Hindalco hits 52—week high as CLSA expects stock to double in four years

MUMBAI: Shares of aluminium and copper major Hindalco surged 7 per cent intraday to hit 52-week high after CLSA upgraded the stock to ‘Buy’ from ‘Sell.’

The stock hit day's high of Rs 177.10 on the BSE; up 7.92%.
According to the brokerage, the company’s subsidiary Novelis will be a big beneficiary of the accelerating shift of global automakers from steel to aluminium given its strong franchise and upcoming capacities. This theme is driving higher valuations multiples for global peers, implying a higher value for Novelis as well.

“Our analysis of the new India smelters suggests that their cost structure is not as bad as we thought. A multi-year deleveraging cycle should boost Hindalco’s equity value starting FY16,” the brokerage said.

CLSA is of the view the stock may double in next four years time. It has increased Hindalco’s target price to Rs 215, an upside of 31 per cent, from its previous closing price of Rs 164.

According to analysts Hindalco is extremely leveraged on a consolidated basis and the company may announce follow-on public issue or a QIP.

“When you see a flurry of reports coming into the market, it is also an indication that some activity of this kind would be taking place. They would need to restructure their capital base and then risks of Hindalco will significantly come down,” said Market Analyst, Satish Ramanathan.

“Having said that, Hindalco and Indian aluminium companies are at the lowest quartile in terms of manufacturing cost and that will continue for some time. Moreover, we have to remember that China is cutting back its aluminium production and India could be a beneficiary to that extent,” Ramanathan added.

Trading strategies on Hindalco:

Sandeep Wagle, Founder & CEO, Power My Wealth, www.powermywealth.com

“Buy Hindalco with a stoploss of Rs 170 and target of Rs185. I would not be surprised if it exceeds on the upside and even goes beyond Rs 200 given a little more time.

Mitesh Thacker, Technicalanalyst, miteshthacker.com

Buy Hindalco with a stoploss below Rs 171.50 for target of Rs 185. Fresh swing and consolidation breakout is seen in the counter.

At 02:30 p.m; the stock was at Rs 176.05, up 7.28 per cent, on the BSE. It touched a high of Rs 176.70 and a low of Rs 166 in trade today.