Prabhudas Lilladher's research report on Hindalco Industries
Hindalco (HNDL) reported Q4FY21 EBITDA above our estimates by 12% due to 16% beat in Aluminium’s (AL) EBITDA, offset by 5% miss in Copper (CU). Led by strong visibility on profitability of Novelis’ operations, management reiterated guidance on sustainable EBITDA margins at US$480-500/t. Despite softness in Auto volumes on shortage of semi-conductors, management guided margin of US$500/t in Q1FY22e. Underpinned by strong profitability across the segments except Aerospace, we expect company to meet its guidance of Net debt/EBITDA at 2.5x (Q4FY21: 2.9x) earlier than targeted timeline of FY23e. In Indian operations (with share at 1/3rd of consolidated EBITDA), quarterly EBITDA run-rate increased to Rs20bn (v/s Rs15bn in FY21) on back of strong LME.
Outlook
Hence, we upgrade EBITDA estimates for FY22e/FY23e by 6%/13% to factor higher LME and increased margins in Novelis. Driven by strong earnings outlook and comfortable B/S, we reiterate BUY with TP of Rs455 (earlier Rs360), EV/EBITDA of 6.5x FY23e.
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