.

Also Read- SAIL share price drops 5% as Q3 profit declines 22%; here's what the analyst say

In terms of financial performance, the net income for Novelis attributable to common shareholder at $121 million, was up compared to $12 million in the same period last year. 

Novelis saw its net sales decline 6% year-on-year to $3.9 billion for the third quarter of fiscal year 2024. the same was driven by lower average aluminum prices while shipments remained flat. 

Total flat rolled product shipments were at 910 kilotonnes in the third quarter of fiscal year 2024 compared to 908 kilotonnes in the prior year period. 

Also Read- Ritesh Agarwal's OYO eyes expedited IPO post profit surge, seeks SEBI nod 

Shipments were flat due to a decline in specialties product shipments from muted economic conditions in some markets, said the company. The decline in specialties products shipments though more than offset by continued growth in automotive shipments and a return in demand for beverage packaging sheets.

Adjusted EBITDA per tonne for the company was up 33% to $499  tonne. nevertheless on the sequential basis the adjusted Ebitda per tonne declined compared to $519 a tonne in the previous quarter. 

Management Expects Q4FY24 adjusted EBITDA per tonne to return to a sustainable ~$525 level

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions