Hindalco shares: Analysts positive on long-term growth plan, maintain 'Buy'

Hindalco stock: Over the next five years, Hindalco Industries is mulling to invest approximately ₹45,000 crore in India, and $5 billion in the US as capex

Hindalco shares: Kumar Mangalam Birla-led Hindalco Industries is aggressively planning capacity additions to expand its India and US businesses. Over the next five years, the copper and aluminium producer is mulling to invest approximately ₹45,000 crore in India, and $5 billion in the US as capex. This, analysts said, puts Hindalco on a strong growth runway for the long-term.

 

"Hindalco's Indian operations are net debt-free, and the consolidated net debt/Ebitda stood at 1.33x as of December, 2024, vs 1.43x in December, 2023. The announced/ongoing expansion is set to position Hindalco as the global leader. Its US' arm Novelis has already secured long-term contracts from marquee customers for Bay Minette, ensuring future revenue visibility. With a larger scale and operational efficiency, margins are expected to expand over the medium to long term," analysts at Motilal Oswal Financial Services said after they attended Hindalco's Investor Day Meeting.

 

 

Most analysts have retained their 'Buy' rating on Hindalco stock, with an upside of up to 16 per cent.

 

On the BSE, however, Hindalco share price fell 1.6 per cent to an intraday low of ₹652.50 per share. By comparison, the benchmark BSE Sensex was up 0.6 per cent at 12:50 PM.  

 

Should you Buy/Sell/Hold Hindalco stock? Check latest share price target, brokerages' view:

 

Motilal Oswal Financial Services | Buy

Hindalco's Indian business looks to enhance Ebitda through scale, efficiency, and recycling. Following the ramp-up, India's Ebitda is expected to increase by $200/tonne for aluminum upstream, $100/tonne for downstream, $120/tonne for copper, and $50/tonne for specialty alumina over FY24, primarily driven by resource security and premiumisation. The company has also planned an energy mix of 70 per cent captive coal and 30 per cent renewable energy by FY33.

 

MOFSL believes, with India's aluminum consumption expected to double to 11,373 KT by FY35 (8 per cent CAGR) and copper demand to grow 2.5x to 2,540 KT, driven by high adoption in EVs, construction, and energy sectors, demand for aluminium and copper is projected ti stay strong.

 

"Globally, demand for Flat Rolled Products (FRP) is projected to post a 4 per cent CAGR, reaching 37.7 MT by 2029, led by beverage packaging and automotive applications. Prices are expected to remain resilient, supported by robust demand, China’s 45 MTPA supply cap, and escalating costs, ensuring favorable LME price strength for Hindalco's operations," it said.

 

JM Financial Institutional Securities | Buy

Novelis has maintained its long-term adjusted Ebitda per tonne guidance of $600/tonne, from the current sub-$500/tonne, driven by operating leverage from scale and de-bottlenecking projects, renewing pricing contracts for beverage sheets, sustaining high margin auto product volumes in the mix, phasing out sub-optimal plants like Richmond, andincreasing recycling content from current 63 per cent to 75 per cent by 2030.

 

As for India business, the aluminum operations will benefit from higher captive coal in the mix with mines getting operational in the medium term, and volume growth led by growth projects in aluminium (180ktpa) / FRP (170ktpa) / alumina (850ktpa) operations. Further, the smelter expansion of 300ktpa in copper division is likely to drive volumes and margins going forward.  

 

"The company has reinstated its Net debt to Ebitda guidance for the consolidated entity to 2x and 2.5x for Novelis as against the current 1.3x. The company continues to maintain a strong ROIC focus alongside 8-10 per cent of the free cash flow (FCF) committed towards return to shareholders. The outlook for Hindalco continues to be buoyant given resilient performance by India aluminium operations and enhanced coal security," it said.

 

ICICI Securities | Buy

Hindalco is getting future-ready with focus on capacity expansion at both downstream and upstream operations in India and Novelis over the next five-year, cost optimisation programme, and higher contribution from new-age products. While capex is expected to increase, we believe earnings would be robust enough to maintain consolidated net debt/Ebitda at less than 2x.

 

"We raise FY27 EV/Ebitda multiple for India business to 6x (earlier 5.5x). That said, we also raise capex for FY26/27E, in line with the management's guidance," it said.

 

Emkay Global Financial Services | Sell

"We assigned 'Sell' rating on Hindalco on concerns around scrap cost and Novelis margins, negative Treatment and Refining Charges, and valuation excesses that built in the lead up to the Novelis IPO last year, which was later called off. We see that concerns are already in the price. The market appears to have priced out excess valuation optimism as well. Therefore, we raise our EV/Ebitda multiples to 6x from 5-5.5x, as we think reduced multiples are no longer warranted. Hence, we raise our blended target price to ₹600. Nevertheless, we think positive levers are still out of sight, for us to take a constructive view," the brokerage said.