Hindalco share price volatile: Should you Buy, Sell or Hold the stock?
- Stock Market Today: Hindalco Share price that had ended 12.43% lower on Tuesday, post disappointment with rise in Novelis Capex, continued to remain volatile in morning trades on Wednesday post Q3 results. Here's what Brokerages are saying about the stock.
Hindalco Industries Ltd share price gained more than 1% in morning trades on Wednesday, however was trading the red thereafter. Hindalco share price had seen sharp correction of more than 12% on Tuesday.
Hindalco had posted its December quarter performance on Tuesday. Hindalco's consolidated net profit at ₹2,331 crore, rose 71% YoY. The consolidated earnings before interest tax depreciation and amortisation (Ebitda) at ₹6,322 crore also was up 61% YoY., helped by declining input costs and strong performance in all verticals.
Hindalco's US subsidiary Novelis while saw adjusted Ebitda per ton at $499, rise 33% YoY, Aluminium Upstream Ebitda at ₹2,443 crore, also was up 54% YoY. Copper segment continues its strong performance with Ebitda at ₹656 crore, up 20% YoY.
However it was the rise in Capex outlay for its key growth project—greenfield expansion in North America—by 65% to $4.1 billion (around $2.5 billion earlier) that impacted street sentiments as the stock price ended 12.43% down on Tuesday.
Here's what Brokerages say about Hindalco
Jefferies India Private Ltd-
Hindalco's 3Q Ebitda rose 68% YoY and 7% sequentially which was in line with Jefferies estimates. Novelis expects sequentially better Q4FY24 and India aluminum margins should hold up too. Jefferies has fine-tune estimates and expect 9-13% Ebitda and Earnings per share CAGR (compound annual growth rate) over FY24-26. The big cost escalation at Novelis' 600ktpa project has deteriorated cashflow outlook and will impact project return ratios, said Jefferies analysts. However, Hindalco valuations at 5.6x FY25 Enterprise Value to Ebitda and 1.0x FY25 estimated Price to Book value are reasonable. They retain Buy, ratings on Hindalco but prefer COAL India over Hindalco.
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Nuvama Institutional Equities-
Analysts at Nuvama in their Hindalco Result review said that lower cost at Indian operation led us to raise FY24 and FY25 consolidated Ebitda estimates by 2–3%. However, the rise in capex at Novelis shall lead to higher debt in FY26E, affecting value. They value Hindalco at 6.0x FY26 estimated Enterprise Value to Ebitda and arrive at Target price of Rs508 (earlier ₹552) and retain HOLD ratings.
Motilal Oswal Financial Services
Analysts at MOFSL in their result review said that though the ongoing capex in Novelis would augment Hindalco as the global leader in beverage cans and automotive FRP segments, an extension in the capex timeline along with an increase in cash outflow will add some pressure on the cash flow of the company. Its capex would be a key monitorable for any further cost revisions or delays.
Considering the delay in commissioning of the capacity, which was expected to come on stream by FY26, MOFSL analysts have cut their FY26 estimated Ebitda by 7%, while keeping the Ebitda for FY25 broadly unchanged. They reiterate BUY rating with a revised Sum of the parts based target price to ₹590
Centrum Broking
Hindalco (including Utkal Alumina) reported better than expected adjusted Ebitda said Centrum analysts in their results review . The outperformance is primarily driven by higher earnings in aluminium business segment. The aluminium business Ebitda per tonne was supported by lower coal and CP coke cost during the quarter. Novelis also reported better than expected earnings in seasonally weak quarter driven by higher pricing and lower cost, as per Centrum Broking.
However, the 600ktpa Bay Minette, US expansion capex cost is hiked by 64% and delay in commissioning to H2FY26 which is expected to increase net debt and muted earnings growth. As a result, Centrum has reduced target price to Rs508 a share ( from Rs535 earlier) valuing Novelis at 6.5 times FY25 and 26 estimated average enterprise value by Ebitda and Indian operations at 5.0x FY25/26E average EV/EBITDA and maintain ADD rating
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
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