Hindalco shares fall by 6% after 18% decline in Novelis

Hindalco, a prominent player in the metals sector, experienced a decline of over 6% in its share price during the early trading session following the announcement of reduced net income by its US subsidiary, Novelis Inc, for the July-September quarter.

As of 9:20 AM IST, Hindalco shares were trading at ₹663.75 on the National Stock Exchange, reflecting a decrease of more than 6.3% as investors opted to divest their holdings.

Novelis reported an 18% drop in net income, amounting to $128 million for the September quarter of the fiscal year 2024-25. This downturn was attributed to a $61 million charge related to production disruptions at its Sierre facility, alongside increased restructuring and impairment costs, as well as diminished operational performance, as stated by Novelis on November 6.

Invest in Indian Markets and Unlock Future Potential With 5paisa!

Open Account Now

In contrast, net sales for the second quarter increased by 4.5%, reaching $4,295 million compared to $4,107 million in the same period last year. The EBITDA per tonne for the quarter was recorded at $489, with adjusted EBITDA at $462 million. The decline in EBITDA was largely influenced by rising aluminum scrap prices, an unfavorable product mix, and the adverse effects of flooding at the Sierre plant.

Following the disappointing outlook from Novelis, domestic brokerage Emkay Global has downgraded Hindalco's rating from 'reduce' to 'sell.' The brokerage expressed skepticism regarding the company's projected improvement in EBITDA per tonne in the medium term. 

With Hindalco retracting its EBITDA per tonne guidance due to concerns over the accelerating tightening of scrap spreads resulting from China's liberalization of scrap imports, Emkay Global believes this poses a near-term challenge for the stock. They have set a price target of ₹600 per share, suggesting a potential decline of 15% from the previous closing price.

Over the past year, Hindalco's shares have appreciated by approximately 37%, in contrast to a 26% increase in the benchmark Nifty 50 index.