Buy Hindalco Industries Ltd For Target Rs. 800 by Yes Securities Ltd
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Results Synopsis
Hindalco’s Q2FY25 performance was upbeat and above the consensus expectations primarily on account of higher LME pricing for the Indian aluminium business reporting an EBITDA/t of $1,349/t up significantly from $ 751/t during CPLY. Net revenue from operations was up by 2.1% QoQ and 7.4% YoY coming in at Rs 582,030 mn, with EBITDA up 5% QoQ and 40.5% YoY at Rs 78,830 mn. On the segmental front, the Indian aluminium business remained strong and showed better volumes along with higher realizations. The copper business on the other hand reported its best-ever EBITDA in a quarter of Rs 8,290 mn despite seeing a fall in volumes.
Bay Minette expansion remains on-track while Indian business now expected to see new capacities come up in Hindalco’s growth story
Hindalco announced major expansions in its aluminium and copper operations in India. The 600kt FRP project at Novelis is progressing as planned with a $4.1 bn capex outlay expected to be operational by CY26 end. Meanwhile, Hindalco is prioritizing growth in its Indian business by increasing domestic aluminium smelting capacity by 180 ktpa, supported by a new 850 ktpa greenfield alumina refinery to optimize costs. In copper, the company plans to add 300 ktpa in smelting capacity, enabling complete integration with its CC Rods mill.
Result Highlights
Consolidated performance
* Consolidated revenue from operations stood at Rs 582,030 (vs our estimate of Rs 552,059 mn), up 2% QoQ and 7.4% YoY.
* Absolute EBITDA for stood at Rs 78,830 mn (vs our estimate of Rs 70,439 mn), up 5.1% QoQ and 40.5% YoY. EBITDA margins came in at 13.5% for the quarter vs 13.2% in Q1FY25 and 10.4% during Q2FY24.
* PAT stood at Rs 39,090 mn (vs our estimate of Rs 33,379 mn), up 78% YoY.
Valuation and View
We project Revenue/EBITDA growth for Hindalco at a CAGR of 4%/8%, over FY25- 27E. This growth is expected to come in through the downstream additions in the Indian aluminium business, clubbed with stabilization of the scrap spreads at Novelis.
We value Hindalco on a SOTP basis to arrive at our revised target price of Rs 800/sh.
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SEBI Registration number is INZ000185632
