Akash Jain
We believe there is room for more upside in NALCO as the rally in aluminium prices will augur well for its earnings in the coming quarters. On Thursday, aluminium hit its highest in nearly seven years, amid growing supply concerns in the aftermath of US sanctions on Rusal.
The company has been grappling with losses in aluminium division and higher prices of aluminium will help it turn around its loss-making aluminium business. In addition, rise in alumina prices due the output curtailment at Alunorte, the world’s largest alumina refinery will also the help the company.
NALCO sells almost its entire alumina volume at spot or index prices against the earlier practice of bench-marking it to a certain percentage of the aluminium rates on the London Metal Exchange which is good for the company amidst rising alumina prices.
The stock has seen a significant rally of over 20 percent in the last eight trading days—the longest stretch since 2009-compared with 12.5 percent gains for Hindalco Industries and an 8.11 percent jump for Vedanta. The rally in metal stocks was especially on rising prices of aluminium and alumina after US sanctions on Russia’s United Co. Rusal, the largest producer of the base metal outside China.
Disclaimer: The author is Vice-president, Equity Research at Ajcon Global Services. The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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