Hindalco stock rallies 5% as subsidiary Novelis posts best ever profitability

Source: Investor Presentation

The adjusted EBITDA was up 1 percent year-on-year to a record high of $561 million in the reporting quarter. The increase was due to higher product pricing, including some higher cost pass-through to customers, favourable product mix on improved automotive and aerospace shipments, and lower metal costs due to improved recycling performance, partially offset by high-cost inflation and unfavourable foreign exchange translation.

Meanwhile, net sales increased 32 percent to $5.1 billion compared to $3.9 billion in the June quarter in FY22, primarily driven by higher average aluminium prices and local market premiums, it said.

"Given the growing market, we are vigorously allocating capital to continue to grow alongside our customers, with more than $4.5 billion of investment opportunities on our horizon," said Devinder Ahuja, Executive Vice President and Chief Financial Officer, Novelis Inc.

CLSA pointed out that Novelis had posted best-ever profitability while adding that strong first quarter results and robust guidance should allay concerns. CLSA says ‘buy’ Hindalco shares with a target price of Rs 525. The guidance is to sustain the profitability of $525 per tonne.

Jefferies also highlighted that Novelis EBITDA, which came in at $561 million, was above Street estimates. Novelis is upbeat on demand and has upgraded margin guidance to $525 from $500, pointed out Jefferies.

It also noted that shipments fell 1 percent on year owing to continued supply chain constraints while net debt rose 2 percent on quarter because rising working capital impacted cash flows.