Hindalco slips 2% after arm Novelis reports Q1 results; read analysis here

Hindalco Industries shares fell by over 2 per cent on Tuesday, hitting an intra-day low of ₹656.85 per share on the BSE, before recovering some lost ground to close 0.72 per cent lower at ₹666.95. 

In comparison, the Sensex was down 0.46 per cent to 80,235.59 points. The decline follows the disappointing April-June quarter (Q1FY26) numbers by the company’s US-based subsidiary, Novelis, announced after market hours on Monday.

 

Moreover, brokerages also believe that any meaningful recovery is still a couple of quarters away for Novelis. 

Meanwhile, Hindalco reported its Q1 results during market hours on Tuesday, which showed that its consolidated net profit gained 30 per cent to ₹4,004 crore, compared to ₹3,074 crore a year ago. Revenue from operations stood at ₹64,232 crore, up 13 per cent against ₹57,013 crore a year ago. The Aditya Birla group firm beat consensus estimates on both these parameters given that the Street had pegged these at ₹3,767 crore and ₹59,883 crore, respectively.

 

 

Analysts noted that Novelis reported a subdued Q1 performance, impacted by elevated scrap costs, US tariffs, and an unfavourable product mix. For the first quarter ended June 2025, Novelis reported a 36 per cent year-on-year (Y-o-Y) decline in net income attributable to its common shareholders. It was at $96 million compared to $151 million a year ago. Net sales stood at $4.72 billion, up from $4.19 billion in the year-ago period. 

Meanwhile, adjusted earnings before interest, tax, depreciation, and amortisation (Ebitda) came in at $416 million, down 17 per cent Y-o-Y. Novelis experienced a net negative tariff impact of $28 million in Q1FY26, which it expects to rise to $60 million per quarter, going forward.

 

Novelis believes this $60 million tariff impact can be mitigated through increased US (local) production, customer pass-throughs, and cost takeout programmes. 

Additionally, it expects the US tariff on aluminium imports, particularly from South Korea and Canada, to affect Q2FY26 Ebitda by $60 million quarter-on-quarter (Q-o-Q). This may be partially offset by the US Midwest premium.

 

The company anticipates that the tariff impact will be cushioned in Q3FY26 through these strategies and plans to offset the entire $60 million impact in Q4FY26.

 

The cost reduction programme is expected to lower the cost base and improve margins, with cost savings of $100 million projected for FY26. This is up from the earlier estimate of $75 million. Brokerages, however, are divided, with some retaining their buy call, while others continued with a ‘reduce/hold’ rating on Hindalco. 

Nuvama Institutional Equities has maintained its ‘buy’ rating with a target of ₹776 per share for Hindalco, believing that earnings have bottomed out and a revival is likely from Q4FY26 onwards. Likewise, JM Financial Institutional Securities also retained its ‘buy’ rating with a target of ₹800 per share. 

Hindalco remains the brokerage’s top pick in the metals sector, owing to its robust and stable Ebitda profile, with 70 per cent of earnings not linked to London Metal Exchange (LME) prices. 

But, not all are on the same page with some either bearish or neutral on Hindalco, which is among the cheapest producers of aluminium in the world. 

Investec, for instance, has maintained a ‘hold’ rating but reduced the target to ₹705 from ₹730, citing tariff headwinds.

It says that Novelis’ spreads disappointed during the quarter and are expected to continue in this manner, according to reports.Likewise, ICICI Securities has re-initiated coverage with a hold rating, and a sum-of-the-parts (SOTP) price of ₹720. 

According to Bloomberg, 9 of the 16 analysts polled post Novelis results (but prior to Hindalco's results) are bullish, while four are neutral and three are bearish. Their average one-year target price is ₹ 729.63. These ratings may change post Hindalco's results.

 

“Though, the company is indicating that performance is near bottom and Q2 would largely be in line with Q1, we suspect that Q2FY26 is where the margin may bottom out with slow and steady recovery in H2,” it said, adding that the elusive $500 Ebitda per tonne looks out of reach in the near to medium term despite management maintaining its long-term Ebitda per tonne target of $600 (once Bay Minette ramps up).

 

“We do believe in the promising long-term story; however, near-term headwinds and normalisation of Utkal’s performance means FY26E Ebitda is expected to be lower than FY25. For the next couple of years, higher capex intensity will likely keep debt levels high; thus, weighing on the stock’s performance,” the brokerage noted while adding that the commissioning of Bay Minette and captive coal shall be the next big triggers for the company, which is an FY27–28 story.

 

Among brokerages bearish on Hindalco is Emkay Global, which has maintained its ‘Reduce’ rating with a target of ₹650 per share. The brokerage expects consensus numbers to be revised lower by a mid-single-digit percentage based on these results. Nevertheless, the company has largely flagged off the earnings impact from the ongoing issues for the next two to three quarters, indicating that profitability is close to bottoming out, with Q2FY26 possibly being a trough quarter for Novelis.