Hindalco dives 15% as Novelis hikes capex and delays key project. Analysts react, slashing share price targets. Get the latest scoop and outlook for the stock.
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Nashik, Maharashtra, India – February 13, 2024
Shares of Hindalco Industries Ltd. witnessed a sharp decline of 15% in today’s trading session, following news that its subsidiary, Novelis Inc., revised its capital expenditure (capex) plans for the Bay Minette project upwards by 65%. This revision, coupled with a one-year delay in the project timeline, sparked concerns among investors about the potential impact on Hindalco’s financials and future growth prospects.
Novelis’ Revised Capex Raises Eyebrows
Novelis, the world’s largest producer of rolled aluminum products, announced the updated capex plan during its December quarter earnings release. The Bay Minette project, located in Alabama, USA, aims to expand Novelis’ flat rolled products capacity to cater to the growing demand in the automotive and aerospace sectors. However, the significant increase in capex and the project delay raised concerns about potential cost overruns and execution risks.
Hindalco Bears the Brunt
As the majority owner of Novelis, Hindalco is directly impacted by its subsidiary’s financial performance. The upward revision in capex and the project delay could potentially strain Hindalco’s cash flow and impact its profitability in the near term. This negative sentiment translated into the sharp sell-off in Hindalco’s shares today.
Analysts React, Adjust Share Price Targets
Following the news, several brokerage firms and analysts revised their share price targets for Hindalco downwards. Here’s a snapshot of some key analyst opinions:
- Motilal Oswal: Downgraded to “Neutral” from “Buy”, with a revised target price of ₹450.
- CLSA: Maintains “Sell” rating, with a revised target price of ₹420.
- JPMorgan: Downgraded to “Underweight” from “Neutral”, with a revised target price of ₹435.
Looking Ahead
The near-term outlook for Hindalco remains cautious, with investor sentiment dampened by the revised capex plans and project delay at Novelis. However, some analysts believe that the long-term growth potential of the Bay Minette project remains intact, and could offer positive returns in the future. The company’s performance in the coming quarters and its ability to mitigate the impact of the revised capex plan will be crucial in determining the stock’s future trajectory.
Disclaimer
This article is for informational purposes only and should not be considered as investment advice. Please consult with a qualified financial advisor before making any investment decisions.
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