Sell NALCO; target of Rs 45: Nirmal Bang
Nirmal Bang is bearish on National Aluminium Company (NALCO) and has recommended sell rating on the stock with a target price of Rs 45, in its January 30, 2013 research report.
January 31, 2013 / 13:16 IST
Nirmal Bang is bearish on National Aluminium Company (NALCO) and has recommended sell rating on the stock with a target price of Rs 45, in its January 30, 2013 research report.
"National Aluminium Company (Nalco) posted strong results for 3QFY13, with EBITDA/PAT being 261%/382% above our estimates, respectively. EBITDA/PAT were 40%/10% up, respectively, compared to consensus estimates. Robust alumina sales along with lower power and fuel costs have primarily driven the strong performance. We have revised our EBITDA estimates upward by 9%/7% for FY13E/FY14E, respectively, while PAT estimates have been revised upward by 10%/8% for the same period.Nalco posted 16% YoY and 9% QoQ increase in alumina revenue, primarily driven by higher volume. EBIT was down 6% YoY due to higher energy costs, but it is up by a whopping 218% QoQ due to higher volume and lower energy costs. Aluminium revenue posted a 13% YoY jump on the back of marginal improvement in volume, realisation and the metal’s premium over LME, while it was up 3% QoQ. However, aluminium PBIT continued to remain in the red due to higher energy costs, although, losses narrowed down to Rs215mn from a loss Rs1,529mn in 3QFY12 and a loss of Rs532mn in 2QFY13. Power revenue was up 5% YoY as well QoQ due to stable generation, while due to lower coal costs the PBIT turned green from a loss of Rs568mn in 2QFY13 to a profit of Rs138mn in 3QFY13.Nalco posted a 7% YoY jump in aluminium production due to higher capacity utilisation, while it was down 2% QoQ. However, alumina performance remained strong with 35% YoY and 14% QoQ jump in sales volume due to commissioning of a new unit. Revenue remained stable with 17% YoY and 5% QoQ jump, but EBITDA was lumpy due to power and fuel costs. The company reported 186%/132% YoY jump in EBITDA/PAT, respectively. On QoQ basis, Nalco posted EBITDA of Rs1,827mn as compared to EBITDA loss of Rs16mn in 2QFY13, while PAT stood at Rs1,189mn as compared to a PAT of Rs48mn in 2QFY13.In 2QFY13, aluminium output was down 1% QoQ, but P&F costs were up 25% QoQ (accounting for 47% of revenue), while in 3QFY13 aluminium output was down 2% QoQ but P&F costs were up 22% QoQ (accounting for 35% of revenue). This was primarily driven by uneven coal sourcing via linkage, resulting in higher usage of imported and e-auctioned coal. We have retained our Sell rating on NALCO with a revised target price of Rs 45 (up 5% from our earlier TP of Rs43)," says Nirmal Bang research report.Non-Institutions holding more than 90% in Indian cos Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies 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.To read the full report click on the attachment 
Read More
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
