Shares of Aditya Birla Group’s metals flagship Hindalco Industries Ltd plunged over 3% ahead of its Q3 results that is scheduled this week. The company will report consolidated results on Thursday, 9 February, 2023. Novelis, Hindalco‘s subsidiary, posted an EBITDA of $341mn, down 33% YoY and EBITDA/t of $376, down 31% YoY. This was primarily due to high energy and freight cost and lower volumes, which in turn was due to lower beverage cans volume amid destocking at consumers’ end.
“The continuous beverage cans destocking and high-cost leads to near-term earnings uncertainty (EBITDA/t of USD400-450 for next 2-3 quarters), versus earlier guided sustainable EBITDA/t of USD525. Near-term outlook is weak. We await lower entry points to re-enter into the stock. Retain ‘BUY’ on Hindalco shares and lower target price to ₹506 (earlier ₹511),” said brokerage Nuvama Research.
Although earnings have bottomed out in Q3FY23, near-term outlook is cautious and EBITDA/t could be USD400-450/t in the next two-three quarters, the brokerage highlighted.
“Novelis expects EBITDA/t to improve from $376 in 3Q to $400+ in 4Q and then gradually to its medium-term guidance of ~$525. Cost pass-through to customers will come into effect from Jan and Apr, and the recent moderation in energy and freight costs should help too. 3Q net debt was up 2% QoQ to $4.7bn. Its 9MFY23 FCF was negative $170mn, but it expects to generate positive $400mn+ FCF in FY23, supported by working capital release in 4Q,” said global brokerage Jefferies which has a Buy tag on the metal stock with a target price of ₹600 per share.
Earlier this month, the company had announced its plans to raise up to ₹700 crore through issuance of non-convertible debentures (NCDs) on a private placement basis. The debentures will be redeemed at par at the end of the 14 months from the date of allotment.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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