Buy Nalco; target of Rs 69: Motilal Oswal
Motilal Oswal is bullish on Nalco has recommended buy rating on the stock with a target price of Rs 69 in its research report dated February 09, 2019.
February 20, 2019 / 02:46 PM IST
Motilal Oswal's research report on Nalco
NALCO's (NACL) EBITDA declined 40% QoQ (+10% YoY) to INR5.1b (our estimate: INR6.2b) in 3QFY19 owing to lower volumes/realizations and higher cost of production (CoP). The miss versus our estimate can primarily be ascribed to higher CoP. Adj. PAT declined 41% QoQ (+9% YoY) to INR3b (our estimate: INR3.8b). Alumina: Production increased 12% QoQ to 532kt, but sales were down 10% QoQ to 293kt. Realization declined 15% QoQ to USD485kt (est. USD450/t). CoP increased USD3 QoQ to USD323/t, despite the currency tailwinds. Aluminum: Production was down 8% QoQ to 105kt, while sales were down 10% QoQ to 104kt (our estimate: 112kt). Realization increased 3% QoQ to USD2,241/t, even as LME was lower, due to higher product premiums. CoP increased USD172 QoQ to USD2,109/t, accentuated by reduced volumes leading to lower absorption of fixed cost.
NACL is best placed to benefit from higher prices. We value the stock at 6x (earlier 5.5x) FY20E EV/EBITDA at INR69/share. Maintain Buy.
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