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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.
Outlook


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.


For all recommendations report, click here


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first published: Feb 20, 2019 02:46 pm

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