Hindalco share price: Emkay upgrades rating to ‘Buy’, raises target price; sees 20% upside. Here’s why

Hindalco share price has traded largely flat over the past year, but analysts expect the stock to gain momentum on improving fundamentals. Emkay Global Financial Services has upgraded its rating and raised target price for Hindalco Industries shares.

Emkay upgraded Hindalco shares to ‘Buy’ from ‘Reduce’ and raised target price to ₹900 apiece from ₹650 earlier. Hindalco share price target implies an upside potential of more than 20% from Tuesday’s closing price.

“We see aluminium prices going from strength to strength which should benefit Hindalco’s India business meaningfully, along with its industry-leading cost curve. Meanwhile, Novelis’s profitability has likely bottomed out, per our scrap spread workings; we expect margins to reset to normalized levels of ~$480 per tonne by FY28E,” said Amit Lahoti, Senior Research Analyst at Emkay Global Financial Services Ltd.

Lahoti added that, after the end of the “commodity supercycle” around 2012, “if there was ever a time to own industrial metals, it is now,” citing supply restraint and the macro tailwind of a weak dollar index as key drivers. He noted that Hindalco Industries is better placed than global peers to benefit from the improving dynamics, with firm aluminium prices likely to enhance earnings visibility and drive a potential valuation re-rating.

India business: Cost leadership, strong cash flow

Hindalco benefits from its global cost leadership, producing aluminium at $1,700/t versus China’s $2,300/t. This supports robust cash flows, with consolidated annual operating cash flow of ₹300 billion (13% of EV), sufficient for its capital allocation plans.

Novelis: Profitability trough behind

Emkay Global believes Novelis’s profitability has likely bottomed out. While tariffs distorted scrap spreads, easing UBC scrap costs and stronger LME prices should aid recovery. Margins are expected to improve from ~$430/t now to ~$480/t by FY28E and above $500/t by FY29E, supported by the Bay Minette ramp-up.

Aluminium Outlook and Risks

Emkay raised its 6M aluminium price target to $2,850/t from $2,700/t and lifted FY27E/28E forecasts by 2%, leading to a 3% – 3.5% upgrade in Hindalco’s EBITDA estimates. Key risks include industry oversupply if prices stay high and easing of Russian sanctions, which could reduce cost support.

Hindalco Share Price Performance

Hindalco share price has gained 6% in one month and has rallied over 11% in three months. The stock has gained 6% in six months and has surged 26% on a year-to-date (YTD) basis. In the past one year, Hindalco shares have risen by just 4%, while it has jumped 56% in two years and has delivered multibagger returns of 370% in five years.

At 11:15 AM, Hindalco share price was trading 0.17% lower at ₹744.45 apiece on the BSE.

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 making any investment decisions.