Hindalco Industries’ share price is in the spotlight following the first-quarter performance reported by its US subsidiary, Novelis Inc. Novelis saw a 3% year-on-year decline in net profit, amounting to $151 million. This decrease was attributed to heavy flooding in the Sierre and Valais regions in Switzerland, which impacted operations at Novelis’s Sierre plant. The financials for the current year include $40 million in initial charges related to the June flooding.
Despite the decline in net profit, Novelis’s operating performance remained strong, with adjusted EBITDA increasing by 19% year-on-year to $500 million. Additionally, adjusted EBITDA per tonne grew by 10% to $525. EBITDA stands for Earnings before Interest Tax Depreciation and amortization. Novelis also reported a 2% year-on-year increase in net sales, totaling $4.2 billion. The company’s total FRP shipments of 951,000 tonnes were up by 8% year-on-year.
Looking ahead, Novelis management has maintained its guidance, emphasizing a healthy operating performance in the near term. The company aims to achieve an EBITDA per tonne target of $525, supported by capacity expansion, favorable pricing, higher recycle content, and operating leverage. Analysts at Motilal Oswal Financial Services anticipate a long-term EBITDA per ton of $600 with the commissioning of recycling projects and new capacities. Motilal Oswal has issued a buy rating for Hindalco Industries’ share price.
Jefferies India has set a target price of ₹825 for Hindalco Industries’ share price, indicating a potential upside of more than 30% for the stock. Following the Q1 results from Novelis, Jefferies analysts noted a 19% year-on-year increase in EBITDA, slightly below their estimates. While volumes grew by 8% year-on-year, EBITDA per ton decreased by 3% sequentially to $525, marking a 10% year-on-year increase.
Novelis anticipates an additional $30 million impact on adjusted EBITDA in Q2 due to the flooding at its Swiss plant. However, the company has maintained its mid-term EBITDA per ton guidance at $525. Hindalco Industries is set to release its domestic and consolidated performance on August 13, 2024, with analysts revising their ratings accordingly.
It is essential to note that the views and recommendations mentioned above belong to individual analysts or brokerage firms and not Mint. Investors are advised to consult certified experts before making any investment decisions. Stay updated on budget news, business updates, market developments, breaking events, and the latest news by downloading The Mint News App for daily market updates.