Shares of Hindalco Industries were trading nearly 7% lower in early trading after U.S. subsidiary Novelis Inc reported a decline in quarterly net income for July-September.

Novelis accounts for just under a third of Hindalco’s total revenue.

What Happened: Novelis, an aluminium producer based in the US, posted an 18% reduction in net income, reaching $128 million (₹1,078 crore) for the second quarter.

This decline was primarily due to a $61 million (₹514 crore) charge linked to production disruptions at its Sierre plant, along with increased restructuring and impairment costs and lower overall operating performance, the company said.

On a positive note, Novelis saw a 4.5% increase in net sales, which rose to $4.3 billion (₹36,193 crore) from $4.1 billion (₹34,609 crore) in the same quarter last year.

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The EBITDA per tonne for the quarter was ₹489, with adjusted EBITDA at ₹462 million. The EBITDA dip was mainly attributed to higher aluminium scrap prices, an unfavourable product mix, and the impact of flooding at the Sierre plant.

Brokerage Reactions: Emkay Global downgraded Hindalco from "reduce" to "sell" after Novelis revised its medium-term outlook. The brokerage firm expressed doubts about Novelis's earlier positive trajectory for EBITDA per tonne, especially after the company pulled back its EBITDA guidance amid concerns about scrap spread tightening due to China's recent relaxation on scrap imports.

Emkay Global set a target price of ₹600 per share, indicating a potential 15% decline from the last closing price.

Price Action: Hindalco’s share price was down 6.78% at ₹660.15 in early trade on Thursday. The stock has gained nearly 8.15% so far this year.

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