Hindalco Industries share price rose over 2% to hit an intraday high Rs 426 apiece on BSE, a day after the company posted a 99.7% on-year rise in its consolidated net profit at Rs 3,851 crore for the quarter ended March, 2022. The Aditya Birla Group firm’s consolidated revenue from operations increased to Rs 55,764 crore as against Rs 40,507 crore in the same quarter of FY21. “The management’s guidance on Novelis is positive. Its long-term outlook is also encouraging,” brokerage firm Motilal Oswal said in its report. So far this year, Hindalco shares have plunged 13%. However, analysts see up to 36% potential rally going forward given meaningful correction in valuations and stable performance.

Stock talk: Should you buy, hold or sell Hindalco shares

Motilal Oswal: Buy
Target price: Rs 555

According to analysts at Motilal Oswal, Hindalco’s entire growth capex will be funded internally. “The USD2.5b greenfield capex in Novelis will drive mid-teen RoCE, implying a massive upgrade to the EBITDA trajectory of Novelis in the medium term,” they said. While Novelis continues to remain the bright spot in Hindalco’s consolidated profitability, the concerns on its India business are transitory, analysts added. The brokerage cut its FY23 EBITDA and PAT estimate by 16%, 22% respectively, at the consolidated level, driven by a 28% reduction in India EBITDA due to higher coal costs. “We expect the coal crisis to dissipate in the next one-to-two quarters,” it said. Motilal Oswal maintains a ‘buy’ rating on the stock with a target price of Rs 555.

Kotak Securities: Buy
Fair Value: Rs 580

According to analysts at Kotak Securities Hindalco’s $11 billion capex over FY2023-27E would be comfortably met through OCF. “deleveraging would continue, albeit at a snail’s pace from hereon. We cut our EBITDA estimates by 16%/10% for FY2023/24E mainly led by higher costs and marginally lower aluminum prices for FY2023E,” the brokerage said. It cut its Fair Value on the stock to Rs 580 per share from 650 earlier, on lower earnings and rollover to March 2024E. The brokerage maintains a buy call on the stock on attractive valuations at 4.4X EV/EBITDA.

Prabhudas Lilladher: Accumulate
Target price: Rs 545

The brokerage house noted that the Indian aluminium business posted a robust Ebitda growth of 123% to Rs 4,050 crore, with Ebitda margins of 41%. The company attributed the same to favourable macros, higher volumes, better operational efficiencies, and improved performance of downstream business offset by higher input costs. “Novelis’ margins are expected to cross US$500/t in Q1FY23 as last quarter was impacted due to production and logistics related one-time issues in North America. Demand for beverage cans and speciality products remained strong with tight market conditions. However, margins would be lower for the next couple of quarters due to high energy costs,” it said.

Led by meaningful correction in valuations and stable performance in both India and Novelis operations, Prabhudas Lilladher has upgraded Hindalco stock to ‘Accumulate’ with target price of Rs 545.

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