(Time Zone: Arizona, USA)
Recently, in its Investor Day, Hindalco laid out its strategy & capital allocation roadmap for the next five years. The focus of Hindalco is towards expansion of downstream India business and deleveraging the balance sheet. At a consolidated level, Hindalco is expected to generate over US$1-1.2 billion cash flow per annum post its normal working capital and maintenance capex. The broad allocation of the above-mentioned cash flow is as follows - a) ~50% of above-mentioned cash flow would be for growth capex, b) ~30% would be for debt reduction, c) ~8-10% would be returned to shareholders (as dividends), d) balance ~10-12% to be retained in treasury.
Valuation & Outlook
Going forward, we upgraded Novelis FY23 EBITDA/tonne estimate to US$500/tonne (from US$480/tonne earlier). We also raise FY23 EV/EBITDA multiple by 0.5x for both domestic and Novelis to 6x and 6.5x, respectively. We continue to value the stock on an SoTP basis and arrive at a revised target price of Rs. 390 (earlier target price of Rs. 309). We upgrade the stock from HOLD to BUY recommendation.
Shares of HINDALCO INDUSTRIES LTD. was last trading in BSE at Rs.333.25 as compared to the previous close of Rs. 315.85. The total number of shares traded during the day was 1438181 in over 10766 trades.
The stock hit an intraday high of Rs. 338.1 and intraday low of 316.65. The net turnover during the day was Rs. 472827220.
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