Citi has maintained its ‘Buy’ rating on Hindalco, setting a target price of ₹725 per share, even as Novelis’ Q3 adjusted EBITDA declined by 19% year-on-year due to higher aluminum scrap prices and an unfavorable product mix. The brokerage remains optimistic about a stronger Q4FY25 performance, expecting Novelis’ earnings to align more closely with Q2FY25 levels.
Novelis, Hindalco’s US-based subsidiary, has indicated that higher seasonal volumes and an improved product mix will aid recovery. The company is also diversifying and expanding its use of scrap inputs to mitigate cost pressures, while simultaneously focusing on operational efficiencies to offset margin challenges.
Citi acknowledges the short-term headwinds affecting Hindalco, but it believes that most of the market concerns are already priced in. The stock is currently trading at less than 5x EV/EBITDA, adjusting for capital work in progress, making it an attractive long-term play in the metals sector.
The brokerage sees Hindalco’s core business as resilient, supported by strong demand in key global markets, particularly in automotive and beverage can segments. With positive tailwinds expected in Q4FY25, Citi remains bullish on Hindalco’s long-term growth potential.
