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Hindalco Industries (HNDL) delivered in-line cons operating performance aided by lower operating costs in India aluminium business and copper. Aluminium cost of production declined 3% QoQ on higher linkage coal from NCL while improving product mix at downstream business aided EBITDA/t. Mgmt. guided similar inch up in Q2 costs and consistent improvement in downstream volumes aided by commercial commencement of Aditya FRP. Coal supply from captive Chakla/Bandha mines is expected to start from Mar’26/Mar’27 respectively. Novelis Q1 was weak on higher scrap prices, unfavorable product mix and tariff impact despite stable volumes. Adverse impact of ~USD60m/quarter is expected due to inter-region movement, as Novelis imports Can sheet from S. Korea/ Brazil (~170kt, 50% tariff as per section 232 Vs 10% earlier which used to get exempted). Also, Canada supports US (90kt) for Auto sheets. We believe Novelis’ 9MFY26 to be impacted due to the tariffs and weak macro, however as mgmt. is taking mitigation initiatives along with higher MJP and stable scrap prices, EBITDA should improve gradually.

We maintain our Novelis EBITDA/t assumption for FY26/27E at USD440/480 & ~1% volume growth till there is some visibility on benefits of efficient scrap sourcing by Novelis. We increase our FY26/27E cons EBITDA estimates by 6%/4% respectively as we factor in tad higher AL prices of USD2,487/USD2,537 and strong by-product prices for FY26E/27E. At CMP, the stock is trading at EV of 5.6x/5.2x FY26/27E EBITDA. Maintain ‘Accumulate’ rating with revised TP of Rs762 (earlier Rs738), valuing Novelis at 6.5x & standalone ops at 5.5x EV of Mar’27E EBITDA.

India Aluminium performance improves on lower coal and better product mix: Stdl. AL revenue grew 6% YoY while copper revenue grew 12% YoY. AL upstream revenue grew 6% YoY on higher realisation and EBITDA was up 17% due to lower input cost. Downstream revenue grew 17% YoY on account of higher shipments/ realization; while EBITDA was up 108% YoY on account of favourable product mix. Copper revenue increased 12% YoY, on account of higher realization. AL upstream sales volumes declined 2% YoY to 325kt, downstream sales volumes declined 4% YoY to 101kt. Copper volumes declined 8% YoY to 124kt. Blended realisation for AL business declined 11% QoQ to Rs235k/t (up 7% YoY) while copper business realisation improved 11% QoQ to Rs1,200k/t (up 7% YoY). Upstream EBITDA/t improved 15% YoY to USD1,467 while downstream EBITDA/t improved 92% YoY to USD264.

Strong India ops offset Novelis weakness: Std. EBITDA grew 14% YoY to Rs31.4bn (+5% QoQ; PLe of Rs26bn) on lower operating costs at aluminium business. Copper EBITDA started getting impacted due to weak TcRc and its contribution would remain weak for next two years till incremental global mine supply comes. Cons. EBITDA grew 5% YoY at Rs79.1bn (-11% QoQ; PLe Rs80bn) on better Utkal and metal performance. Novelis’ performance was a miss on PLe this quarter which was largely compensated by stronger Hindalco India performance.

Novelis segment wise demand: Beverage packaging (Cans; ~60% volumes) witnessed robust 8% YoY volume growth during Q1FY26. While there is significant pressure on rest of the segments due to uncertain macro-economic environment, mgmt.’s 3-year USD300m structural cost reduction program would aid. We believe uncertain macros to impact overall demand of FRP in FY26 and have assumed just 1% volume growth for FY26/27E.

Region wise volumes & EBITDA/t: Shipments of flat rolled products (FRP) grew 1.3% YoY to 963kt (0.6% QoQ, PLe 970kt) on higher demand for beverage packaging shipments which were partially offset by lower Auto and specialty shipments. Novelis’s adj. EBITDA/t declined 18% YoY to USD 432/t driven by higher aluminum scrap prices, unfavorable product mix, and a net negative tariff impact, partially offset by higher product pricing, lower SG&A costs and favorable forex. FRP Shipments grew 4% QoQ in N.A. to 389kt (higher cans, lower auto & specialties, lower metal benefit); Europe volumes de-grew 1% QoQ to 262kt on better cans negated by lower Autos, higher scarp prices and lower local market premiums. Asia volumes grew 7% QoQ to 215kt (higher cans & Aero offsetting lower specialties & auto) and S.A de-grew 5% QoQ to 156kt. EBITDA/t declined 15% QoQ in N. A. to USD342/t; declined sharp 32% QoQ to USD267/t in Europe. While in Asia EBITDA/t declined 2% QoQ to USD 433/t and -3% QoQ to USD 763/t in S. A..

Higher premiums and stable scrap pricing should aid: Novelis expects a USD60mn negative tariff impact per quarter (without mitigation) due to doubling of duties under Sec232 by US President. Mitigation efforts undertaken are tariff pass-throughs, strategies to open up more US mfg/scrap sourcing, and costtakeout actions (USD100m in FY26). Q2 performance should be better than Q1. Most mitigation benefits will be visible in Q3 (seasonally weak) and fully in Q4. Higher premiums and stable scrap pricing should aid in next few quarters along with mitigation benefits. HNDL Q1FY26 Concall Highlights: ? 18% of the currency is hedged at an exchange rate of Rs87/USD and 20% of metal is hedged at USD2,666/t for Q2FY26. ? Alumina sales stood at 170kt in Q1FY26 and would be ~190-200kt in Q2FY26. ? HNDL incurred a capex of Rs12.73bn in Q1FY26. For FY26, capex is projected at Rs75-80bn, with FY27 expected to see peak spending of ~Rs150bn. ? In HNDL India, total cash is Rs186bn and Rs70bn of long-term debt. Cons net debt is Rs342bn. Net debt-to-EBITDA stood at 1.02 at the end of Q1FY26.

HNDL Q1FY26 Concall Highlights:

• 18% of the currency is hedged at an exchange rate of Rs87/USD and 20% of metal is hedged at USD2,666/t for Q2FY26.
• Alumina sales stood at 170kt in Q1FY26 and would be ~190-200kt in Q2FY26.
• HNDL incurred a capex of Rs12.73bn in Q1FY26. For FY26, capex is projected at Rs75-80bn, with FY27 expected to see peak spending of ~Rs150bn.
• In HNDL India, total cash is Rs186bn and Rs70bn of long-term debt. Cons net debt is Rs342bn. Net debt-to-EBITDA stood at 1.02 at the end of Q1FY26.
• In its downstream business, HNDL is moving up the value chain by expanding beyond extrusions to offer premium products, e.g. adding battery enclosures for EV manufacturers, which is further enhancing margins.
• Commercial coal production from Chakla to start from Mar'26. In the first year, production is estimated at 0.5-1mt. The Bandha coal mine, having high stripping ratio, is expected to produce coal by the end of FY27. Meenakshi is expected to begin production only in FY28.
• HNDL has guided for a 30% reduction in coal costs compared to linkage once all captive mines are operational at 20mtpa full capacity.
• HNDL sourced 63% of its coal supplies in Q1 through linkage as prices were down 3% in Q1 QoQ. Q2 costs expected to rise by ~3% QoQ. CP coke prices have also increased.
• HNDL began commercial sales from Aditya-FRP in Jun’25, with the ramp up progressing well and a full-year volume target of 70kt.
• FRP demand in India is projected to grow 6-7% YoY, driven by strong uptick from the construction, packaging, and consumer durables sectors.
• HNDL has guided Rs6bn quarterly EBITDA run rate for the copper business.
• HNDL incurred an impairment loss of Rs1.6bn in Q1FY26 related to the return of the Kathautia mines.
• HNDL is setting up a 50kt copper scrap facility, expected by Dec’27, with phased expansions of 50kt each up to 200kt. This will sustainably enhance copper business EBITDA, as scrap-based production yields 2-3x the margins of the smelting business.
• Aditya alumina refinery (FY28) and copper e-waste & recycling project (FY27) all orders placed, with construction underway. For the copper smelter (FY29), the company is yet to go for the public hearing and obtain approvals. Novelis Q1FY26 Concall Highlights:
• Cost Takeout Action: Of the USD300mn cost reduction target by end FY28, Novelis expects cost savings of over USD100mn by FY26-end (Vs earlier target of USD75mn). Measures include shutting down one of two automotive finishing lines in China, ceasing operations at Richmond and Fairmont, and streamlining SG&A.
• Novelis imports ~170kt annually from South Korea and South America, and 90kt of scrap from Canada

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