Hindalco keeps brokerages upbeat with June quarter earnings

Motilal Oswal Securities has raised Hindalco estimates for FY25E EBITDA and net profit by 4% and 10% respectively.

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Brokerages remained bullish on Hindalco Industries Ltd and raised its target price after its better-than-expected earnings for the June quarter.

Brokerage firm JM Financial has upheld its ‘buy’ rating on the stock and raised its target price by 21 percent to Rs 550 per share. The firm expressed that the stock continues to be its favourite within the metals space.

Motilal Oswal Securities maintained the ‘buy’ rating and increased its target price to Rs 550 a share, up 21 percent from current market price. Jefferies India upped the target price by 26 percent to Rs 575, while Antique stock broking raised its target price to Rs 526 and maintained the ‘buy’ rating.

Hindalco reported a 9 percent on-year decrease in consolidated revenue for the first quarter of FY24, amounting to Rs 53,000 crore. This surpassed analysts’ expectations by 12 percent, as their estimate stood at Rs 47,500 crore. The company also experienced a 32 percent on-year drop in consolidated EBITDA, reaching Rs 5,700 crore, but this still exceeded analysts’ projections by 10 percent, compared to their estimate of Rs 5,200 crore.

The company’s net profit took a hit, declining by 40 percent to Rs 2,500 crore, yet it managed to surpass analysts’ estimates by 22 percent, which were at Rs 2,000 crore. This improvement was primarily driven by increased other income, although it was somewhat offset by higher interest costs and tax expenditure.

The company has reported that the Chakla mine is progressing according to its established timeline and is anticipated to commence operations by FY26. Notably, the company has also achieved success in acquiring the Meenakshi West mine, which has the potential to yield approximately 6-7 million tonnes of coal annually. Looking ahead to FY24, the projected capital expenditure (capex) for both India operations and Novelis is estimated to be Rs 4,500 crore.

Analysts hold the belief that Hindalco will sustain its positive momentum due to several factors. These factors include the confidence in Novelis achieving its medium-term EBITDA-per-tonne target of $525 by the fourth quarter of FY24, the steadfast performance of Hindalco’s aluminum operations in India, strengthened coal security resulting from the acquisition of the Meenakshi and Chakla coal mines, as well as the growth-focused capital expenditure aimed at expanding capacity in the downstream business segment.

Analysts hold the perspective that Hindalco exhibits a robust outlook for long-term opportunities. Their confidence is anchored in the company’s leadership position in both the beverages can and automotive markets. This optimism is fuelled by the company’s strong performance, driven by factors such as sturdy domestic demand, increased demand from electric vehicles and consumer durables sectors, elevated investments in infrastructure and construction, as well as heightened public and private sector capital expenditures.

As a result, Motilal Oswal Securities has raised their estimates for FY25 EBITDA and net profit by 4 percent and 10 percent, respectively.

According to Antique Stock Broking, enhanced performance in the copper segment, improved aluminum operations (driven by increased downstream volume from the new 34 KT Silvassa extrusion facility and an ongoing additional expansion of 350 KT through debottlenecking at the Utkal Alumina), reduced coal expenses, and progress in enhancing Novelis’ operations are expected to contribute to an uplift in profitability.