Hindalco Industries: High-quality assets; expansion on track

9 Oct 2023 , 10:24 AM

Recommendation: Buy

Target Price: Rs. 574

The 170ktpa FRP expansion is on track for June 2025 commissioning and would drive product portfolio and margin expansion. Aditya can accommodate another 360ktpa smelter, which seems likely now (post the recent announcement of 2mtpa Alumina refinery expansion), once the viability of green power is established. Hindalco’s ESG focus was strongly visible, in terms of minimizing environmental impact, an enthusiastic employee base and strong focus on EH&S.

High-quality, well-run plant at Aditya and Hirakud

Hindalco’s 360ktpa smelter, along with 900MW CPP at Aditya and the 135ktpa FRP line at Hirakud were impressive. This was in terms of operational excellence visible in higher than rated output (380ktpa from smelter), capability to produce the highest purity Aluminium (P2020 grade) and low power consumption (~13200KwH/t at Aditya). This has been achieved through increasing automation, well-established processes, gains from digitalization/AI and gains/control/flexibility emanating from backward integration.

170ktpa FRP expansion on track; smelter expansion possible

The planned 170ktpa FRP expansion at Aditya and Hirakud is on track for commissioning over December 2024 to June 2025. This includes debottlenecking of the hot mill capacity at Hirakud and addition of cast house and cold rolling and finishing capacity at Aditya. This capex (Rs. 36.8 billion), along with US$105 million capex for battery foil plant at Aditya will expand the FRP product offering and improve the profitability of the India Al business. Aditya has enough land to accommodate another 170ktpa FRP line and a similar-sized smelter (360ktpa) post the viability of ~1GW green power (floating solar, pumped hydro) is established.

Results of sustainability-focus visible at the site

Hindalco’s focus on sustainability was visible at the Hirakud and Aditya sites. Continuing investment in equipment and processes to minimize environmental impact and strong compliance by an enthusiastic and proud employee base who seemed to be taken care of has driven this. Strong focus on employee safety was evident as well.