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    Hindalco shares down despite healthy Q1 show! What should investors do?

    Synopsis

    Hindalco said its results were driven by better macros, robust performance of aluminium downstream and copper businesses along with better operating efficiencies.

    Hindalco shares down despite healthy Q1 show! What should investors do?Agencies
    Shares of Hindalco Industries traded lower on Thursday a day after the company reported its earnings for the quarter ended June 2022. The scrip tanked 2 per cent to hit an intraday low of Rs 432.30 on BSE.

    The company reported a 48 per cent year-on-year (YoY) jump in consolidated PAT at Rs 4,119 crore compared with Rs 2,787 crore in the corresponding quarter last year. This was the highest ever quarterly profit figure the aluminum maker ever posted.

    Consolidated sales for the quarter rose 40.28 per cent YoY to Rs 58,018 crore from Rs 41,358 crore in the same quarter last year.

    ICICI Securities has maintained a 'Sell' call on the stock with a target price of Rs345/share at 0.8x FY24E book value. "Hindalco India’s Q1FY23 EBITDA exceeded our estimate. India's aluminium cost increase of 17% QoQ was offset by lower-cost inventory from the past quarter, it said.

    It expects the cumulative impact of H1FY23 inflation to show on Q2FY23E EBITDA for the Indian aluminium business and noted that the net debt increased by Rs31bn QoQ to Rs422bn. The possible stress on Novelis' EBITDA is on account of compressing scrap, impending housing sector downturn, and recent Ball Corp (contributing 17% of Novelis FY22 revenue) commentary on inflation weakening demand for cans in North America. Further, the increase in capex leaves no scope for any deleveraging.

    According to Prabhudas Lilladher, High margins and quantum release of working capital due to a fall in aluminium prices would deliver sound cash flow generation in Novelis in FY23. While India's operation’s earnings would be under pressure in near term due to fall in LME and high energy costs. It is expected to recover in Q3Y22 and onwards on the back of restoration of coal supplies by Coal India and stable LME, it said.

    Led by a strong outlook on Novelis and bottomed-out earnings in India operations, the brokerage house has maintained an 'Accumulate' rating on the stock with a revised target price of Rs 580 (earlier Rs545), EV/EBITDA of 6x FY24e.

    Jefferies has maintained a 'hold' on the shares of Hindalco with a target price of Rs 380. The brokerage house expects a further contraction in India Aluminium EBITDA/t and raised the FY23-24 EPS estimate by 9-13 percent.

    Hindalco said its results were driven by better macros, robust performance of aluminium downstream and copper businesses along with better operating efficiencies.

    Managing Director Satish Pai said, “After the record profitability in the fourth quarter, I am pleased to share that we delivered an even stronger first quarter despite rising input costs and inflationary pressures. Our performance was backed by strong operational efficiencies and pre-emptive sourcing of critical raw material.

    (Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)



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    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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