Sell NALCO; target of Rs 49: Nirmal Bang

“National Aluminium Company (NALCO) reported very strong 4QFY12 results, with its EBITDA being 53%/59% above our/street estimates and PAT 101%/116% above our/street estimates, respectively. Decline in power and fuel costs and staff costs were the primary reason for strong EBITDA performance, while PAT performance was also boosted by a 21% QoQ increase in other income, exceptional gains and lower tax rate as compared to our estimates. We have not revised our revenue and EBITDA estimates as we are not assuming any significant decline in power and fuel costs and staff costs. However, we have revised our PAT estimates downwards by 4% and 1% for FY13E and FY14E, respectively, due to a change in the cash surplus after updating the balance sheet data. We retain our Sell rating with a revised TP of Rs49 (4% down from our earlier TP of Rs51). We may review our rating and earnings estimates post the company’s conference call scheduled today.”

“NALCO reported a 11% QoQ increase in aluminium production, while it was flat YoY. In terms of sales volume, it reported a 8% QoQ increase, but 10% YoY decline. Higher coal output from Coal India enabled negligible use of e-auctioned coal and this was the primary reason for a 11% QoQ drop in power and fuel expenses despite a 11% QoQ jump in aluminium production. Employee costs were down 24% YoY and 15% QoQ, but we were factoring in higher employee costs due to year-end provisioning. The company also reported 53% YoY and 84% QoQ increase in alumina volume due to commissioning of its new facility in 3QFY12. NALCO posted a multi-fold 380% and 451% QoQ jump in EBITDA and PAT, respectively, for the quarter on the back of lower fuel and power costs, employee costs, exceptional gains, higher other income and lower tax. On YoY basis, the company reported a 32% drop in EBITDA, but a 64% YoY surge in other income, thereby leading to PAT decline of only 8% YoY,” says Nirmal Bang research report. 

Public holding more than 90% in Indian cos

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