Hindalco's value-add focus to drive growth and a stock re-rating

Hindalco reported record quarterly revenue and net profit in the September quarter, driven by higher metal prices and improved Novelis performance. However, growth is expected to slow in the second half of the fiscal year due to lower aluminium prices and increased input costs. The company is investing heavily in capacity expansion and developing value-added products, with ₹50,000 crore in ongoing projects and another ₹50,000 crore in potential investments over the next five years.

Hindalco's stock trades at a 11.2 P/E ratio, below its three (12.7) and five-year (12.1) averages, suggesting potential for a re-rating if earnings growth continues. India's aluminium demand is projected to grow 7% annually over the next five years, with automotive, packaging, consumer electronics, home appliances, and data centres emerging as key growth areas.

Hindalco aims to shift towards higher-margin value-added products to reduce reliance on London Metal Exchange earnings. Novelis is transitioning from operational disruption and heavy investments to earnings growth and debt reduction, with commercial shipments from its Bay Minette facility expected in the June quarter of FY28. The company sees annual cost savings of $300 million by the end of FY27 and $350-400 million by the end of FY28, with a target price of ₹1,180 on Hindalco Industries and increased FY27 and FY28 revenue, EBITDA, and profit estimates by 5%.