Hindalco Industries shares decline 3% in early trade; here is why

According to news reports, another fire ignited on Thursday at Novelis' aluminium plant in Oswego, New York, that supplies Ford's lucrative F-150 truck line, about two months after a blaze halted much of the facility's production.

Ford in October cut its profit forecast, citing a gross hit of up to $2 billion from the incident. The Dearborn, Michigan, automaker expects to offset about $1 billion of that next year by increasing production at certain truck plants, it said in October.

News reports note that although Novelis serves multiple automakers, Ford is a key customer because its trucks rely heavily on aluminium bodies. After the September fire, Ford indefinitely suspended production of the F-150 Lightning in Michigan, and output of its gas-powered trucks has also been affected. The Oswego facility later saw a minor fire in October.

HSBC India, in its latest note, said that for Hindalco, the impact of a series of setbacks suffered by Novelis, its US subsidiary, will fade from FY27. Besides, its India business outlook remains strong, given its integrated aluminium operations.

The research report added that the large $10 billion capex between India and Novelis will scale up earnings sharply from FY28e onwards, even as the market is not pricing in any earnings increase.

The research report states that the outlook for aluminium stocks such as Hindalco and NALCO is bright.

HSBC said aluminium is its most preferred commodity, given China’s capacity cap and steady global demand.

"We also have a positive view on silver and expect prices to remain firm, given increasing investor demand. We see steel as a more cyclical opportunity, given the seasonality of demand and lower Chinese steel production. The safeguard duty of 12% in India provides domestic steel companies with earnings support. We see coal and iron ore as being relatively more challenged, given looser supply-demand balances."