Hindalco shares in focus as Novelis Q1 profit drops 36%, US tariffs to weigh further- Grow Mudra

Hindalco shares in focus as Novelis Q1 profit drops 36%, US tariffs to weigh further

12 Aug , 2025 By : Debdeep Gupta

Shares of metal major Hindalco Ltd will be in focus on Tuesday, August 12, after its U.S.-based subsidiary Novelis reported its earnings show for the quarter ended June 30, 2025. Novelis posted a net income of $96 million, down 36 percent year-on-year for the first quarter of fiscal year 2026.

Net income, excluding special items, declined 43 percent to $116 million. Adjusted EBITDA slipped 17 percent to $416 million, and adjusted EBITDA per tonne was down 18 percent to $432.

For the quarter ended June 30, 2025, net sales climbed 13 percent to $4.7 billion, supported by stronger average aluminium prices and a 1 percent rise in total rolled product shipments to 963 kilotonnes.

Novelis told analysts during an investor call, that despite tariff-related pressures, the aluminium smelting company is eyeing long-term growth through its Alabama greenfield rolling and recycling plant that will have a 600kt capacity upon completion.

The company is aiming to defend volumes through tariff mitigation strategies, after it shared that the Q1FY26 adjusted EBITDA includes a net negative tariff impact of $28 million.

The Hindalco subsidiary has projected the FY26 capex to be in the range of $1.9-2.2 billion. Novelis CFO Dev Ahuja said the company is 'finding opportunities' to streamline costs, in response to the 'challenging external environment'. US President Trump’s 50 percent tariff on steel and aluminium is expected to impact prices of electronics, cars and several other products.

Domestic brokerage Nuvama said, "High aluminium prices in the US pose downside risk to overall demand if aluminium imports tariff continue in US. Though management guides adjusted EBITDA bottoming out in Q1FY26, any major recovery is not visible until Q3FY26." The brokerage maintained its 'buy' call, with a price target of Rs 776.

Jefferies maintained a 'hold' rating with a target price of Rs 690 per share. Novelis’ Q1 EBITDA came in below estimates, with volumes up just 1 percent year-on-year. EBITDA per tonne fell 13 percent quarter-on-quarter due to an unfavourable product mix and US tariffs.

CLSA retained its 'outperform' call with a target price of Rs 850 apiece. Novelis’ Q1FY26 adjusted EBITDA missed estimates due to weaker profitability. Profitability is expected to stay subdued for the next two quarters before improving in Q4.