Buy Hindalco, target price Rs 475: Motilal Oswal

Motilal Oswal has a buy call on Hindalco Industries with a target price of Rs 475. The current market price of Hindalco Industries is Rs 386.35.

Hindalco Industries Ltd, incorporated in the year 1958, is a Large Cap company with a market cap of Rs 86542.28 Crore, operating in Metals - Non Ferrous sector.

Hindalco Industries Ltd's key Products/Revenue Segments include Aluminium, Other Operating Revenue, Sale of services for the year ending 31-Mar-2020.

Investment Rationale
Hindalco Industries is Motilal Oswal's preferred non-ferrous pick owing to:

• Robust volume recovery in both India and Novelis
• Strong profitability in its primary Aluminum business, given its low-cost integrated operations in India (in the top quartile globally) and higher LME prices
• Solid FCF generation, which should reduce leverage sharply
• Reasonable valuation

Given the tight demand-supply, Motilal Oswal expects aluminum prices to remain strong, though prevailing higher inventory could limit a further upside. Motilal Oswal factors in LME prices of $2,300/$2100 per tonne in FY22E/FY23E. A $100/t change in aluminum prices impacts Hindalco’s FY23E EPS by 6 per cent and Motilal's target price by 5 per cent.

Financials
For the quarter ended 31-03-2021, the company has reported a Consolidated Total Income of Rs 40696.00 Crore, up 15.35 per cent from last quarter's Total Income of Rs 35281 Crore and up 37.38 per cent from last year same quarter Total Income of Rs 29624 Crore. Company has reported a net profit after tax of Rs 1928 Crore in latest quarter.

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