This Metal Stock Jumps Over 70% In Year, Axis Securities Sees More Upside

Hindalco Industries Ltd is a large-cap company with a market capitalization of Rs 1,34,245 that operates in the metal industry. The company is the flagship firm of Aditya Birla Group and an industry leader in aluminium and copper. The stock has jumped 77.81% in 1 year and is up by 25.20% on a year-to-date (YTD) basis. The stock is surged 31.16% in the last 6 months and has also surged 13.61% in the last 1 month. The brokerage firm Axis Securities sees more upside on the stock and has set a target price of Rs. 630. The stock is currently trading at a market price of Rs 598.50 on the NSE as of 8 Mar 2022, 10:30 am IST.

Result update of Hindalco Industries

Axis Securities has said "Hindalco reported a strong set of numbers with consolidated revenue increasing by 44% YoY and 6% QoQ at Rs 50,272 Cr. Segmental EBITDA stood strong at Rs 7,580 Cr +40% YoY and -1.6% QoQ beating our estimate led by higher Alumnium and copper EBITDA. The sequential drop in the EBITDA is led by the drop in Novelis EBITDA mainly due to higher energy prices in Europe. Adjusted PAT (excluding exceptional items) stood strong at Rs 3,438 Cr +67% YoY and +1.2% QoQ. Net Debt stood at Rs 43,733 Cr as of Dec-21 vs Rs 48,011Cr as of Sep-21, with Net debt to EBITDA improving to 1.62x in Q3 from 1.93x in Q2."

Buy for a target price of Rs 630

The brokerage has claimed "In 2022, the Aluminium market is likely to be in a deficit of ~1.4Mnt a second consecutive time (2021 deficit of ~0.9Mnt), mainly due to positive global demand growth expectation (2022 vs. 2021), supply constraints due to energy issues in Europe, environmental policy issues In China, with China expected to remain in primary Aluminium structural deficit (~1-2Mtpa). Inventory days of consumption are at a decade low levels and Industry costs are expected to increase vs. the 2021 average. In Europe, the power prices have increased substantially, driving smelters to halt production."

As per the brokerage "Out of Europe's total aluminium capacity of 4.5MnT, according to various global consultants, ~650Kt-730Kt capacity is cut so far, ~15% of the total operating capacity supporting Aluminium prices. The recent geopolitical tension in Europe has pushed prices above $3,200/t. We revise upward our LME price forecast based on the recent price developments. We maintain a BUY rating on the stock and revise our TP upwards at Rs 630 (SOTP based) from Rs 570, implying an upside of 15% from the CMP. We use a 12MF EV/EBITDA multiple of 5.5x for Indian business and 6.5x for the Novelis operations on FY24 EBITDA estimates."

Disclaimer

The stock has been picked from the brokerage report of Axis 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.