- 07 Nov 2024
- ICICI Securities
NOVELIS REPORTS MUTED PERFORMANCE IN Q2FY25; PAIN TO PERSIST IN H2FY25
News: At Novelis (wholly owned subsidiary of Hindalco), Total operating income for the quarter came in at $4.3 billion up 5% YoY & 2.6% QoQ with shipments of flat rolled product at 945 kilo tonnes (kt), up 1% YoY & flat QoQ. Adjusted EBITDA for the quarter came in at $462 million with EBITDA/tonne at $489/tonne, down by 6% YoY, 7% QoQ. This includes one-time negative $25 million impact from Sierre flood outage. Excluding this impact, Adjusted EBITDA stood at $487 million with EBITDA/tonne at $502/ton, down 3% YoY, 5% QoQ. Net Income for the quarter stood at $128 million down 18% YoY.
Views: EBITDA per tonne for the quarter came in below our expectation and was impacted due to sharp rise in aluminium scrap prices and unfavourable product mix amid slowdown in auto segment. Moreover, it anticipates further impact on operating performance due to same over the next two quarter as well. Consequently, Hindalco’s financials will also be impacted given Novelis contributes ~60% and ~56% of Hindalco’s consolidated sales and EBITDA. However, from a long-term perspective, we maintain a positive outlook on the stock supported by healthy demand for Aluminium metal due to its growing applications in the automobile and renewable energy sectors, strategic capacity expansion at Novelis and Hindalco. However, in the near term, it lacks triggers for up move except for any surprise on Chinese stimulus.
Impact: Negative