Hindalco shares in focus following Novelis Q3 FY25 update

Shares of Hindalco Industries Limited, part of the Aditya Birla Group, are in focus on Thursday, January 9, following a preliminary update from its 100% downstream subsidiary, Novelis, for Q3 FY25.

Novelis Q3 FY25 Highlights:

• EBITDA (Adjusted): Expected between $360 million to $370 million, lower than $454 million reported in Q3 FY24.
• Shipments: Likely between 900k – 910k tonnes, similar to the 910k tonnes recorded in the year-ago period.
• EBITDA per tonne: Projected at $400 – $407, down from $499 in the same quarter last year.
• Contributing Factors: Higher scrap prices and an unfavorable product mix impacted the quarter’s performance.

Management Outlook:

• The company anticipates Q4 performance to align with Q2 levels, with EBITDA per tonne rebounding to $480 – $490.

Broker Insights:

• CLSA Analysis:
  • The weakness in Novelis’ results was partly expected due to continued correction in scrap spreads.
  • Hindalco’s stock price, which has corrected 24% from its peak of ₹772 (October 2024), already factors in Novelis’ stress.
  • Domestic business remains robust, supported by stable aluminum prices and a low-cost structure.
  • CLSA expects Novelis’ profitability to improve as shipment volumes increase, despite weak spread scenarios.