Shares of National Aluminum Company (Nalco) declined over 2 percent in morning trade on BSE on September 7 after the company reported an 83 percent year-on-year fall on Q1FY21 profit.
On September 4 post-market hours, Nalco reported its June quarter consolidated profit came at Rs 16.69 crore against Rs 97.87 crore in the corresponding quarter of the previous financial year.
Net sales came at Rs 1,380 crore, declined 34 percent YoY due to lower commodity prices. COVID-19 impacted volumes at both aluminum and alumina divisions.
EBITDA stood at Rs 130 crore, declined 40 percent YoY due to high operating leverage partly offset by inventory build-up of Rs 44 lakh. The net income of Rs 16.60 crore was down 83 percent YoY and 84 percent QoQ on lower other income.
Brokerages have expressed mixed views on the company's growth prospects.
Brokerage firm Kotak Institutional Equities has a 'sell' call on the stock with a target price of Rs 26.
As per the brokerage, Nalco’s Q1FY21 EBITDA came higher than estimates led by lower costs in the aluminum division and sharp inventory buildup.
"Alumina margins were impacted by weak prices whereas cost deflation (coal and carbon) helped the aluminum division report a positive EBITDA. Both aluminum and alumina markets remain in surplus and we see downside risks to current prices. We increase FY2021E earnings factoring the recent commodity price strength and maintain 'sell' rating," Kotak said.
On the other hand, Motilal Oswal Financial Services has a buy call on Nalco with a target price of Rs 42.
Motilal Oswal highlighted that the aluminum LME prices have recovered to pre-COVID levels and turned positive YoY.
"Alumina prices are also hovering near pre-COVID levels. Accordingly, we have raised our LME aluminum estimate to USD1,675/t in FY21 (earlier USD1,575/t) and USD1,750/t (earlier USD,1700/t) in FY22. With integrated operations, Nalco is best placed to benefit from the recovery in prices," Motilal Oswal said.
Motilal Oswal expects Nalco to benefit from lower coal prices due to improved coal availability in India and lower input commodity costs such as furnace oil, etc.
"We maintain our positive stance on Nalco, considering its integrated business model, high cash levels, and attractive dividend yield," Motilal Oswal said.
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