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Centrum Broking Report
Hindalco Industries Ltd.'s share price has fallen ~50% from its peak of March 2022 with investors having concern on its huge capex plans coinciding with falling aluminum prices and possibilities of earnings hit of Novelis amid recessionary fear in developed economies like U.S. and Europe.
We believe that the stock has factored in pessimism and market failed to single out the companies like Hindalco Industries whose earnings are relatively less susceptible to commodity prices and ~60% of Ebitda comes from conversion business which is intact.
We believe that fundamentals of aluminum are robust and there should not be any major fall from current price of $2,500/tonne.
However, with China increasing exports, global deficit may reduce and accordingly, we cut our average London Metal Exchange aluminium prices to $2,600/tonne in FY23E and $2,400/tonne in FY24E, leading to 3%/6% cut in FY23E/FY24E Ebitda.
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