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Shares of Hindalco Industries Ltd. jumped nearly 4% on Wednesday, boosted by solid fourth-quarter results from its U.S. subsidiary, Novelis. Positive news about the Novelis Oswego hot mill restarting sooner than expected also supported the stock, promising to improve earnings faster than previously forecast.
Oswego Mill Restart Accelerates Earnings Recovery
Analysts note that the Oswego mill is now expected to resume operations in the coming weeks, well ahead of the previously guided June 2026 timeline. Operations are anticipated to quickly return to pre-incident levels. This faster restart is set to strengthen Novelis' earnings recovery starting in the second quarter of fiscal year 2027, aided by normalizing volumes, improving scrap spreads, and global cost-efficiency initiatives.
Novelis Reports Strong Fourth Quarter Despite Fire Impact
Novelis reported fourth-quarter revenue of $4.8 billion, up 4.4% year-on-year, driven by higher LME prices and premiums. Adjusted EBITDA decreased 3% year-on-year to $459 million, but EBITDA per tonne rose 10% to $544, thanks to favorable scrap conditions and cost savings. The company absorbed an EBITDA loss of $53 million from the Oswego fire and faced a $27 million tariff headwind, though it received $41 million in insurance recoveries.
Novelis revised its estimated free cash flow impact from the Oswego fire to $1.7 billion, expecting to recover 70-75% through insurance. While the North American business was affected by the Oswego disruption, Europe, South America, and Asia showed mixed results, with Europe seeing significant gains from rerouted volumes.
Brokerages Maintain Positive Stance on Hindalco
Multiple brokerages have reiterated a 'Buy' rating on Hindalco. JM Financial set a target price of ₹1,210, noting Hindalco's $950 million infusion into Novelis in FY26 with no expected further infusions, though short-term borrowing is possible. Motilal Oswal Financial Services also recommended 'Buy', pointing to Novelis' target of over $600/tonne EBITDA in the next 2-3 years and projected savings from cost-efficiency programs. Emkay Global Financial Services maintained a 'Buy' rating with a target of ₹1,100, acknowledging potential near-term leverage increases but anticipating moderation by the end of FY27.