Prabhudas Lilladher has given an 'accumulate' recommendation on Hindalco Industries with a target price of Rs 245.
Shares of Hindalco traded at Rs 198.05 apiece around 1 pm on 9 May, 2019. The brokerage has set a one-year horizon for this recommendation.
March quarter highlights:
- Volumes grew 8 per cent year-on-year (YoY) at 870kt. Volume in Asia grew 13.8 per cent to to 198kt while in North America it grew 7.7 per cent to 294kt YoY. Volume in South America (143kt) and Europe (246kt) grew 5.1 per cent and 4.2 per cent YoY, respectively.
- North America’s Ebitda grew 27.6 per cent YoY to $157 million with margins at nearly $534/t.
- South American operations reported 5.3 per cent YoY growth in Ebitda to $99 million due to higher volumes.
- Ebitda from Asian operations grew 4.7 per cent YoY. However, European’s ops delivered 8.2 per cent YoY de-growth in Ebitda at $56 million due to pricing pressure.
- Adjusted PAT rose 28.7 per cent YoY to $130 million on strong operating performance.
Investment rationale:
"Novelis posted strong set of earnings for Q4FY19 with adjusted Ebitda margins at $410/t. Strong demand outlook in the US and stable demand in Europe, South America and Asia, aided by quality operations and sound balance sheet sets firm outlook for Novelis," said the brokerage.
The brokerage added that the the increased investments in conversion business model of Novelis, expansion of downstream capacity of domestic operations and value added products would increase the Ebitda by nearly 500bps to 75 per cent by FY20E.
"Backed by strong business model and attractive valuations, we maintain Accumulate with a target price of Rs 245, EV/Ebitda of 6 times FY20E," said the brokerage.