Motilal Oswal is bullish on Nalco has recommended buy rating on the stock with a target price of Rs 50 in its research report dated August 13, 2019.
Motilal Oswal's research report on Nalco
EBITDA of INR2.1b (-59% QoQ) came in below our estimate of INR4.3b owing to higher aluminum cost of production, lower-than-expected aluminum volumes and likely lower alumina volumes. The sequential decline in EBITDA can be attributed to lower alumina/LME prices and higher cost. Adj. PAT was down 69% QoQ at ~INR1b (our estimate: INR2.6b).
We believe alumina/aluminum LME prices are close to bottom as, at the current levels, ~10% of global smelters/refiners (particularly Chinese) would be in cash losses. NACL is best placed to benefit from higher prices. We value the stock at 5x FY20E EV/EBITDA. Our TP stands at INR50/share. Maintain Buy.
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