July 27, 2018 / 5:39 AM / 9 months ago

BUZZ-India's Hindalco Industries rises, U.S. unit to buy Aleris

** Hindalco Industries Ltd rises as much as 6.9 pct to 220.80 rupees

** Co said on Thursday U.S. unit Novelis Inc would buy aluminium processor Aleris Corp for $2.6 bln

** Deal to increase production capacity of Novelis, one of the world’s biggest suppliers of aluminium sheets for beverage cans and car parts, by nearly a quarter to 4.4 mln tonnes

** Deal may diversify Novelis’ product mix and lift its auto sheet capacity, but could be 16-23 rupees per share value dilutive based on estimates, Jefferies analysts write, maintaining “buy” rating and PT of 318 rupees

** Jefferies says risk-reward is still positive as aluminium prices should be underpinned by cost push, Novelis margins should continue to expand and valuation appears attractive

** While heavy capital expansion phase at Aleris is over, operating cash flows have been negative in CY17 and Q1 CY18. Hence, guidance of net debt/EBITDA reaching 3x by CY21 helped by Aleris’ cash flows is distant, and at this stage unconvincing - Credit Suisse; maintains rating “outperform” and TP 310 rupees

** About 16 mln shares change hands, compared with 30-day avg of 10.3 mln

** Twenty-seven of 28 brokerages covering the stock rate it “buy” or higher, and 1 “sell”; median PT 305 rupees - Thomson Reuters data

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