Citi has reiterated its ‘Buy’ rating on Hindalco with a target price of ₹725, citing strong strategic direction presented at the company’s Investor Day. The management emphasized its twin-track strategy of capacity expansion both upstream and downstream in India and ambitious sustainability goals for its US subsidiary, Novelis.
For Novelis, the target is to increase recycled content to 75% (from 63% currently) and cut carbon emissions from 4 tonnes to under 3 tonnes per tonne of flat rolled products. The company aims to maintain strong returns on invested capital (ROIC), while continuing to build on its EBITDA per tonne aspiration of $600.
In India, Hindalco’s EBITDA per tonne is projected to improve further driven by resource security and premium product offerings. On the capital allocation front, Hindalco is working to maintain a strong balance sheet (targeting net debt/EBITDA of 2x), executing $10 billion of growth capex, and plans to return 8-10% of post-maintenance free cash flows to shareholders.
Currently trading at just 5.4x EV/EBITDA (adjusted for capital work-in-progress), Citi sees significant upside potential for the stock.
