Hindalco shares decline up to 2% after Novelis' Q1 results: Should you buy, hold or sell it?

Shares of Aditya Birla group-owned Hindalco fell nearly 2 per cent to day's low of Rs 613.55 as the company's US-based subsidiary Novelis revealed its results. At the last count, the stock pared some of its early losses and was down 0.8 per cent at Rs 619.9 apiece on the BSE. 

For the June quarter, the company's profitability declined 3 per cent on-year to $15 crore. Net income attributable to the company's common shareholder stood at $151 million, down 3% YoY. Adjusted EBITDA climbed by 19 per cent to $50 crore.  Furthermore, the company's revenue soared 2.4 per cent and is recorded at $419 crore during the reporting quarter.

"Net sales for the first quarter of fiscal year 2025 increased 2% versus the prior year period to $4.2 billion, mainly driven by higher average aluminum prices and higher total shipments. Total flat rolled product shipments increased 8% to 951 kilotonnes in the first quarter of fiscal year 2025 versus the prior year period, due primarily to normalized demand for beverage packaging sheet compared to the prior year, which had been impacted by customer inventory reduction activity," noted the company's press release.

Margins at the US company climbed 170 bps to 11.9 per cent from 10.2 per cent in the same period last year.

Debt at the company in the just concluded quarter grew 6 per cent sequentially on the back of capacity and working capital expansion."We continue to take a prudent approach to capital allocation, investing in our future while maintaining a disciplined net leverage position," said Devinder Ahuja, executive vice president and CFO, Novelis Inc.

The company has maintained its mid-term EBITDA per tonne guidance at $525 per tonne. 

What global brokerages suggest for Hindalco after Novelis Q1 show?

Jefferies has continued with its buy rating on the stock for a target of Rs 825, implying over 32 per cent potential gains. As per the brokerage, the company posted good growth but missed on EBITDA. 

JP Morgan, meanwhile, maintained its overweight rating with a reduced target of Rs 725, an upside of 16 per cent. The brokerage sees some near term headwinds led by

a) softness in LME prices

b) flooding in Novelis’ Switzerland plant (EBITDA impact of $30mn in 2Q,

c) weakening scrap spreads led by rising prices of UBC or used beverage cans.