ICICI Securities has given Buy recommendation for Hindalco Industries recommended buy rating on the stock with a target price of Rs 550 in its research with a target price of Rs. 550 in its research report issued on Dec 21, 2021

ICICI Securities research report on Hindalco Industries

Hindalco’s decision to acquire Hydro’s aluminium extrusions business in India (Kuppam in AP) for Rs2.5bn (Link) falls within the envelope of Hindalco’s ‘Doubling the downstream’ strategy wherein the company has entailed a capex of US$1.1bn. The plant will also serve as an archetype for Hindalco’s upcoming extrusions plant in Silvassa (Rs7.3bn capex for 34ktpa greenfield plant). Once commissioned, the Kuppam and Silvassa units are expected to boost Hindalco’s total aluminium extrusions capacity from 60ktpa to 109ktpa. The transaction is expected to close by Q1CY22. Sales in extrusion market is driven by dealer network, differentiated by quick turnaround and increasing SKUs, and customers prefer distributed setup closer to demand footprint. This, in our view, will be a deviation from the current means of doing business in Hindalco.

Outlook

We maintain BUY on Hindalco; stated downstream shift excites us.

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