Hindalco Share Price: Dividend Paying Largecap Metal Stock Jumps On Strong Q2 Results; Buy Or Not?

Hindalco Industries saw its shares rise over 2% on November 12 after reporting fiscal Q2FY25 earnings that exceeded market expectations. The metals and mining powerhouse, a subsidiary of the Aditya Birla Group, posted a significant profit increase, driven by strong domestic operations, favourable macroeconomic conditions, and effective cost management.

During the quarter ending September 2024, Hindalco's consolidated net profit rose to Rs 3,909 crore, up from Rs 3,298 crore in the same period last year. In standalone terms, the company recorded an impressive 123% year-on-year (YoY) increase in net profit, reaching Rs 1,891 crore compared to Rs 847 crore last year.

Hindalco's revenue from operations also saw a notable rise, increasing by 8% YoY to Rs 22,262 crore for its standalone business. Consolidated revenue rose 7% to Rs 58,203 crore, compared to Rs 54,169 crore in the year-ago quarter, reflecting sustained growth across its core business lines.

The stellar profit growth can be attributed to the company's India business performance. Notably, Hindalco managed to keep costs under control, optimizing its operations while benefiting from favourable macro conditions, which further boosted profitability.

Hindalco's US-based subsidiary, Novelis, encountered challenges during the quarter. Novelis' revenue reached $4.3 billion, marking a 5% increase, primarily due to elevated aluminium prices. However, adjusted EBITDA for Novelis declined 5% to $462 million, impacted by less favourable metal margins, an unfavourable product mix, and a $25 million hit from the Sierre flood. Excluding the flood impact, shipments at Novelis grew 4%, with EBITDA per tonne recorded at $502.

Following Hindalco's strong quarterly performance, major brokerage firms expressed a positive outlook on the stock. CLSA issued a 'Buy' rating with a target price of Rs 800, acknowledging Hindalco's robust earnings before interest, tax, depreciation, and amortization (EBITDA) of Rs 4,300 crore, which surpassed estimates by an impressive 35%. The brokerage particularly noted a $96 per tonne increase in aluminium EBITDA for Hindalco, achieved despite a $140 per tonne decline in London Metal Exchange (LME) aluminium prices.

Investec also maintained a 'Buy' rating on Hindalco, setting a target price of Rs 860 per share. The firm lauded Hindalco's operational strength but noted that further clarity on capital expenditures would be beneficial. Additionally, it highlighted that Hindalco is well-positioned compared to its peers with regard to bauxite lease expiries in India.

Hindalco shares surged to a day's high of Rs 672.20 on the Bombay Stock Exchange (BSE), climbing 2.6%. As of 12:35 pm on the National Stock Exchange (NSE), the stock was trading with gains of nearly 1% at Rs 660. Over the past year, Hindalco's stock has delivered impressive returns, appreciating over 36%.