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Strong aluminium prices coupled with healthy performance from Novelis augurs well for Hindalco, believes domestic brokerage and research firm ICICI Securities. Hindalco is the world’s largest aluminium company by revenues, and a major player in copper. Its wholly owned subsidiary Novelis is the world’s largest producer of aluminium beverage can stock.

Hindalco’s share price has grown by around 3.5x over the last five years (from around 155 on October 2016 to around 543 levels in October 2021). It has delivered multibagger return of around 115% so far this year. 

ICICI Securities sees further upside on the stock and has a Buy rating on Hindalco shares with a target price of 650 apiece with a target period of around 12 months. 

Global aluminium prices on the LME witnessed a sharp rally during the current calendar year. Aluminium prices on the LME have increased from US$2028/tonne in January 4, 2021 to US$3149/tonne on October 15, 2021, indicating an increase of 55% in the period. Increase in aluminium prices augurs well for an integrated player like Hindalco (domestic operations).

"In the last few quarters Novelis has been reporting a healthy performance, which has aided Hindalco’s consolidated performance. Going forward, on the back of healthy demand from key user industries we upward revise Novelis’ EBITDA/tonne estimate to US$525/tonne each for both FY22E & FY23 (earlier estimate of US$500/tonne each for both FY22E, FY23E)," the brokerage note stated.

In its metal sector coverage, ICICI Securities also likes Tata Steel. It said that India’s share in Tata Steel’s overall consolidated production capacity has risen from 29% in 2010 to 57% in 2020 and is likely to reach 73% in 2030. It has Buy rating on the metal stock with a target price of 1,750 apiece. 

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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