Hindalco - Stable Cash Flows, Lower Financial Leverage To Drive Growth: Axis Securities Initiates Coverage
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Axis Securities Report
We initiate coverage on Hindalco Industries Ltd. on a positive note as the stock is currently trading at 5.4 times 12MF enterprise value/Ebitda and appears cheap against its long-term average of 6.5 times enterprise/Ebitda.
While aluminium prices witnessed notable price increase year-to-date, primarily due to major disruptions led by production curbs in China, we believe Hindalco's outlook remains strong with London Metal Exchange prices staying above $2,500/tonne.
China continues with its ambitious decarbonisation plan and has imposed stringent limits on carbon-intensive industries. This supports our assumption that the country will stick to its smelting capacity cap of 45 million tonnes per annum.
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