Brokers’ Call: JPM pegs Hindalco Industries at Rs 160

JP Morgan has maintained its ‘Overweight’ rating on Hindalco Industries with a target price of Rs 160 given its inexpensive valuations and continued strong downstream earnings at Novelis.However, key risks remain a sharp decline in US subsidiary earnings and Utkal project delays.

It said, against investor concerns that Novelis (Hindalco’s 100% subsidiary) would report a weak Q4, it reported adjusted EBITDA of $240 million, marginally ahead y/y and in line with JPM. Reported net profit for FY13 stood at $202 million (Q4 at $59mn).”These are broadly strong numbers.

No guidance was given for FY14 against an earlier practice of EBITDA (adjusted) guidance; this does not imply a weak FY14, in our view. With many of the expansions likely to come onstream, startup costs could weigh on earnings, but we expect Novelis to report steady earnings for FY14, with capex benefits flowing through in FY15,” it said.