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Novelis reported 1QFY25 Adj. EBITDA of USD500mn, in line with JMfe. The company achieved an EBITDA/t of USD525/t during 1QFY25 vs USD479/t last year. Key takeaways from the call are – 1) company remains committed towards its earlier stated EBITDA/t guidance of ~USD525/t despite tightening scrap spreads 2) progressing well on Bay Minette project - no change in cost outlay of USD4.1bn, no change in timeline 4) FY25 capex to be in the lower range of USD1.8-2.1bn 5) Bay Minette commissioning timeline continues to be calendar 2HCY26 ~1.5 year ramp up period likely 6) Net debt/EBITDA improved to 2.4x in Q1; endeavour to maintain sub ~2.5x; FCF outflow of USD280mn+ in 1Q 7) Switzerland flood impact to be USD30mn in 2Q / cash impact of USD80mn to be spread over 2Q and 3Q FY25. Hindalco, given ~70%+ steady/strong EBITDA being non-LME linked, remains our preferred play in the metal space. We await consolidated numbers to be published shortly. Maintain BUY rating.

* Higher shipments drove net sales: Net sales increased 3% QoQ and 2% YoY mainly driven by higher aluminium prices and total shipments. Total flat rolled product shipments increased 8% to 951ktons in 1QFY25 vs 1QFY24 primarily due to normalized demand for beverage packaging sheet impacted earlier due to inventory reduction activity and supply chain issues. EBITDA/ton in 1QFY25 came in at USD526 vs USD540 in Q4FY24.

* Adjusted EBITDA up significantly : Net income attributable to our common shareholder decreased by 3% YoY in 1QFY25 to USD151mn due to initial charges associated with flooding at Sierre, Switzerland plant, at the end of June, higher restructuring and unfavourable metal price lag, largely offset by higher Adjusted EBITDA. Net income attributable to our common shareholder, excluding special items, was up 32% YoY to USD204mn. Adjusted EBITDA increased 19% YoY to USD500 million in 1QFY25, primarily driven by higher volume and favourable product pricing, partially offset by less favourable product mix and higher cost. Adjusted EBITDA/t increased 10% YoY to USD525.

* Better operating cash flow leading to better FCF: Net cash flow provided by operating activities came at USD74mn 1QFY25 vs USD32mn last year same quarter, primarily due to higher adjusted EBITDA and favourable changes in working capital. Adjusted free cash flow outflow of USD280mn in this quarter, an improvement compared to the prior year period outflow of USD349mn due to higher cash flow from operating activities. Total capital expenditures in the quarter stood at USD348mn, primarily attributed to strategic investments in new rolling and recycling capacity under construction.

*  Impact of flooding in Sierre: The impact of the floods in Switzerland would be an estimated USD30mn in 2QFY25, all in consideration to volume loss and an estimated USD80mn impact on the cash flow in Q2FY25/3QFY25. This estimated cost is net of insurance which could take a while and hence the company might have to deploy cash. The further costs pertaining to other damage and repair is being analysed by the company.

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SEBI Registration Number is INM000010361