Buy Hindalco Industries: target of Rs 550: ICICI Securities

Trading Calls - Equity F&O

ICICI Securities is bullish on Hindalco Industries recommended buy rating on the stock with a target price of Rs 550 in its research report dated December 21, 2021.

Broker Research

December 22, 2021 / 04:52 PM IST

The research firm ICICI Securities believes earnings of apparel brands and retail companies under their coverage may surprise positively from Q3FY22E as the likely demand recovery may result in better than expected margin performance. Some of the costs savings achieved during pandemic may sustain and coupled with high operating leverage may lead to higher than pre-covid margins from Q3FY22E.  Stocks like Trent, V-Mart and Aditya Birla Fashion and Retail are the preferred picks backed by their strong and consistent track record of execution.

The research firm ICICI Securities believes earnings of apparel brands and retail companies under their coverage may surprise positively from Q3FY22E as the likely demand recovery may result in better than expected margin performance. Some of the costs savings achieved during pandemic may sustain and coupled with high operating leverage may lead to higher than pre-covid margins from Q3FY22E.  Stocks like Trent, V-Mart and Aditya Birla Fashion and Retail are the preferred picks backed by their strong and consistent track record of execution.

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ICICI Securities research report on Hindalco Industries

Hindalco’s decision to acquire Hydro’s aluminium extrusions business in India (Kuppam in AP) for Rs2.5bn (Link) falls within the envelope of Hindalco’s ‘Doubling the downstream’ strategy wherein the company has entailed a capex of US$ 1.1bn. The plant will also serve as an archetype for Hindalco’s upcoming extrusions plant in Silvassa (Rs7.3bn capex for 34ktpa greenfield plant). Once commissioned, the Kuppam and Silvassa units are expected to boost Hindalco’s total aluminium extrusions capacity from 60ktpa to 109ktpa. The transaction is expected to close by Q1CY22. Sales in extrusion market is driven by dealer network, differentiated by quick turnaround and increasing SKUs, and customers prefer distributed setup closer to demand footprint. This, in our view, will be a deviation from the current means of doing business in Hindalco.

Outlook

We maintain BUY on Hindalco; stated downstream shift excites us.

For all recommendations report, click here

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