Hindalco in focus after Novelis showcases better operating performance, reduces debt

However, the company's operational performance improved compared to the December quarter aided by better product mix, better prices, and improved spread.

Novelis' management has maintained its guidance of EBITDA per tonne reaching $500 by the fourth quarter of financial year 2024. For the first half of the year, that figure is likely to remain between $400 - $450 per tonne.

Release of substantial working capital during the quarter meant that the company was able to pay off some debt. Net debt at the end of March stood at $4.14 billion, from $4.72 billion in December.

Novelis is a wholly-owned subsidiary of Hindalco and is a leading producer of flat-rolled aluminium products. It is also the world's largest recycler of Aluminum.

Brokerage firm CLSA believes that Novelis earnings were better-than-expected but the near-term headwinds will persist. The note further said that visibility on a rebound in profitability will be key for the stock to re-rate. It has a buy rating on Hindalco with a price target of Rs 550.

Nomura says that while EBITDA per tonne improved on a sequential basis, but it remains lower compared to sustainable levels of $525 per tonne. It expects capex intensity to remain high in financial year 2024-2025. Nomura has a buy rating on Hindalco with a price target of Rs 540.

Shares of Hindalco have underperformed the benchmark Nifty 50 this year, declining 10 percent year-to-date. In comparison, the Nifty 50 is flat.