Here is why Hindalco shares tumbled 6 per cent on Thursday

In Q4, Novelis reported 15 per cent YoY decline in adjusted EBITDA at $431 million primarily due to short-term operational cost challenges.

Shares of Hindalco Industries hit an over nine-month low at Rs 397, and traded at its lowest level since July 26, 2021, as the stock dipped 6 per cent on the BSE in Thursday’s intra-day trade, after Novelis' March quarter result. The company’s subsidiary reported 15 per cent year-on-year (YoY) decline in adjusted earnings before interest, taxes, depreciation, and amortization (Ebitda) at $431 million during the quarter, primarily due to short-term operational cost challenges. 

Hindalco traded lower for the third straight day, down 11 per cent during the period. Moreover, in the past one month, the stock has underperformed the market by falling 27 per cent as against a 9 per cent decline in the S&P BSE Sensex. The stock has corrected 38 per cent from its 52-week high of Rs 636 touched on March 29, 2022. The stock had hit a 52-week low of Rs 359.80 on June 18, 2021.

For Q4FY22, Novelis's net sales increased by 34 per cent YoY to $ 4.8 billion. The increase was primarily driven by higher average aluminium prices and local market premium.

"Total flat rolled product shipments were at a record 987 kilotonnes, a slight increase over prior year shipments of 983 kilotonnes, driven by strong beverage can and aerospace shipments offsetting lower automotive shipments impacted by semiconductor shortages in the automotive industry," Hindalco said in a press release.

The lower Ebitda on account of approximately $55 million of higher operational costs, primarily in North America, as a result of production and logistics challenges that are not expected to continue in fiscal 2023. The current year quarter also included a $15 million non-recurring regulatory provision. Other higher inflationary cost pressures were largely offset by favorable product pricing, the company said.

The management expects first quarter fiscal year 2023 adjusted Ebitda per ton to return to levels above $500 per ton, even as the company navigates continuing impacts from semi-conductor shortages, customer impacts from Covid-19 lockdowns in China, global supply chain challenges, and elevated energy costs.

Tech view

Outlook: Negative

Support: Rs 360

Hindalco's stock has been on a downward spiral after the stock hit its 52-week high on March 29, 2022. Including today's fall, the stock has cracked 38 per cent on the BSE since then, as against around 10 per cent fall in the benchmark S&P BSE Sensex.

Going forward, bears are likely to have upper hand over the stock as key momentum indicators, such as the Directional Index and MACD, are suggesting weakness ahead, as per daily charts. The Relative Strength Index (RSI), too, has been in the oversold territory since April 25 with no signs of respite in selling.

The price-to-moving averages' action, however, remains mixed on the daily charts. The 20-Day Moving Average (DMA) is below the 50-DMA, but 50-DMA is above 100-DMA, and 100-DMA is above 200-DMA. 

Today's fall saw the stock test the lower end of the Bollinger Band on the daily charts, at Rs 398. A decisive close below this level may drag the stock towards Rs 360 level, its 100-Week Moving Average.

As per the weekly charts, on the upside the stock will need to cross Rs 420-level for hopes of a pull-back rally to emerge.

(With inputs from Nikita Vashisht)