Pricey metal

Though metal prices have risen and Hindalco’s financials are improving, its stock valuations already reflect most of the positives. The LME aluminium prices, which made a low of about $1,250 per tonne in February this year, have since recovered by about 48 per cent. This is also a reason that companies like Hindalco Industries, which is a leading aluminium player in India, have seen its share prices bounce back. During this period, its share price has run up by almost 230 per cent from its lows. But, besides recovery in metal prices, the company's plans to raise funds as well as improving profitability of its US subsidiary, Novelis, has contributed partially to run up in its share price. However, analysts believe that most of the positives are already factored in and valuations have become expensive. Besides, they highlight the risk on account of the high debt in the company’s books and a possible equity dilution on account of its fund raising plans. The edge Hindalco Industries is leading player in the aluminium and copper space. Its integrated operations give it an edge resulting in lower cost of production as compared to some of the companies in the sector. However, given that aluminium accounts for 74 per cent of its revenues, the lower international aluminium prices have resulted in a decline in revenues and profits for the company recently.