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On Wednesday, Investec (LON:INVP) analysts downgraded Hindalco Industries (NSE:HALC) Limited (HNDL:IN) stock from Buy to Hold, adjusting the price target from INR765.00 to INR730.00. The revision reflects a cautious stance on the company’s future financial performance and operational challenges.
The downgrade comes after Hindalco’s fourth-quarter performance, which outperformed Investec’s expectations due to favorable conditions in aluminum premiums and alumina tailwinds. Despite the positive quarter, Investec revised its outlook due to several factors that could impact Hindalco’s growth and profitability in the coming years.
Investec’s analysis points to increased capital expenditure and the absence of volume growth tailwinds for Hindalco’s operations in India and its Novelis segment until the fiscal years 2026/27. Additionally, potential headwinds for Novelis concerning tariffs and London Metal Exchange (LME) to scrap spreads were highlighted.
Furthermore, the firm anticipates that Hindalco’s initiatives to manage raw material costs will only yield significant benefits by fiscal year 2028. As a result, Investec has trimmed its EBITDA forecasts for fiscal years 2026/27 by 6% and 4%, respectively, as it expects alumina and aluminum premiums to decline in the following years.
The report also notes that Novelis’ ability to secure exemptions under the Metal Containment Agreement (MCA) 2.0 could pose an upside risk to Investec’s forecasts for the segment. Despite the lowered estimates, Investec has decided to maintain its valuation multiple at 6 times the fiscal year 2027 EV/EBITDA for Hindalco, which it refers to as the "cleanest non-ferrous proxy."
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