HINDALCO

Trades Rich Despite Commodity Headwinds

.’s stock has fallen 7% since Q3FY26 results, as investors weighed the impact of fires at Novelis’s Oswego plant and concerns that aluminium prices may have peaked. While consolidated revenue grew in the mid-teens YoY, profit after tax fell 45% YoY due to exceptional charges of ₹2,610 crore. Analysts caution that fading support for aluminium prices and rising debt levels could weigh on valuations, even as Hindalco pursues downstream expansion and long-gestation projects. Financial Performance • Consolidated revenue: Mid-teens YoY growth, supported by domestic aluminium demand • PAT: -45% YoY, impacted by Oswego fires. • PBT (ex-exceptional): Fell sequentially from ₹6,720 crore to ₹5,440 crore. • Copper: Higher revenues but flattish volumes; profitability pressured by weaker treatment/refining charges. Novelis Fires & Impact • Two fires (Sep & Nov 2025) disrupted operations, shipments, and supply chain. • Repair costs, external sourcing, and delayed normalization (extended to June quarter). • Insurance recoveries expected, but uncertainty remains. Aluminium Cycle Concerns • InCred downgraded Hindalco and Nalco, citing aluminium price peak. • Forecast: Aluminium could fall 20% over next year due to scrap supply and fading weak-dollar support. • Hedging: 64% for Q4, 21% for FY27 to cushion volatility. Capex & Debt • Parent equity infusion: ~$1 billion (including $250m announced last week) to support Novelis. • FY27 capex: ₹10,000–12,000 crore for smelter expansion, captive coal mines, recycling, • Net debt: ₹59,500 crore, net debt/EBITDA at 1.73x (vs 1.06x in March), close to 2x threshold. • Bay Minette project facing cost overruns, raising debt concerns. Outlook • Stock down from 52-week high of ₹1,029.8 (29 Jan). • Trades at 6.65x FY27 EV/EBITDA, considered rich amid commodity headwinds. • Outlook: Downstream push and vertical integration provide resilience, but aluminium cycle risks and debt trajectory remain key investor concerns.