This Metal Stock Jumps Over 12% In 6 Months, ICICI Securities Sees More Upside

The Aditya Birla Group's metals cornerstone company is Hindalco Industries Limited. Aluminum and copper are two of the company's main products. The company's shares have risen by 62.84 percent in a year and are up by 19.44 percent year-to-date (YTD). On the NSE, the stock has risen 12.91 percent in the last six months. ICICI Securities anticipates more upside in the stock and has given it a buy call rating with a 12-month target price of Rs 725.

Investment rationale for Hindalco according to ICICI Securities

• Hindalco has unveiled a capex plan of ~US$8 billion over the next five years. This capex would be incurred in FY23E-27E. Of the total capex, ~US$4.5-4.8 billion would be incurred at Novelis while ~US$3.37 billion would be spent on the India business.
• During FY23-27, Novelis has chalked out a capex plan of ~US$4.5-4.8 billion, of which ~US$3 billion is expected to be spent in North America, ~US$400 million in Asia, ~ US$300-400 million in Europe and ~ US$800- 900 million in South America.
• During FY23-27, the India business has chalked out a capex of US$3.37 billion, of which ~US$1.71 billion is expected to be spent on aluminium - upstream, ~US$719 million on aluminium - downstream, ~US$286 million on the copper Business, ~US$194 million on specialty alumina and ~US$459 million on coal mining operations.

Buy for a target price of Rs 725

The brokerage has claimed "Hindalco's share price has given a return of 75% over the last 12 months (from ~Rs 327 in March 2021 to ~Rs 573 levels in March 2022). We maintain our BUY rating on the stock. We value Hindalco at Rs 725, based on SoTP valuation."

Steep decline in aluminium prices on the LME, and lower-than-expected profitability at Novelis could adversely impact consolidated earnings are the key risks of the stock as per ICICI Securities.

Disclaimer

The stock has been picked from the brokerage report of ICICI Securities. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.