Hindalco shares fall as Novelis drag hits; near-term pressure likely

Shares of Aditya Birla Group company Hindalco Industries Ltd. are trading lower on Thursday, February 12, after its US subsidiary Novelis reported quarterly results marked by a fire-related disruption and the impact of higher tariffs.

Novelis reported an 11% YoY decline in total flat rolled product shipments to 809 kt, with an estimated 72 kt shortfall due to the fire at its Oswego facility in New York.

Production at the Oswego hot mill remains disrupted, with operations expected to restart only by late Q2 calendar 2026.

The operational setback is likely to weigh on performance until Q2CY26.

Adjusted EBITDA fell 5% YoY to $348 million, hit by an estimated $54 million impact from the Oswego fire and $34 million due to tariffs.

Excluding the impact of tariffs and the fire on shipments and earnings, Q3FY26 adjusted EBITDA per tonne stood at $495.

The company estimates a total free cash flow impact of $1.3-1.6 billion from the Oswego fire before insurance, including an adjusted EBITDA hit of $150-200 million and shipment losses of 150-200 kt.

Around 70-80% of the cash flow and EBITDA impact is expected to be recoverable through insurance claims.

Novelis' leverage ratio has climbed to a 21-quarter high, and net debt is expected to rise further due to the fire-related disruption, ongoing capex for the Bay Minette greenfield project, and elevated working capital amid higher aluminium prices.

The company received a $750 million equity infusion from its parent in December 2025 and is evaluating an additional $200 million infusion to strengthen its balance sheet.

What are brokerages saying

CLSA has an 'Outperform' rating on Hindalco with a price target of ₹1,035 per share. The brokerage said the stock could face near-term pressure due to weak, one-off driven Novelis results.

CLSA expects adjusted EBITDA per tonne to expand in Q4 and beyond, compared with $430 in Q3, led by the absence of tariff impact, spread expansion and cost savings.

However, reported EBITDA and PAT are likely to remain under pressure for at least the next couple of quarters due to the one-off impact of the Oswego fire.

CLSA added that delayed insurance recovery and ongoing capex may necessitate another $200 million equity infusion from the parent.

A rise in working capital is also expected to weigh on free cash flow.

HSBC maintains a 'Buy' rating with a price target of ₹1,240.

The brokerage said the Oswego fires dented an otherwise strong operating performance, with adjusted EBITDA per tonne at $430, up 6% YoY.

Management has reiterated that full plant commissioning at Bay Minette is on track for H2CY26, with cold mill commissioning set to begin in March.

Brokerage firm Nuvama has maintained a 'Hold' rating on Hindalco and raised its target price to ₹923 from ₹838.

It expects consolidated EBITDA to decline 10% in FY26, followed by 8% growth each in FY27E and FY28E, factoring in higher aluminium prices.

The brokerage has advised investors to await lower levels to re-enter the stock.

Jefferies has also maintained a 'Hold' rating with a target price of ₹855, saying it prefers steel companies within the India metals and mining space.

Hindalco shares settled 0.24% lower at ₹966.60 on Wednesday and are up 8% so far in 2026.