Shares of Hindalco Industries Ltd fell 15 per cent in Tuesday's trade as Novelis, while reporting its December quarter results, revised upward its Bay Minette project capex by 65 per cent and also suggested a one-year delay. Besides, it cut its return guidance from the project to ‘double digits’ from ‘mid-teens’ earlier.
Following the development, the stock plunged 14.69 per cent to hit a low of Rs 496.80. Analyst targets on the stock suggest upside from the prevailing levels.
"The company has revised the capex outlay upward for its key growth project—greenfield expansion in North America — by 65 per cent to $4.1 billion and delayed the timeline by one year to end-FY2027E.Cost inflation and delay do not impact our explicit earnings forecast until FY2026E, but damage the growth, earnings and return prospects of the company from a 5-year perspective," said Kotak Institutional Equities. The brokerage suggested a fair value of Rs 535 on the stock.
JM Financial said that a significant escalation in projected cost for Bay Minette plant is likely to result in lower IRR but earnings trajectory is likely to benefit tracking plant commissioning, increased recycling and evenly spread capex, resulting in higher shipments and margins keeping its journey of sustainable Ebitda per tonne of $525 per tonne intact.
Milan Tomic
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