Prabhudas Lilladher has given Buy recommendation for Hindalco Industries with a target price of Rs. 305 in its research report issued on Feb 04, 2021
Prabhudas Lilladher’s research report on Hindalco Industries
Excluding positive US$25mn from a customer’s contractual obligation, Novelis’ Adj. EBITDA grew 39% YoY/5% QoQ at US$476mn (US$455) on back of 24% YoY (+6.5% QoQ) growth in Novelis’ legacy operation’s EBITDA at US$426mn and 15% YoY (down 9% QoQ) inorganic growth. Company witnessed strong demand momentum with volumes back to pre-covid levels except Aerospace. Scrap spreads tightened in USA due to variety of reasons including high ocean freight, transportation issues due to restrictions related to Covid and ease in restrictions on scrap imports by China. Management expects spreads to revive as the temporary ocean freights and transportation bottlenecks eases. The same is vindicated in strong guidance on margins. In line with our expectation, management expects to achieve guidance of Net debt/EBITDA<3x earlier than targeted timeline of FY23e.
Driven by strong margin outlook and comfortable B/S, we reiterate BUY with TP of Rs305, EV/EBITDA of 6x FY22e.