Hindalco shares can rally over 30%, say analysts after Q3 results

Hindalco shares have been down about 18% in the last four months and have underperformed Indian peers like Tata Steel and JSW Steel, however brokerages expect more than 30% upside in the stock following third quarter results, which surpassed market expectations on key metrics.

CLSA has retained its buy rating on the metal stock and set the target price at ₹815, a potential upside of 34% from the closing price of February 14.

The brokerage firm noted that the company has reported another strong quarter in India helped by higher prices and flat costs. With stable aluminium prices, it believes the fourth quarter domestic aluminium profitability is likely to remain strong, while Novelis was guided to bounce back.

It added that secured coal blocks (benefit in two years) and downstream expansion should further support domestic profitability. Hindalco’s debt is likely to rise over the next three years as expansion projects pick-up steam, benefits of which will become visible from FY27 onwards, it said.Jefferies has set the target price at ₹800 with a buy rating. It expects a 31% upside in the stock from the previous closing price.
The brokerage noted that the stock is down 18% in the last four months and has underperformed Indian peers (TATA/JSTL) by 3-13 percentage points, despite 1-9% upgrade to consensus FY25-26 EPS versus 22-55% cuts for peers.It noted that third quarter earnings before interest, taxes, depreciation and amortization or EBITDA rose 26% YoY (down 5% sequentially) and was in line with estimates as India business offset a weaker Novelis.

Jefferies is concerned that Novelis’ margins on rising scrap prices are alleviating while India business is benefiting from higher aluminum prices.

The brokerage commentary comes after the metal giant’s standalone net profit surged 74.6% year-on-year (YoY) to ₹1,463 crore in Q3, significantly higher than ₹838 crore reported in the same period last year.

Revenue from operations grew 17.2% YoY to ₹23,776 crore, exceeding analysts’ expectations of ₹21,956 crore. The robust performance was supported by strong demand, higher realisations, and improved operational efficiencies.

Earnings before interest, taxes, depreciation, and amortisation (EBITDA) jumped 35.7% YoY to ₹2,664 crore from ₹1,963 crore, slightly ahead of the CNBC-TV18 poll estimate of ₹2,650 crore. The EBITDA margin stood at 11.2%, reflecting an improvement from 9.7% in the year-ago period but lower than the estimated 12.1%.

Hindalco shares traded half a percent lower at ₹602.90 on NSE at 11:54 am.