Buy Hindalco Industries; target of Rs 1200: ICICI Securities

Moneycontrol • 4 days ago

Original source

Key Investment Pillars

  • Bay Minette commissioning: Expected to start commercial shipments in Q1FY28, with a focus on beverage can body stock, followed by automotive and other high-value products, supporting long-term growth.
  • Structural cost savings: Novelis has achieved over USD 240mn in annualised cost savings, with a target of USD 300mn by FY27-end and USD 350–400mn by FY28-end, driven by SG&A efficiencies and operational improvements.
  • Volume recovery: Oswego operations are gradually normalising, with tariff impact expected to decline, supporting a gradual improvement in volumes and profitability.
  • Deleveraging: Management expects positive free cash flow in Q4FY27, supported by working capital release, insurance recoveries, and lower capex, leading to a decline in net leverage.

Thesis Validation Checklist

  • Bay Minette ramp-up: Monitor the progress of Bay Minette commissioning and customer qualification.
  • Volume growth: Track the recovery in volumes, particularly in the North American market.
  • Tariff mitigation: Watch for a decline in tariff-related costs and the impact on profitability.
  • Scrap spreads: Monitor scrap spreads and their impact on Novelis' earnings.
  • Working capital normalisation: Track the release of working capital and its impact on free cash flow. These signals will help validate or challenge the analyst's thesis over the next ~12 months.