Buy NALCO; target of Rs 108: Motilal Oswal

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26 Aug, 2025 12:21

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Motilal Oswal's research report on NALCO

NALCO's 1QFY19 EBITDA increased 61% QoQ (+344% YoY) to INR10.1b (est. of INR6.9b), driven by strong alumina pricing. Adj. PAT grew 70% QoQ (~5x YoY) to INR6.3b. PAT is adjusted for ~INR0.9b gain on revaluation of renewable purchase obligation after resumption of trading on electricity exchanges. Alumina: Production increased 3% QoQ (+11% YoY) to 583kt - best ever in a quarter. Sales declined 27% QoQ (+24% YoY) to 320kt due to re-stocking. Alumina realization increased 36% QoQ to USD562/t. Aluminum: Production was down 2% QoQ but up 9% YoY to 110kt. Sales were down ~6% QoQ (+18% YoY) to 105kt. Aluminum realization increased ~7% QoQ to USD2,526/t led by higher LME. Cost of production (incl. depreciation) was down USD177/t QoQ to USD2,161/t due to lower other expenses. EBIT per ton doubled QoQ to USD365.

Outlook

We expect EBTIDA to increase by 71% to INR28.4b in FY19, considering the strong sector tailwinds. The stock is trading at attractive valuations of EV/EBITDA of 3x FY20E. We value the stock at 5.5x FY20E EV/EBITDA at INR108/share. Maintain Buy.

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