IDFC/SSKI on Hindalco Industries
IDFC/SSKI has upgraded the rating on Hindalco Industries to Outperformer with a target price of Rs 156.
A report released said: The wheel is turning for Novelis; demand seems to be returning as key clients emit improving business confidence while the loss-making price ceiling and derivative contracts too are due to expire by December 2009. With improving operational cash flows, Novelis would cease to be a drain on parent balance sheet.
In India, large greenfield projects have picked up pace and offer huge volume growth potential with capacity slated to increase ~3.5x by FY14. Though adjusted gearing would remain high at 2x as of March 2011, we believe the worst is behind though any hiccup in the on-going recovery in developed markets is a key risk to Novelis's profitability.
Given the emerging long-term growth visibility and that the worst behind for Novelis, we upgrade the stock to Outperformer with a 12-month price target of Rs 156.
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