Hindalco nosedives to lowest level since March 2020 ahead of Q3 results; know why

Hindalco Share Price: The stock of Hindalco nosedived over 12 per cent on BSE on  Tuesday (February 13, 2024) after its subsidiary Novelis reported its results, and on a day when the parent company is set to announce its December quarter results.

The stock of Hindalco ended the trading session on Tuesday sliding by 12.43 per cent, or Rs 72.40, at Rs 509.95.

The stock plummeted to the day's low of 496.80, which is its biggest intraday fall since March 2020. On March 23, 2020, its lowest price was Rs 83.05.

Why Hindalco shares are falling today

The stock is falling due to an increase in cost and time in CAPEX of Novelis' plant at Bay Minette, Alabama, USA. Novelis said in a press statement that the CAPEX for the plant has increased from $250 crore to $410 crore, which is a 64 per cent jump.

Novelis' is building an aluminum recycling and rolling plant planned in Bay Minette.

It will take time of 9-12 months to start the plant as the company is targeting it to be commissioned in the second half of calendar year 2026.

The plant's IRR reduced from 15-16 per cent (Mid Teens) to 11 per cent (LOW DOUBLE DIGIT).

Novelis Q3 Results 

Novelis' profit after tax for the third quarter jumped 10.1 times to $12.1 crore in the third quarter compared to $1.2 crore YoY.

Its revenue for the third quarter was down by 6.4 per cent to $393 crore from Rs $420 crore Year-on-Year (YoY).

The company's adjusted EBIDTA skyrocketed by 33 per cent to $45.4 crore against $34.1 crore.

Margin was also up by 11.6 per cent in the quarter under review from 8.9 per cent.

It had rolled product shipments of 910 kilotonnes, flat YoY. 

It was driven by lower average aluminum prices as shipments were in line with prior year levels. 

What do brokerages say about Hindalco?

CLSA on Hindalco Industries (CMP:582)

It has downgraded the company to 'underperform' from 'buy' and raised the share target price to Rs 635 from Rs 590.

In its commentary about the company, CLSA says that Novelis is operationally ahead, but it is downgrading Hindalco to 'underperform'.

It downgraded as at a 6.5x FY25 EV/Ebitda (1 std. above median) CLSA sees limited room for disappointment. The cost and time overrun of its green-field Bay Minette project would be an overhang, says the brokerage.

Achieving a double-digit IRR (revised down from mid-teens earlier) will also be a tough task, the brokerage says about Hindalco.

Jefefries on Hindalco Industries (CMP:582)

It has maintained a 'Buy' with a target of Rs 725.

Jefefries says Novelis' 3Q EBITDA rose 33 per cent YoY (down 6 per cent QoQ) and is inline.

The brokerage says Novelis' volume fell 2 per cent QoQ while EBITDA/t was down 4 per cent QoQ to $499.

It expects the facility to now cost $4.1bn, 64 per cent higher than the initial estimate. The facility is expected to start in 2HCY26.

Macquarie on Hindalco Industries (CMP:582)

It has maintained an 'outperform' rating on the firm with a target of Rs 570.