Buy Hindalco; target of Rs 1180: Motilal Oswal

Moneycontrol • 2 days ago

Original source

Key Investment Pillars

  • Aluminum business growth: Hindalco's aluminum business is expected to drive growth, supported by favorable aluminum macros, higher premiums, and value-added products.
  • Copper business expansion: The company's copper business is expanding, with a new copper recycling plant and potential for higher by-product realizations.
  • Novelis' recovery: Novelis, a subsidiary of Hindalco, is recovering from supply chain disruptions and is expected to contribute to the company's growth.
  • Deleveraging: The company is focused on deleveraging, with a target to reduce its net debt/EBITDA ratio.

Thesis Validation Checklist

  • Aluminum demand growth: Monitor Indian aluminum demand growth, expected to be around 7% CAGR over the next five years.
  • Copper production costs: Track copper production costs, which are expected to increase due to higher coal and CP Coke costs.
  • Novelis' EBITDA: Watch Novelis' EBITDA, which is expected to improve as the company recovers from supply chain disruptions.
  • Debt reduction: Monitor the company's debt reduction progress, with a focus on reducing its net debt/EBITDA ratio.