Hindalco Steady going at Novelis

Research evidence excerpt

J P M O R G A N

Asia Pacific Equity Research

06 August 2026

Hindalco

Steady going at Novelis

Overweight

HALC.NS, HNDL IN

Price (05 Aug 26):Rs1,040.00

Price Target (Sep-27):Rs1,190.00

Novelis posted a strong 1Q print with Adj EBITDA (net of Oswego impact &

insurance recovery) exceeding our estimate by 6%. We are encouraged that

Novelis is currently in the midst of commissioning the Bay Minette project

(November timeframe), with commercial shipments targeted from 1QFY28. The

cost and timelines are on track as ~76% of the project capex has been incurred and

customer qualification process will take roughly two months. Full ramp up will

take 18-24 months and the company will incur ~$150mn startup costs (below

EBITDA). However, management reiterated the $1,000/t EBITDA potential (vs.

1Q $525/t) & reiterated that demand is not a concern. Novelis’s Oswego plant will

be ramped up to full capacity by the end of 2Q and 3Q/4Q should see supply chain

normalizing (leading to an easing in tariff costs). Novelis reiterated FCF positive

position by end FY27 aided by normalized volumes and WC release & ND/

EBITDA to be <4x by FY27 end (peaking in 2QFY27). Insurance recovery will be

a key monitorable as management highlighted $800mn of proceeds will take some

time to recover, potentially stretching into FY28. Hindalco reports consolidated

earnings on Aug 7, where higher LME Al prices should continue to provide

earnings tailwinds in FY27. Maintain OW.

1QFY27 results scorecard: Novelis’ Adj EBITDA of $516mn & Adj

EBITDA (excl Oswego impact & insurance recovery) of $498mn were well

ahead of JPMe at $469mn. Adj EBITDA/ton (excl Oswego impact & insurance

recovery) came in at $525/t vs. JPMe at $523/t. Overall FRP shipments

declined 5% YoY to 916kt but were ahead of JPMe at 896kt. Net debt to

EBITDA increased to 4.5x (vs. last year 3.2x). Adj EBITDA of $516mn

includes a $18mn positive impact ($47mn insurance proceeds partially offset

by $29mn of Oswego hit). Shipment loss due to Oswego impact was 33kt. Adj

EBITDA was thus $498mn at 949 kt, translating to $525/t EBITDA. The Adj

EBITDA includes the impact of $70mn tariff costs.

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