Motilal Oswal has reaffirmed its Buy recommendation for Hindalco, projecting a target price of Rs 770. This suggests a potential growth of 16% from the current share price of Rs 664. The brokerage’s optimistic stance stems from Hindalco’s aggressive expansion initiatives, robust demand forecasts, and anticipated improvements in profit margins. Let’s delve into the three main factors that have motivated this positive outlook.

Expansion Initiatives Driving Growth

Hindalco, along with its subsidiary Novelis, is embarking on significant growth projects. Currently, they are channeling a hefty $5.2 billion into expanding their aluminum and copper production capacities.

Key projects include:

• Aluminum Upstream Expansion:

  • Aditya Smelter (180 KT)
  • Alumina Refinery (850 KT)

• Downstream Expansion:

  • FRP (170 KT)
  • Battery enclosures and related products
• Copper Smelter Expansion:
  • 300 KT and Copper Recycling (50 KT)

Additionally, Novelis is investing $4.1 billion in its facility in Bay Minette to enhance production capabilities. This strategic move is positioning Hindalco to emerge as a leader in the global metals sector.

Promising Demand Forecasts

The demand for both aluminum and copper is poised for substantial growth. According to projections, India’s aluminum consumption is expected to surge to 11,373 KT by FY35, reflecting a CAGR of 8%. Similarly, copper demand is anticipated to 2.5x to 2,540 KT in the coming years.

On a global scale, the demand for Flat Rolled Products (FRP) is projected to grow at a steady 4% CAGR, primarily driven by the beverage packaging and automotive sectors. The report emphasizes that metal prices are likely to remain stable due to strong demand, supply constraints from China, and rising electrification requirements.

Enhancing Profit Margins and Financial Health

Hindalco’s commitment to high-quality products and operational efficiency is set to enhance its profit margins. Novelis, for instance, is aiming for an adjusted EBITDA of USD 600 per tonne in the long run, primarily through increased recycled content and operational efficiencies.

Moreover, Hindalco’s operations in India are currently net debt-free, with an improved consolidated net debt/EBITDA ratio of 1.33x as of December 2024, down from 1.43x in December 2023.

Long-Term Growth and Considerations

Motilal Oswal views Hindalco as a compelling long-term investment opportunity. The report suggests that with enhanced scale, operational efficiency, and a solid demand backdrop, profit margins are expected to expand over the medium to long term. However, investors should remain aware of potential risks, including possible delays in capital projects, rising scrap prices, and trade tariffs imposed by the U.S.

By keeping a close eye on these developments, stakeholders can better navigate the future landscape of Hindalco’s growth trajectory.