Despite short-term concerns, brokerages remain bullish on Hindalco

Upstream aluminium revenue stood at Rs 10,300 crore in Q4FY25 (up 22 per cent YoY), led by higher aluminium prices

Hindalco’s India business, including Utkal Alumina, reported good results for the January-March quarter of the financial year 2024-25 (FY25) and consolidated earnings before interest, taxes, depreciation, and amortisation (Ebitda) also rose.

 

Earnings growth was driven by favourable pricing, lower input costs and lower tax outgo for Novelis. The company’s US-based aluminium rolling and recycling subsidiary, Novelis' performance rebounded in Q4. Copper Ebitda dropped 21 per cent quarter-on-quarter (Q-o-Q). Aluminium profitability is likely to decrease Q-o-Q in Q1FY26 due to lower aluminium prices. Novelis may be affected by the US tariffs.

 

Consolidated net sales were ₹64,900 crore, up 16 per cent year-on-year (Y-o-Y) and up 11 per cent Q-o-Q. Consolidated Ebitda stood at ₹8,840 crore (up 32 per cent Y-o-Y and up 17 per cent Q-o-Q). Adjusted PAT was ₹5,280 crore (up 66 per cent Y-o-Y and up 40 per cent Q-o-Q). There was lower tax outgo at Novelis.

 

In FY25, revenue was up 10 per cent Y-o-Y to ₹238,500 crore, while adjusted Ebitda rose 33 per cent and adjusted PAT increased 64 per cent Y-o-Y to ₹31,800 crore and ₹16,600 crore, respectively. Consolidated net debt to Ebitda ratio stood at 1.06x in Q4FY25, compared to 1.21x in Q4FY24. 

 

Upstream aluminium revenue stood at ₹10,300 crore in Q4FY25 (up 22 per cent Y-o-Y), led by higher aluminium prices. Upstream Ebitda stood at ₹4,840 crore (up 79 per cent Y-o-Y). The upstream Ebitda margin was 47 per cent in Q4, compared to 42 per cent in Q3FY25.

 

Downstream revenue was ₹3,600 crore (up 23 per cent Y-o-Y). Downstream Ebitda stood at ₹220 crore (up 52 per cent Y-o-Y), translating to Ebitda per tonne of $240 (up 46 per cent Y-o-Y) in Q4FY25, compared to $179 in Q3FY25 and $186 (up 4 per cent Y-o-Y) in FY25. Upstream sales stood at 332,000 tonnes (down 2 per cent Y-o-Y), and downstream sales were 105,000 tonnes (flat) in Q4FY25.

 

Copper revenue stood at ₹14,600 crore (up 8 per cent Y-o-Y), with higher copper prices. Ebitda for the copper business dipped 21 per cent Y-o-Y to ₹610 crore in Q4FY25. Copper metal sales were 135,000 tonnes (flat Y-o-Y), while CCR (continuous casting rod) sales stood at 109,000 tonnes (up 12 per cent Y-o-Y). 

 

Novelis’ Q4FY25 shipment volumes stood at 957,000 tonnes (flat Y-o-Y and up 6 per cent Q-o-Q), driven by higher beverage packaging, specialties, and aerospace, partially offset by lower automotive shipments. The Q4FY25 revenue stood at $4.6 billion (up 13 per cent Y-o-Y and up 12 per cent Q-o-Q). Adjusted Ebitda stood at $473 million (down 8 per cent Y-o-Y and up 29 per cent Q-o-Q). Ebitda was hit by higher scrap prices and rising operating costs, partially offset by higher pricing. Adjusted PAT stood at $294 million in Q4FY25 with lower income tax outgo. Net Debt/Ebitda ratio as of March ’25 was 2.9x.

 

For FY25, Novelis’ revenue grew 6 per cent Y-o-Y to $17.2 billion, while adjusted Ebitda declined 3 per cent Y-o-Y to $1.8 billion and APAT dipped 1 per cent to $816 million. Shipments stood at 3.76 million tonnes (mt), with a growth of 2 per cent Y-o-Y during FY25.

 

Hindalco’s capex guidance is ₹7,500-8,000 crore for FY26, with capex of ₹6,500 crore in FY25. Key projects include expansion of alumina refinery, copper smelter, and aluminium smelter. The company has acquired Bandha coal block but major changes to coal sourcing only expected post-commissioning of captive Chakla and Bandha mines, which will not happen in FY26.

 

Alumina prices may be range-bound at $350-400 per tonne during FY26. Downstream Ebitda per tonne is expected to be $250-300 for FY26 with Alumina sales for FY26 at 700,000-800,000 tonnes. The company has commissioned 6.3Mw of solar capacity at Mahan, taking total renewable energy (RE) capacity to 189Mw. Another 100Mw hybrid capacity (with storage) will be done in H1CY25 and an additional 20Mw of hybrid capacity (solar + wind) is to be operational by H2FY26. Around 15 per cent of aluminium was hedged at $2,695 per tonne and 13 per cent of currency exposure at ₹86 per USD.

 

Novelis aims to be a global leader in beverage aluminium cans and automotive FRP (fibre reinforced polymer) segments once capex is completed at its Bay Minette project. A capex of $1.3 billion has been spent so far, with commissioning expected in H2CY26. Bay Minette’s IRR (internal rate of return) is expected to be double digits. Novelis also has a cost-cutting target of $300 million by FY28.

 

About 2/3rd of primary aluminium imports into the US come from Canada and tariffs may impact this leading to short-term uncertainty with a $40 million adverse impact in Q1FY26. In Q4FY25, Novelis completed a new debt raising and refinancing transaction raising $750 million in senior unsecured notes due January ’30, and $1.25 billion term loan B due March ’32.

 

Despite short-term concerns, most analysts are positive on the stock. According to Bloomberg, 17 of the 21 analysts polled over two days post results are bullish, while two each are bearish and neutral. Their average target price is ₹761.38.