300% rally in 14 months! This Aditya Birla Group firm to shine further post best quarterly performance

Analysts on Dalal Street believe that the ongoing bull run in Hindalco Industries, the Aditya Birla Group metals flagship company, will continue after it posted a nearly three-fold rise in its consolidated profit-after-tax (PAT) at Rs 1,928 crore for the quarter to March 2021, mainly on account of higher volumes and lower input costs.

Shares of the metals major have rallied 343% to Rs 389.85 on May 21 from the low of Rs 87.95, scaled on March 23 last year. On the other hand, the benchmark BSE Sensex has gained 95% during the same period.

Hindalco had posted a consolidated profit after tax of Rs 668 crore in the year-ago period. Its consolidated revenue from operations in the January-March 2021 period increased to Rs 40,507 crore, over Rs 29,318 crore in the year-ago period.

In a statement, Hindalco Industries said that the “company reported its best quarterly performance with consolidated PAT up 189 per cent at Rs 1,928 crore, a nearly three-fold increase YoY.”

Factors that supported Q4

The results were driven by a strong performance by Novelis and India aluminium business, supported by higher volumes and better product mix, lower input costs, stability in operations and cost-saving actions.

“The copper business recorded a 33 per cent jump in EBITDA sequentially in Q4 FY21 versus Q3 FY21 on account of stable operations. Novelis reported an all-time high EBITDA, as a result of continued demand for innovative, sustainable aluminium solutions and outstanding operational performance across its expanded business,” Hindalco said.

The company further added that its gross debt declined by Rs 18,187 crore and net debt fell by Rs 14,883 crore as of March 31, 2021 from its peak on June 30, 2020. Shares of Hindalco traded 0.64% higher at Rs 387.35 at around 11.10 am (IST). On the other hand, the benchmark BSE Sensex was up 223 points, or 0.44%, at 50,764.

Brokerages view

Phillip Capital retained ‘Buy’ on Hindalco with a price target of Rs 435, indicating an upside of over 12% from the current market price.

“Bullish demand sentiments and strong macro environment will continue to favour Novelis. Strong cash flow in Novelis will continue to aid the company with further deleveraging albeit at a slower pace as capex intensity is expected to increase going forward. Higher LME would drive further improvement in domestic aluminium business as well,” the brokerage said in a report.

Centrum Broking is bullish on the metal major with a price target of Rs 533. “Hindalco (incl Utkal Alumina) reported better-than-expected EBITDA of Rs 1,880 crore, up 23% QoQ on account of higher aluminium prices which inturn was due to better product and geographical mix. Hindalco is on its way to de-commoditise its earnings by way of expanding in value-added products and backward integration. With a disciplined approach to capital allocation, focus on ESG and firm outlook on aluminium prices, Hindalco is one of our preferred investment picks,” Centrum added.