Nuvama awaits a better entry point to buy this Aditya Birla Group stock

Shares of Hindalco Industries Ltd. opened as much as 4% lower on Friday, February 13, amid concerns around rising leverage at its subsidiary Novelis and near-term earnings pressure.

Novelis' debt is expected to rise to $8 billion from $6.2 billion before insurance proceeds, translating into an uptick of roughly ₹16,000 crore. The subsidiary may require a mix of equity and debt infusion going ahead.

Meanwhile, LME aluminium for Q4 is largely hedged at $2,807 per tonne versus the prevailing market price of $3,097.

Despite these overhangs, brokerages remain largely constructive following Hindalco's third-quarter earnings, though some prefer to wait for lower levels to re-enter.

HSBC maintains a 'Buy' rating with a price target of ₹1,210, citing robust underlying earnings momentum.

It said that the spike in net debt was partly due to higher working capital in India, which is expected to reverse. It also flagged South32's production guidance cut as a sign of a tightening aluminium market.

Jefferies has a 'Hold' rating with a target of ₹890. It said Q3 EBITDA, adjusted for the fire incident at Novelis, declined 10% sequentially and was broadly in-line with estimates.

While the India business saw a 7% QoQ improvement in EBITDA, it was slightly below expectations due to weaker aluminium performance.

The brokerage has raised FY27 and FY28 EPS by 6% on higher aluminium price assumptions but remains concerned about repeated fire incidents at Novelis and the rising debt profile.

CLSA retains an 'Outperform' rating with a target of ₹1,035. It pointed to pressure on India aluminium profitability from higher cost of production, lower alumina and downstream profitability, and adverse hedging impact.

However, it expects a recovery in subsequent quarters and a structural improvement once captive mines ramp up.

Consolidated net debt rose ₹18,000 crore QoQ to ₹59,400 crore due to the Novelis fire impact and elevated working capital in copper, which it expects to normalise in Q4.

Post commissioning of Bay Minette and receipt of insurance claims, leverage is likely to decline from FY27-end. The company has reiterated its commitment to maintain net debt to EBITDA below 2x.

Nuvama maintains a 'Hold' rating with a target of ₹913, valuing the stock at 6x FY28E EV to EBITDA.

It has cut EBITDA estimates by 9%, 6% and 5% for FY26, FY27 and FY28, respectively, factoring in lower profitability at Indian operations.

It expects Novelis earnings to remain muted in Q4FY26, with recovery likely in H2FY27, and prefers to wait for better entry levels.

On the operational front, Q3 numbers were largely in line. Net profit rose to ₹3,017 crore from ₹1,463 crore YoY, while revenue increased 23.1% to ₹29,264 crore.

EBITDA climbed 59.5% to ₹4,248 crore, with margins expanding to 14.5% from 11.2%.

Total aluminium and copper EBITDA came in broadly in-line with estimates. Upstream aluminium performance was led by strong operations and favourable macros.

The Aditya smelter expansion remains on track to lift upstream capacity to 1.71 million tonnes by FY29, while captive coal mines are expected to reduce production costs.

In downstream aluminium, extrusion volumes rose 29% on strong demand, while FRP volumes increased 6% driven by ramp-up at Aditya FRP.

The rise in net debt was attributed to higher working capital, debt restatement amid rupee depreciation, elevated capex and restoration expenses following the fire at the Oswego plant.