Leading brokerage firm Axis Direct has highlighted APL Apollo Tubes Ltd and Hindalco Industries Ltd as its premier selections within the metals and mining industry. Both companies have received a 'Buy' rating from Axis Direct, which has also provided specific target prices and an optimistic outlook.
Axis Direct's Top Picks in Metals
The brokerage firm underscored the robust financial health and growth prospects of both APL Apollo Tubes and Hindalco Industries, positioning them as attractive investment opportunities.
APL Apollo Tubes: Prioritizing Profitability Amidst Volatility
Axis Direct praised APL Apollo Tubes for its strong performance, noting that despite late-quarter disruptions such as geopolitical conflicts, energy shortages, and destocking, the company achieved an EBITDA of approximately Rs 5,500 per tonne. This was largely driven by a strong brand premium and an improved product mix, capitalizing on supply tightness in steel tubes.
- Sustained Profitability: Management expressed confidence in maintaining an EBITDA between Rs 5,000-5,500 per tonne, even in fluctuating market conditions.
- Strategic Shift: Amid demand uncertainty and macroeconomic headwinds, APL Apollo has shifted its focus towards protecting margins and absolute EBITDA, rather than solely pursuing volume growth.
- Financial Strength: The company demonstrated strong cash generation, with FY26 Operating Cash Flow reaching approximately Rs 2,000 crore (up 65% YoY) and Free Cash Flow at around Rs 1,336 crore (up from Rs 374 crore in FY25). Net Cash surged to over Rs 1,500 crore from Rs 304 crore in FY25, largely due to inventory reduction and working capital efficiency in Q4.
- Expansion Plans: APL Apollo aims to increase its total capacity to 10 million tonnes by FY30, up from the current 5 million tonnes, with intermediate targets of 6.0-6.5 million tonnes by FY27 and 8 million tonnes by FY28.
Hindalco Industries: Driving Growth Through Strategic Expansions
For Hindalco Industries, Axis Direct pointed to a series of significant ongoing and planned expansion projects that are expected to bolster future earnings and market position.
- Alumina and Aluminum Projects: The Aditya alumina refinery (850 ktpa) and the 180 ktpa Phase I Aluminium smelter at Aditya are on track for commissioning by FY28. A Phase II expansion at Aditya Aluminium, adding 193 ktpa, is slated for FY29.
- Copper Sector Growth: A 50 ktpa copper recycling plant is also expected by FY28. Furthermore, a 300 ktpa brownfield copper smelter expansion in Gujarat is anticipated to be operational by FY29. This expansion will increase Hindalco's copper smelting capacity to 721 kt from the current 421 kt.
- EBITDA Enhancement: In conjunction with the smelting capacity increase, a 300 kt CCR expansion is underway, complementing the existing 540 ktpa rods capacity. This is projected to add $100 per tonne to the EBITDA per tonne over the FY24 base.
Target Prices and Outlook
Axis Direct has assigned a target price of Rs 2,250 for APL Apollo Tubes, suggesting a potential upside of 27.17% from its previous closing level. For Hindalco Industries, the brokerage set a target price of Rs 1,220, indicating an upside potential of 6.41% from its recent closing price.