Buy Hindalco; target of Rs 1170: Motilal Oswal

Moneycontrol • 10 days ago

Original source

Key Investment Pillars

  • Aggressive upstream expansion: Hindalco has outlined a capex plan of INR450-500b to expand aluminum and copper capacities, providing long-term growth visibility.
  • Downstream expansion and portfolio enrichment: The company targets a 4x increase in downstream EBITDA by FY30, driven by higher downstream volumes, favorable LME prices, and improved premiums.
  • Cost optimization via backward integration and RE share: Hindalco aims to reduce external coal dependence through captive mining and increase renewable energy share to 30% by 2030, delivering ~USD200/t in cost savings.
  • Novelis' recovery and Bay Minette expansion: Novelis' operational recovery and the Bay Minette facility's 600ktpa capacity addition will drive earnings growth and cash generation.

Thesis Validation Checklist

  • Monitor capacity expansion and utilization rates: Track the progress of Hindalco's capacity expansion plans and the utilization rates of new capacities.
  • Keep an eye on LME prices and premiums: Monitor LME prices and premiums to assess their impact on Hindalco's revenue and profitability.
  • Track renewable energy and coal cost savings: Monitor the progress of Hindalco's renewable energy initiatives and coal cost savings to assess their impact on the company's cost structure.
  • Follow Novelis' operational recovery and Bay Minette's ramp-up: Track Novelis' operational recovery and the Bay Minette facility's ramp-up to assess their contribution to Hindalco's earnings growth.