Strong performance in Q4 leads to upgrades for Hindalco Industries

Industrial base metals major Hindalco delivered a strong consolidated performance during the January-March quarter (Q4) of FY24.

Consolidated revenue was reported at Rs 56,000 crore, up 6 per cent quarter-on-quarter or Q-o-Q (flat year-on-year or Y-o-Y), with better realisation and higher India volumes.

Earnings before interest, taxes, depreciation and amortisation (Ebitda) grew 25 per cent Y-o-Y and 14 per cent Q-o-Q to Rs 6,700 crore with better performances across segments. The adjusted profit after tax (PAT) stood at Rs 3,200 crore, up by 32 per cent Y-o-Y (up 36 per cent Q-o-Q) in Q4 FY24.

The growth was due to good performances of India aluminium, copper, and strong results from Novelis. In FY24, revenue was Rs 2.16 trillion (down 3 per cent Y-o-Y), Ebitda Rs 23,900 crore (up 5 per cent Y-o-Y), and adjusted PAT at Rs 10,100 crore (flat Y-o-Y).

The net-debt-to-Ebitda ratio improved to 1.21x versus 1.39x at end-FY23.

Aluminium upstream revenue grew 5 per cent Y-o-Y (6 per cent Q-o-Q) to Rs 8,500 crore in Q4. The Ebitda was Rs 2,700 crore (up 24 per cent Y-o-Y and 11 per cent Q-o-Q), due to lower input costs. Upstream margin was 32 per cent in Q4FY24. Upstream shipments were 337,000 tonnes (up 4 per cent Y-o-Y and 1 per cent Q-o-Q) in Q4FY24.

Aluminium downstream revenue was up 7 per cent Y-o-Y (up 15 per cent Q-o-Q) to Rs 2,900 crore, and Ebitda was up 36 per cent Y-o-Y (up 48 per cent Q-o-Q) to Rs 150 crore in Q4 FY24. Downstream shipments were 105,000 tonnes, (up 17 per cent Y-o-Y and 17 per cent Q-o-Q). Downstream Ebitda per tonne was $174 (up 15 per cent Y-o-Y and 27 per cent Q-o-Q).

Copper revenue was Rs 13,400 crore (up 20 per cent Y-o-Y and 12 per cent Q-o-Q), with higher volumes.

The copper Ebitda was Rs 780 crore (up 30 per cent Y-o-Y and 18 per cent Q-o-Q). Shipments were at 135,000 tonnes (up 15 per cent Y-o-Y and 13 per cent Q-o-Q) in Q4 FY24.

Continuous casting rod sales stood at 98,000 tonnes (up 3 per cent Y-o-Y and 5 per cent Q-o-Q), indicating good value-added demand.

Subsidiary Novelis shipped 951,000 tonnes (up 2 per cent Y-o-Y and 5 per cent Q-o-Q) in Q4FY24, around market expectations. Novelis’ Q4 FY24 revenue was $ 4.1 billion (down 7 per cent Y-o-Y and up 4 per cent Q-o-Q), beating estimates.

Lower aluminium prices were offset by higher shipments. Adjusted Ebitda was $514 million (up 28 per cent Y-o-Y and 13 per cent Q-o-Q).

Reported Ebitda per tonne was $540, driven by recycling and lower operating costs. The adjusted PAT was $243 million (up 23 per cent Y-o-Y and 25 per cent Q-o-Q).

Novelis FY24 revenue was $16 billion (down 3 per cent Y-o-Y), Ebitda was $1.9 billion (up 3 per cent), and adjusted PAT was $826 million (down 5 per cent). FY24 shipments stood at 3.7 million tonnes (down 3 per cent Y-o-Y).

Novelis has $1.3 billion of cash and cash equivalent on its balance sheet. Net debt is $4.3 billion, with a net-debt-to-adjusted Ebitda ratio at 2.3x.

Ongoing capex in Novelis will give it leadership in beverage and automotive flat rolled products (FRPs).

The capex will be completed within the revised timeline, with no more changes in cost estimates. Novelis would see margin improvement in FY25 and FY26.

The management guided for coal costs to reduce 1-2 per cent in Q1 FY25. India’s fiberglass-reinforced polymer or FRP demand will grow 6-8 per cent in FY25.

Capex will be Rs 6,000 crore in India across downstream, refining and mines. Copper Ebitda could be around Rs 600 crore per quarter.

The strong show across metals and value-added products, plus higher margins in Novelis indicates good trends.

Analysts are upgrading earnings and Ebitda estimates for FY25. According to Bloomberg, 21 of 23 analysts polled post results are bullish on the stock; the remaining has neutral ratings.

Their average one-year target price is Rs 748.4 for the stock, which closed at Rs 677.75 on the BSE on Monday.