China Aluminium Network
Hold Hindalco, target Rs 150: HDFC Securities
Edited by : AL CIRCLE
1 min read
HDFC Securities has given a hold recommendation on Hindalco with a target price of Rs 150. The stock has risen 38 per cent from the start of the year and is now trading at 5.7 times FY13EV/EBITDA.
"We like the company for its hedged aluminium price play and stable cash flows from Novelis, potential for rampup in domestic projects and low impact from potential mining bill," the brokerage said.
"That said, Novelis showed volume softening in the past quarter and is prone to a volume downside in case of a soft global growth/recession. While production cuts have been announced in aluminium, the key trigger for aluminium price support, we believe will come from the Chinese volume cuts. We revised the FY13EV/EBITDA multiple upwards to 5.7 times from 5.3 times to account for increases in pure play valuation globally. We maintain our earnings estimates and a hold recommendation on the stock with a revised target price of Rs 150. Fall in aluminium demand would be the key downside risk," the brokerage said.
"We like the company for its hedged aluminium price play and stable cash flows from Novelis, potential for rampup in domestic projects and low impact from potential mining bill," the brokerage said.
"That said, Novelis showed volume softening in the past quarter and is prone to a volume downside in case of a soft global growth/recession. While production cuts have been announced in aluminium, the key trigger for aluminium price support, we believe will come from the Chinese volume cuts. We revised the FY13EV/EBITDA multiple upwards to 5.7 times from 5.3 times to account for increases in pure play valuation globally. We maintain our earnings estimates and a hold recommendation on the stock with a revised target price of Rs 150. Fall in aluminium demand would be the key downside risk," the brokerage said.
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