Hindalco stock surges to near 1-year high after 23% rally in 8 weeks. Should investors jump in?

Indian stock market: Hindalco Industries, the flagship company of the Aditya Birla Group and one of the world’s largest aluminum rolling companies, saw its shares make significant strides on Dalal Street in recent sessions following stimulus measures announced by China—the world’s largest producer and consumer of base metals.

The world’s second-largest economy announced a series of measures last week, including a larger fiscal deficit amid escalating trade tensions with the U.S., and set its GDP growth target for FY25 at 5%, fueling hopes that metal prices will remain resilient and the demand will stay strong.

Donald Trump’s 20% tariff announcement on Chinese imports initially created a sense of uncertainty among investors, fearing it would lead to an economic slowdown. However, Beijing’s response with large stimulus measures has reinforced investor confidence, resulting in a notable uptick in base metal prices.

The positive sentiment, along with a softening US Dollar Index, bolstered a rally in domestic metal stocks last week, with Hindalco becoming one of the top gainers, rising 9%, causing the stock to gain 22.6% in just eight weeks, outperforming the Nifty Metal index, which gained 8% in the same period.

The rally has also brought the stock closer to its all-time high of ₹772, with current levels suggesting it is just 9.3% away from touching that mark.

Apart from the China stimulus boost, the rally was also supported by major global players like Alcoa and Norsk Hydro, which hinted at a global aluminum deficit of 550k tonnes in CY25—marking the first deficit in three years following a period of surplus—driven by improved demand outside China.

According to domestic brokerage firm JM Financial, the cooling-off in global aluminum production growth is primarily driven by China nearing its 45 MTPA capacity cap, along with limited expansions outside China due to higher production costs.

Additionally, sustained demand in Europe and North America, particularly in the packaging and electrical sectors, is further influencing market dynamics, while building, construction, and automotive demand is expected to improve in 2HFY25.

The brokerage also believes that Trump’s announcement of a 25% tariff on all aluminum imports into the U.S. will have minimal impact on India, given that India exports only 6-8% of its total aluminum output to the U.S. and remains one of the lowest-cost aluminum producers globally, thanks to its high-quality bauxite reserves.

Can Hindlaco shares rally more?

Global brokerage firm Jefferies, in its latest note, maintained its ‘buy’ rating on Hindalco, setting a target price of ₹800 per share, implying a 16% upside from its latest closing price of ₹691 apiece. 

The brokerage expects stable LME aluminum prices and strong demand for Novelis in 2025, particularly in the beverage can sector. Jefferies sees Hindalco as a solid investment in aluminum, supported by robust earnings visibility over the next six months.

Similarly, JM Financial continues to prefer Hindalco in the aluminum space, citing strong near-term earnings visibility. “The long-term outlook for Hindalco remains positive, driven by resilient performance in India’s aluminum operations, record-high run rates in the copper business, and enhanced coal security following the acquisition of the Meenakshi, Meenakshi West, and Chakla coal mines, along with bauxite procurement through the Aditya FRP project,” said the brokerage.

Given these positive factors, it reiterated its ‘Buy’ rating on the stock, maintaining a target price of ₹800 per share.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.