Motilal Oswal Initiates Buy Recommendation on Hindalco with a Target Price of Rs 1,110

Hindalco (HNDL) Research Report

Key Highlights

• Management expects domestic demand in Asia to remain robust, outpacing global growth expectations of ~2-4% CAGR, driven by renewable & electrification, infra spending, packaging, and auto/EV adoption.
• The ongoing conflict in the Middle East is expected to have a limited impact, primarily due to rising energy costs, with ~75% of energy fulfilled via coal linkages and the rest via e-auction.

Business Outlook

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• Hindalco's cost mix consists of ~40% coal, ~35% alumina, and 25% others (including caustic soda and petcoke/CP coke).
• To mitigate rising coal costs, Hindalco targets to be 100% captive by FY33 via three captive mines (Chakla – 1HFY27, Bandha - FY27, and Meenakshi - FY29), resulting in ~USD200/t in direct cost savings.

Expansion Roadmap

• Hindalco plans to expand value-added product offerings (both copper and aluminum) to cushion margins and achieve higher downstream EBITDA in India over the medium term.
• The Aditya FRP and battery enclosure facility is currently ramping up, while the commissioning of the IGT, battery foil, and AC fin is expected.

Financials

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• Hindalco's Indian operation has been nearly net debt-free, while its consolidated net debt-to-EBITDA ratio stood at 1.7x as of Dec'25, mainly attributed to Novelis Bay Minette expansion.

Recommendation

• We reiterate our BUY rating on Hindalco with a SoTP-based Target Price (TP) of INR1,110, premised on our Sep'27 estimates.