HINDALCO - Hindalco Industries Ltd. Share Price

Management provided a positive outlook for Hindalco Industries, focusing on growth and sustainability. Key forward-looking points include:

1. Financial Performance: In Q4 FY '25, the consolidated business segment EBITDA increased by 24% year-on-year to Rs. 9,774 crores, while the net profit after tax rose by 66% to Rs. 5,284 crores. For Q1 FY '26, they are hedged at around 15% of aluminum at $2,695 per ton and 13% currency at Rs. 86 per dollar.

2. Strategic Acquisitions: The proposed acquisition of the Bandha coal mine aims to secure resources to support aluminum smelting operations. The mine has a lifespan of approximately 45 years and is close to the Mahan smelter, crucial for ensuring resource security.

3. Capital Expenditure Plans: For FY '26, the CAPEX guidance is between Rs. 7,500 crores to Rs. 8,000 crores, focusing on upstream projects and capacity expansion.

4. Aluminum Demand: The aluminum demand in India is projected to reach 1.435 million tons in Q4 FY '25, reflecting an 18% year-on-year growth, driven by sectors such as electrical, packaging, and consumer durables.

5. Sustainability Initiatives: Hindalco aims to increase its renewable energy capacity to 300 megawatts and improve its greenhouse gas emissions through more renewable energy utilization. The aluminum-specific GHG emissions stood at 19.39 tons of CO2 per ton of aluminum, with plans to reduce this as renewable capacity increases.

6. Downstream Growth: Management indicated optimism in the downstream aluminum business, expecting steady increases in EBITDA due to transitioning to higher value-added products, with the target of quadrupling downstream EBITDA by FY '30 relative to FY '24.

7. Novelis Performance: Novelis' EBITDA is targeted to improve as they work on expanding recycling facilities and increase the percentage of recycled content in their aluminum products to 75% by FY '30.

Overall, the management's outlook emphasizes growth, sustainability, and strategic resource management amidst a dynamic global economic environment.

Question from Amit Dixit: "Could you elaborate on the product mix change in the downstream aluminum business and whether the recent EBITDA per ton increase is sustainable?"

Answer: We're optimistic about the product mix improving in the coming quarters. In Q4, demand surged for packaging and foil stock, contributing positively to pricing. We also introduced more value-added products like battery enclosures. We expect steady increases in downstream EBITDA due to these developments, though short-term volatility may arise based on market conditions. Overall, our capacity expansions will enhance our product mix, supporting ongoing growth.

Question from Amit Dixit: "Your greenhouse gas emission intensity remained unchanged year-on-year. Why is that and is this the peak intensity?"

Answer: Our carbon intensity is tied to coal use, and until we implement our 100 MW of renewables at Aditya, we may not see reductions. While we've achieved significant decreases in alumina's carbon footprint via renewables, the real challenge remains with aluminum smelters. More renewable energy deliveries will drive down emissions, but reaching lower carbon intensity requires our coal reliance to diminish substantially.

Question from Prateek Singh: "Can you elaborate on the EMIL mining acquisition and the status of the Novelis Fairmont facility?"

Answer: The Bandha coal mine acquisition secures coal for our Mahan smelter, crucial as coal availability declines in the Northern Coalfields. We're progressing with shareholder approval on Bandha's takeover at cost. Regarding Fairmont, we received interest for a non-binding sale offer; we're assessing this and will move to closure if no agreement materializes soon.

Question from Pallav Agarwal: "What is your CAPEX guidance for FY '26 and '27?"

Answer: For FY '26, our CAPEX guidance is between Rs. 7,500 crores and Rs. 8,000 crores. FY '27 might see even higher CAPEX due to upstream projects ramping up. I'll provide more detailed guidance in Q3 when we have clearer visibility on cash outflows.

Question from Satyadeep Jain: "What is the status of your ongoing projects, and are there any surprises expected?"

Answer: Most engineering for projects, like the Aditya refinery, is complete, ensuring we stay on schedule. While two new projects are in the engineering phase, I don't anticipate major surprises. We remain confident about timely commissioning and cost management across our initiatives.

Question from Ritesh Shah: "What is your sourcing mix for bauxite, particularly concerning any long-term arrangements with OMC?"

Answer: Our total bauxite requirement is around 7 million tons annually, sourced mostly internally. We have a signed long-term agreement with OMC for 3 million tons aligning with our upcoming refinery. Currently, we do not have ongoing contracts with OMC but occasionally source from them as needed.

Question from Somaiah V: "What is the impact of recent tariffs on Novelis, especially concerning the Midwest premium and scrap imports?"

Answer: Tariffs have driven Midwest premiums higher, benefiting our recycling margins despite increased costs from imports. The cabinet deals expected to unfold might reduce future tariff impacts. Overall, we're closely monitoring these developments while ensuring efficient operations against these challenges.

Question from Prateek Singh: "Why only quarterly guidance for alumina, and what's the outlook for pricing?"

Answer: We can confidently project alumina sales of about 700 KT to 800 KT for the year. I provided quarterly guidance since it's typical for us to assess quarterly operational dynamics. Accounting for global supply uncertainties, we anticipate alumina prices stabilizing between $350 to $400, influenced by Guinea's political landscape affecting bauxite supply.