Target: ₹800

CMP: ₹696

Hindalco is undertaking a capex of ₹6.9b (₹4.9b for Novelis and ₹2b for itself) to expand capacities for several products across multiple locations over the next three to five years. This capex plan will augment its capacity across USA (FRP and recycling mill), Utkal (alumina debottlenecking), Aditya (can recycling and battery foil mill) and Silvassa (extrusion), among others.

For FY25, the management expects to incur a capex of ₹6,000 crore in India for: mines expansion; alumina refinery; FRP-II expansion (battery and copper foil, copper tube, copper e-waste recycling foil); smelter expansion; and aluminum power work.

We believe the upcoming 600kt facility at Bay Minette (Alabama, USA) will act as a proxy for the growing demand for beverage cans and auto-grade aluminum sheets in North America. The company has fully contracted its beverage packing facility at Bay Minette.

The company’s Indian operation is net debt free and HNDL’s consolidated ND/EBITDA ratio improved to 1.21x as on Mar’24 vs. 1.43x in Dec’23.

Volume growth across geographies is expected to remain stable going forward and HNDL has already secured long-term contracts from marquee customers for its Bay Minette facility, which provides future revenue visibility. Therefore, with favorable pricing and muted costs, Novelis will see its EBITDA/t improve further in the mid-to-long term