Hindalco Industries share price took a sharp hit in today’s trading session, falling nearly 7% . The decline came after its US-based subsidiary Novelis reported quarterly results over the market holiday, which triggered brokerages like Nuvama to downgrade the stock and target price cuts for the parent company.
The company reported net sales of $4.7 billion, up 10% year-on-year. The total shipments of Flat Rolled Products (FRP) stood at 941 kilo tonnes, marginally lower than 945 kilo tonnes a year ago.
Adding to the pressure, Novelis announced that its free cash flow for the current financial year would be negatively impacted by $550–650 million, following a fire incident at its Oswego plant in New York in September.
Let’s take a look at what the brokerage firm Nuvama say on this stocks and the rationale behind it –
Nuvama downgrades Hindalco to ‘Hold’
The brokerage firm Nuvama has downgraded the stock to a ‘Hold’ rating with a revised target price of Rs 838, citing margin pressure and rising capital expenditure concerns.
“Novelis (Hindalco’s 100% subsidiary) posted weak but in-line adjusted EBITDA (Earnings Before Interest, Tax, Depreciation, and Amortisation) of $422 million (our estimate: $419 million), up 1.4% quarter-on-quarter and EBITDA per tonne of $448, up 4% QoQ during Q2FY26,” the brokerage said in its latest note.
Nuvama highlighted that while Novelis operations are stable, certain external factors continue to weigh on performance. “Further inflation in capex, adverse effect of fire at the Oswego plant and likely future volume loss to competitors are negatives,” it added.
Nuvama on Hindalco: Impact of the Oswego fire
The fire at Novelis Oswego facility is expected to have a significant impact on earnings. According to Nuvama, “The fire at Oswego plant is likely to affect EBITDA by $100–150 million in H2FY26 and $550–650 million cashflows (70–80% is recoverable in insurance).”
Additionally, cost pressures are mounting on the company’s upcoming projects. Nuvama pointed out that capex for the Bay Minette project has increased by nearly 22% to $5 billion, which could strain balance sheet flexibility.
Despite these concerns, Nuvama noted that Hindalco’s net debt-to-EBITDA ratio is likely to remain comfortable at around 1.2x by the end of FY26.
Nuvama on Hindalco: Cost efficiency measures and outlook
To offset the impact of higher tariffs and costs, Novelis has stepped up its internal efficiency drive. The company “revised cost take-outs run-rate upwards to USD 125 million (versus $100 million earlier) in end-FY26 and $300 million by FY28.”
The brokerage further noted that the “net impact of US tariff was USD 54 million in Q2FY26 (versus $28 million in Q1FY26),” which was partially mitigated through cost-cutting initiatives.
However, Nuvama expects the coming quarters to remain challenging. “Novelis’ H2FY26 earnings are likely to be weaker due to the fire impact at Oswego facility (to restart by end-Q3FY26). This coupled with higher capex at Bay Minette by 22% keeps consolidated net debt high, but in comfortable zone (net debt/EBITDA: 1.2x at end-FY26).”
Nuvama on Hindalco: Recovery likely from FY27
However, the brokerage believes the long-term recovery could begin once the Oswego plant resumes operations. “Scrap spread has improved aided by higher mid-west premiums. As a result, we expect an earnings recovery in FY27,” the brokerage added.