Hindalco a compelling investment case, says HSBC

HSBC has retained buy rating on Hindalco Industries with a target price of Rs 260 after it hosted the company's management for investor meetings in Singapore.

The management clearly stated its intention not to infuse further capital in Idea, said HSBC. The management believes the issues marring the telecom sector are too big to be solved by further capital infusion, the brokerage said. Rising contribution from Novelis and the potential merger with Aleris, which is not in the base case, make Hindalco a compelling investment case, the brokerage said.

"Management continued to exude confidence in Novelis’s ability to post EBITDA/t (tonne) in excess of USD400 on a sustainable basis. Novelis EBITDA/t has been improving over several quarters partially aided by higher import tariffs in the US and China’s crackdown on imported waste, improving scrap availability in other regions," said HSBC.


"Management believes USD400/t guidance to be conservative, even if the above mentioned benign factors were to
reverse, as improving product mix and cost efficiencies should support margins," said HSBC.