Shares of Hindalco Industries traded lower for the second day in a row, down 4% to Rs 577.45 on BSE during Thursday’s intraday trading in an otherwise limited market. By comparison, the S&P BSE Sensex rose 0.13% to 58,760 at 11:01 a.m.
Shares of India’s biggest aluminum player have fallen 8% in the past two days due to profit booking. The title corrected by 9% compared to its record of Rs 636 reached on Tuesday March 29, 2022.
However, over the past three months, Hindalco has outperformed the market, jumping 22% from a 0.78% rise on the S&P BSE Sensex. Over the past year, the stock has climbed 77%, compared to a 19% rally on the benchmark.
Hindalco has unveiled an investment plan of around $8 billion over the next five years. These investments would be incurred in FY23-27 with total investments of approximately $4.5-4.8 billion to be committed at Novelis, while approximately $3.37 billion would be spent on the Indian activity.
Management sees strong demand for aluminum in key segments such as beverage cans, automotive body sheet, specialty and aerospace. The aluminum supply disruption will worsen the deficit and cause LME prices to rise in FY23 and FY24.
“Hindalco is one of the cheapest producers of alumina at its Utkal refinery. The same has been fully accelerated, which has further reduced costs. The company is expanding both downstream and upstream to increase its aluminum capacity as well as the share of value-added products, which will ultimately result in improved EBITDA margin,” said Motilal Oswal Financial Services. The brokerage firm retains the “buy” rating on the stock with a target price of Rs 750 per share. “The main downside risk to our call is a slowdown in China. A sharp reduction in LME prices will negatively impact Hindalco’s investment plans,” he said.
“Global supply shortages and strong demand prospects have pushed global aluminum prices to healthy levels. With its recently announced growth investment plan, over a medium to long term horizon, Hindalco is poised to benefit. Regarding the investment plan, both for Novelis and the Indian operations, some projects are in the evaluation phase and should obtain the required approvals in due course,” ICICI Securities said in a note.