Brokerage firm Jefferies has maintained a ‘Hold’ rating on Hindalco with a price target of ₹1,075. The brokerage said Novelis’ underlying business continues to be impacted by last year’s fire incident, although the effect is gradually receding following the restart of the Oswego facility in June.
Excluding business interruption insurance proceeds, Novelis’ adjusted EBITDA grew 13% year-on-year, broadly in line with Jefferies’ estimates.
However, EBITDA per tonne declined 6% sequentially to $512, while net debt rose 17% quarter-on-quarter to $7.9 billion, which remains the key near-term overhang.
CLSA retained its ‘Outperform’ rating with a target price of ₹1,240, saying Novelis’ core EBITDA of around $525 per tonne was in line with expectations, while reported adjusted EBITDA of $563 per tonne exceeded estimates due to insurance recoveries.
The brokerage expects profitability to improve further as production at the Oswego facility ramps up through the third quarter of FY27 and tariff-related headwinds ease.
It also highlighted management’s confidence in achieving EBITDA of more than $1,000 per tonne at the Bay Minette project and a medium-term blended EBITDA of around $600 per tonne. CLSA also said management’s expectation that leverage will decline below 4x by the end of FY27.
Citi maintained a ‘Neutral’ rating with a target price of ₹1,175. The brokerage said adjusted EBITDA of $516 million exceeded expectations, supported by lower scrap costs, operational efficiencies and $47 million of business interruption insurance proceeds.
Excluding the impact of the Oswego fire and insurance recoveries, adjusted EBITDA stood at approximately $469 million, broadly in line with estimates.
Novelis reported adjusted EBITDA per tonne of $563 during the quarter. Excluding the combined impact of the Oswego disruption and insurance recoveries, adjusted EBITDA per tonne was $525.
The company recognised $300 million in insurance recoveries during the quarter and expects additional recoveries in the coming periods.
Management said the Oswego hot mill resumed operations in early June and production is ramping up steadily. It also expects leverage to moderate during the second half of FY27 as working capital normalises and free cash flow improves.
Novelis reiterated FY27 capital expenditure guidance of $2.1-2.4 billion, including around $350 million of maintenance capex, and expects to return to positive free cash flow by the end of FY27.
The company also reaffirmed that the Bay Minette aluminium recycling and rolling plant remains on track to commence commercial shipments in the first quarter of FY28.
Separately, Novelis said it has already achieved annualised cost savings of more than $225 million and expects this to increase to around $300 million by the end of FY27 and ₹350-400 million by FY28.
