Hindalco among top losers on Nifty 50 after weak Novelis results

Adjusted EBITDA for the quarter declined 33 percent from last year to $341 million. Lower volumes, extraordinary inflationary environment, higher energy costs due to geopolitical instability and tighter scrap spreads impacted the company's operating profit for the quarter. The adjusted EBITDA for Novelis was also the lowest in many quarters.

Weakness in the operating performance translated into weaker realisations, which fell to $376 per tonne from $544 per tonne during the same period last year.

On the operational front, the company said that things are bottoming out in the December quarter but did not share a fixed number on how the operating profit would be going forward. However, the management expressed confidence that EBITDA per tonne will be back to the $500 - $525 range in the next financial year.

Free cash flow for the first nine months of the current financial year was a negative $170 million.

Novelis reported a $100 million increase in net debt during the quarter to $4,729 million from $4,626 million in September.

Brokerage firm Jefferies said that Novelis expects these headwinds to continue for a few more quarters but believes that the December quarter was a trough for the margin. It maintained its buy rating on Hindalco with a price target of Rs 600.

CLSA expects a gradual recovery for Novelis owing to new pricing clauses and softening costs. However, it expects the EBITDA per tonne to return to the $525 mark only in the second half of the next financial year.

The brokerage further said that visibility in profitability rebounding would be key for a re-rating. It has also maintained its buy rating on Hindalco with a price target of Rs 580.

Shares of Hindalco are trading 3.2 percent lower at Rs 432.9.