Prabhudas Lilladher has given Buy recommendation for Hindalco Industries with a target price of Rs. 455 in its research report issued on May 24, 2021
Prabhudas Lilladher’s research report on Hindalco Industries
Hindalco (HNDL) reported Q4FY21 EBITDA above our estimates by 12% due to 16% beat in Aluminium’s (AL) EBITDA, offset by 5% miss in Copper (CU). Led by strong visibility on profitability of Novelis’ operations, management reiterated guidance on sustainable EBITDA margins at US$480-500/t. Despite softness in Auto volumes on shortage of semi-conductors, management guided margin of US$500/t in Q1FY22e. Underpinned by strong profitability across the segments except Aerospace, we expect company to meet its guidance of Net debt/EBITDA at 2.5x (Q4FY21: 2.9x) earlier than targeted timeline of FY23e. In Indian operations (with share at 1/3rd of consolidated EBITDA), quarterly EBITDA run-rate increased to Rs20bn (v/s Rs15bn in FY21) on back of strong LME.
Hence, we upgrade EBITDA estimates for FY22e/FY23e by 6%/13% to factor higher LME and increased margins in Novelis. Driven by strong earnings outlook and comfortable B/S, we reiterate BUY with TP of Rs455 (earlier Rs360), EV/EBITDA of 6.5x FY23e.