Shares of Hindalco were slumping on Tuesday as the company’s subsidiary Novelis posted its earnings for the quarter ended March.

What Happened: The company’s net sales decreased 7% year-on-year to reach $4.1 billion (around ₹33,600 crore) for the fourth quarter of fiscal year 2024, driven by lower average aluminium prices, partially offset by higher total shipments.

The company reported a significant 28% year-on-year increase in operating profit or EBITDA, reaching $514 million (around ₹4,220 crore). This growth was attributed to higher volumes, reduced cost of production, and improved pricing dynamics. Consequently, the EBITDA per tonne stood at $540, surpassing the management’s guidance of $525 per tonne.

What Are Analysts Saying: Jefferies reiterated its “buy” rating on the stock and raised the target price to ₹810 from ₹700. The research firm highlighted that Novelis’ EBITDA growth was in line with its estimates. The analyst added that despite a modest 2% year-on-year increase in volumes, the EBITDA per tonne rose by 8% quarter-on-quarter to $540, marking a 7-quarter high. The analysts also pointed out that the outlook for the company’s earnings is positive, especially with the surge in demand for beverage cans.

JPMorgan has also maintained an “overweight” rating on the stock, with a revised target price of ₹730, up from ₹665. The brokerage emphasized Novelis’ sustained profitability improvement, reduction in net debt to adjusted EBITDA ratio, and positive outlook on demand. Additionally, JPMorgan sees the Bay-Minette expansion as a significant long-term opportunity in the US market.

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Axis Securities also maintained its “buy” rating for the stock raising the target price to ₹720 from ₹660. The brokerage firm said that Novelis’ March quarter was in line with its estimates while EBITDA was slightly above its estimates. The brokerage projects Novelis’ EBITDA per tonne to reach $600 in the future, driven by factors like operating leverage from capacity expansion, increased pricing from new contracts, a diversified product portfolio focusing on automotive segments, utilization of recycled inputs, and improved operational efficiency.

Kotak Securities also maintained its “add” rating for the stock with a price target of ₹650. The analysts said that Novelis' Q4FY24 adjusted EBITDA came marginally higher than their estimate. The brokerage also noted that demand in the aero and auto segments remains robust.

Price Action: Hindalco’s share price was down 3.75% to trade at ₹614.85 in the late hours of trading on Tuesday.

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