Novelis expects improved outlook in near term, Q4FY25 to outperform Q3

Hindalco Industries’ consolidated results for third quarter of financial year 2025 (Q3FY25) were in line with Bloomberg consensus estimates.

Management expects operating profit margins to jump at Novelis, but India margins may be range bound.

The consolidated Q3FY25 net sales stood at Rs 58,400 crore (+11 per cent Y-o-Y /flat Q-o-Q).

Consolidated operating profit stood at Rs 7,600 crore (+29 per cent Y-o-Y and down 4 per cent Q-o-Q).

Adjusted net profit stood at Rs 3,800 crore (+61 per cent Y-o-Y/down 12 per cent Q-o-Q).

For the first nine months of financial year 2025 (9MFY25), revenue stood at Rs 173,600 crore (+9 per cent Y-o-Y), operating profit came in at Rs 23,000 crore, (+34 per cent Y-o-Y), and adjusted net profit was Rs 11,300 crore (+63 per cent Y-o-Y).

The net debt-to-operating profit ratio rose to 1.33 times in Q3FY25 from 1.19 times in Q2FY25.

Higher demand from China has led to higher scrap aluminium prices, reducing the metal benefit from scrap inputs.

Upstream revenue in aluminium stood at Rs 9,990 crore in Q3FY25 (+25 per cent Y-o-Y).

The aluminium upstream operating profit stood at Rs 4,220 crore (+73 per cent Y-o-Y). The operating profit margins stood at 42 per cent (31per cent in Q3FY24).

Downstream revenue stood at Rs 3,200 crore (+25 per cent Y-o-Y) with higher volume.

Downstream aluminium sales stood at 99,000 tonnes in Q3FY25 (+10 per cent Y-o-Y).

Downstream operating profit stood at Rs 150 crore (+36 per cent Y-o-Y).

The operating profit per tonne stood at $179 (flat Q-o-Q) in Q3FY25 compared to $146 in Q3FY24.

The copper revenue stood at Rs 13,700 crore (+15 per cent Y-o-Y) with higher copper prices.

The copper operating profit was at Rs 780 crore, up 18 per cent Y-o-Y.

Copper sales were at 120,000 tonnes (up 1 per cent Y-o-Y) in Q3FY25 and copper continuous cast rod or CCR sales were at 95,000 tonnes (up 1 per cent Y-o-Y).

Novelis’ Q3FY25 volume stood at 904,000 tonnes (down 1 per cent Y-o-Y, down 4 per cent Q-o-Q), due to lower VAP and automotive shipments.

Revenue stood at $4.1 billion (+4 per cent Y-o-Y, down 5 per cent Q-o-Q).

Adjusted operating profit stood at $367 million (down 19 per cent Y-o-Y, down 21 per cent Q-o-Q), due to higher aluminium scrap prices.

The adjusted net profit stood at $125 million (down 36 per cent Y-o-Y/ down 38 per cent Q-o-Q).

The net debt-to-adjusted operating profit ratio stands at 2.9 times (2.5 times in Q2FY25).

As of now, Novelis may not be significantly impacted by the tariff war.

It may secure exemptions for the cross-border trade between Canada and the US. But there may be short-term cash flow impact.

Hindalco’s coal costs were stable. Management guided new captive coal mines (Chakla + Meenakshi coal mines) will reduce coal costs by 30 per cent.

Chakla will start operations by end-FY26.

Hindalco has hedged 35 per cent of its aluminium production at $2,600/tonne for Q4FY25 and secured 12 per cent hedging at $2,700 per tonne for FY26.

Hindalco has commissioned 6.3MW of solar capacity, bringing total renewable energy power to 189MW.

Another 100MW hybrid capacity will be commissioned in H1CY25 and another 20MW of hybrid capacity (solar + wind) is to be operational by the second half of financial year 2026 (H2FY26).

Treatment and refining charges (TC/RC prices) at $0.054/450 grams (down 73 per cent Y-o-Y from $0.205 in CY24), has increased smelting costs and hurt margins.

Restarting of Indonesia’s copper concentrate exports will provide relief. Management expects scrap prices to normalise.

In copper, expansion of Aditya Alumina Refinery (850,000 tonnes) in Odisha is under construction, with a total capex of Rs 7,500-8,000 crore.

The Aditya Aluminum FRP project of 200,000 tonnes will be commissioned in June’25 bringing downstream capacity to 600,000 tonnes.

The expansions of the 180,000 tonnes aluminium smelter and 300,000 tonne KT copper smelter are awaiting environmental clearances and will be commissioned over FY 28-29.

The Silvassa Extrusion Facility will be commissioned in mid’25.

Capex guidance is Rs 8,000 crore for FY26 and Rs 6,000 crore for FY25 (completed Rs 4,400 crore in 9MFY25).

Global aluminium demand is driven by solar and EVs, but construction is weak.

Copper consumption outpaced production. Beverage can demand remains strong, offsetting muted demand in the European and Chinese automotive sectors.

Novelis management guided that Q4FY25 will be better than Q3.

Novelis raised $750 million of senior notes in Jan’25 and will raise more later in CY25 to fund the Bay Minette facility.

The capex budget of $4.1 bn is unlikely to be revised upwards and commissioning is scheduled for H2CY26.

Targets for the stock range from Rs 640 to Rs 730.

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