Metals · investment research
Hindalco Industries
HINDALCO
Verdict
AVOID
low confidence · 3-5 years
Composite score
54/100
Weighted across all eight pillars
Business quality
69/100
Moat, returns, balance sheet, cash, management
Valuation score
19/100
At 64.9x against a sector median of 51.1x, the price embeds roughly 48% earnings growth. Anything less has to come out of the multiple.
Decision intelligence
Every conclusion states what would make it wrong
WHAT
Avoid for now — the business or governance risk outweighs the opportunity.
WHY
- • Balance sheet scores 89/100 (improving) — Leverage is serviceable from current cash generation.
- • Growth quality scores 13/100 (deteriorating) — Top-line compounding over the reported history.
- • Profitability & returns scores 86/100 (improving) — ROCE was 22.9% a year ago. Sustained ROCE above the cost of capital is what compounds value.
- • Valuation scores 19/100 (stable) — At 64.9x against a sector median of 51.1x, the price embeds roughly 48% earnings growth. Anything less has to come out of the multiple.
WHERE
Metals · Mid cap · position sized to at most 0% of an equity portfolio.
WHEN
Re-run this analysis after the next quarterly result.
WHAT IF WRONG
- • The thesis is wrong if ROCE falls below 22% or cash conversion stays under 70% for two straight quarters.
- • Valuation support fails below ₹794 of fair value — a drawdown to that level is a re-underwrite, not automatically a buy.
- • Watched risk: Cash conversion — Only 59% of profit converted to operating cash.
WHAT NEXT
- • Read the latest quarterly cash-flow statement alongside the P&L.
- • Check Global commodity prices — it moves the earnings base independently of execution.
- • Compare against the sector peers listed below before sizing anything.
Hindalco Industries is a competitively exposed metals business compounding revenue at 4.8% and profit at -7.4%, earning 26.1% on capital. Quality scores 69/100 and valuation 19/100 at 64.9x. The decision is therefore avoid with low confidence — this is analysis for learning, not investment advice.
What does this business actually do?
Business understanding before ratios
Hindalco Industries operates in the Indian metals sector with a mid-cap footprint and a listed market value of about ₹151k Cr.
Revenue is earned across 4 reported segments; profitability is driven by realisations, mix and operating leverage rather than one-off items.
Revenue drivers
- • Volume growth in the core segment
- • Realisation / pricing power
- • Mix shift toward higher-margin lines
- • Capacity utilisation
Cost drivers
- • Raw material and input costs
- • Employee cost inflation
- • Depreciation from recent capex
- • Distribution and marketing spend
Moat · 36/100
Regulatory / licence moat
Approvals and order pipelines limit how quickly new entrants can compete.
Segment mix
Growth -4.8% · margin 20.9% — Flat to declining; drags the consolidated growth rate.
Growth 19.3% · margin 11.7% — Fastest growing part of the mix — watch whether margins hold as it scales.
Growth 29.7% · margin 19.3% — Fastest growing part of the mix — watch whether margins hold as it scales.
Growth 28.1% · margin 31.8% — Fastest growing part of the mix — watch whether margins hold as it scales.
Analysis pillars
Score, trend and the drivers behind each — no bare numbers
Business & moat
62/100Trend: improving · weight 14%
- MoatRegulatory / licence moat
Approvals and order pipelines limit how quickly new entrants can compete.
- Segment concentrationFlat products is 26.6% of revenue
Revenue is spread across segments, which softens single-market shocks.
- EBITDA margin33.0%
Margin moved from 27.0% to 33.0% year on year.
Profitability & returns
86/100Trend: improving · weight 16%
- ROCE26.1%
ROCE was 22.9% a year ago. Sustained ROCE above the cost of capital is what compounds value.
- ROE25.2%
Return on equity after leverage — read alongside debt levels.
- Net margin13.2%
Share of every rupee of revenue that reaches reported profit.
Growth quality
13/100Trend: deteriorating · weight 15%
- Revenue CAGR (4y)4.8%
Top-line compounding over the reported history.
- Profit CAGR (4y)-7.4%
Profit lags revenue, so growth is being bought with margin.
- Growth sourceAsset-light / incremental
Capex is 5.0% of revenue this year.
Balance sheet
89/100Trend: improving · weight 12%
- Debt / EBITDA0.32x
Leverage is serviceable from current cash generation.
- Debt / equity0.24x
Capital structure relative to shareholder funds.
- Working capital78 days
Cycle is tight, so growth is largely self-funding.
Cash conversion
30/100Trend: stable · weight 13%
- OCF / PAT59%
Accounting profit is not fully turning into cash — the single most common early warning sign.
- Free cash flow₹929 Cr
Cash left after maintaining and expanding the asset base.
Management & governance
79/100Trend: deteriorating · weight 14%
- Guidance delivery81% of last 8 quarters
Whether management historically delivered what it promised.
- Promoter holding57% (-1.54 y/y)
Promoters have been reducing ownership over the last year.
- PledgeNo pledge
No pledge disclosed in the sample data.
- Institutional flowFII +0.24 · DII +2.05
Direction of institutional ownership over the last year.
- Capital allocationMost operating cash is reinvested into the core …
Most operating cash is reinvested into the core business.
Industry & macro
36/100Trend: deteriorating · weight 8%
- Demand trenddeteriorating
Metals (India) demand is deteriorating.
- StructureFragmented
Fragmented — share shifts are possible but price competition is real.
- Competitive intensitymedium
How hard it is to keep pricing and share.
- Macro driversGlobal commodity prices, China demand, Import duties
Variables that move the earnings base regardless of company execution.
Valuation
19/100Trend: stable · weight 8%
- P/E vs sector64.9x vs 51.1x
At 64.9x against a sector median of 51.1x, the price embeds roughly 48% earnings growth. Anything less has to come out of the multiple.
- Growth-adjusted64.90 (PE/growth)
Below ~1.5 the multiple is supported by growth; above ~2.5 it depends on the market staying optimistic.
- FCF yield0.62%
Cash return on the current market value, before any growth.
Financial history
Profit, cash and returns over five reported years
| Year | Revenue | EBITDA | PAT | OCF | FCF | ROCE |
|---|---|---|---|---|---|---|
| FY2022 | ₹27,656 Cr | ₹8,297 Cr | ₹5,974 Cr | ₹3,047 Cr | ₹281 Cr | 29.7% |
| FY2023 | ₹29,073 Cr | ₹6,687 Cr | ₹2,875 Cr | ₹1,524 Cr | ₹70 Cr | 30.3% |
| FY2024 | ₹30,490 Cr | ₹9,147 Cr | ₹6,037 Cr | ₹3,320 Cr | ₹271 Cr | 27.6% |
| FY2025 | ₹31,908 Cr | ₹8,615 Cr | ₹5,427 Cr | ₹3,093 Cr | ₹1,179 Cr | 22.9% |
| FY2026 | ₹33,325 Cr | ₹10,997 Cr | ₹4,399 Cr | ₹2,595 Cr | ₹929 Cr | 26.1% |
- ⚠ Operating cash flow is well below reported profit — check receivables and inventory.
Ownership & management
Who owns it, and have they delivered?
Promoter
57%
-1.54 y/y
Pledge
None
No disclosed pledge
FII
3.4%
+0.24 y/y
DII
25.2%
+2.05 y/y
Guidance delivered in 81% of the last eight quarters; average leadership tenure 16 years.
Most operating cash is reinvested into the core business.
- ⚠ Two auditor changes in the last five years
Industry & macro context
Metals (India)
Demand trend
deteriorating
Cyclicality
medium
Competition
medium
Regulatory pressure
low
Fragmented — share shifts are possible but price competition is real.
Macro drivers: Global commodity prices · China demand · Import duties
Valuation
expensive versus the sector
P/E
64.9x
Sector median P/E
51.1x
P/B
11.50x
Earnings yield
1.54%
FCF yield
0.62%
PE / growth
64.9
Estimated fair-value band ₹794 – ₹1,014 , built on FY2026 EPS of ₹19.6. Gap to the current price: +34.5%. Ranges are a modelling output, not a target price.
At 64.9x against a sector median of 51.1x, the price embeds roughly 48% earnings growth. Anything less has to come out of the multiple.
Risk register
What can break the thesis, and how it is monitored
- Cash conversionmedium
Only 59% of profit converted to operating cash.
Monitor: Receivable days and inventory in the next two quarters.
- Valuation riskhigh
The multiple already discounts a lot of future growth.
Monitor: Any quarter where growth slows below the implied rate.
- Governancehigh
Two auditor changes in the last five years
Monitor: Annual report disclosures and auditor commentary.
- Accounting qualitymedium
Operating cash flow is well below reported profit — check receivables and inventory.
Monitor: Cash-flow statement versus P&L each quarter.
Ongoing thesis monitoring
The thesis is a living position, not a one-time verdict
| Metric | Currently | Thesis holds if | Thesis breaks if |
|---|---|---|---|
| ROCE | 26.1% | stays above 23% | falls for two consecutive years |
| Cash conversion | 59% | stays above 80% | drops below 70% while revenue grows |
| Revenue growth | 4.8% CAGR | tracks the 48% priced in | slows for two quarters with no margin offset |
| Promoter holding | 57% | stable or rising | falls sharply or fresh pledge appears |
Peers in the same sector
Compare before sizing anything
Data quality 58/100
Stated openly, as required by the product principles
- • Fundamentals in this build come from a deterministic sample dataset, not licensed exchange filings.
- • Segment, ownership and management figures are illustrative and must be verified against annual reports.
- • Educational analysis only — not a recommendation to buy or sell any security.
- • Accounting flags reduce the reliability of the reported profit base.