Neutral Nalco; target of Rs 85: Motilal Oswal

Neutral

Motilal Oswal's research report on Nalco

Nalco (NACL)’s revenue declined 16% YoY to INR31.8b, in line with our estimate of INR31.3b in 1QFY24. EBITDA declined 32% YoY to INR5.9b, vs. our estimate of INR6.9b. The miss was due to higher power expense, higher employee costs and other manufacturing expenses, which were partially offset by lower input costs. APAT declined 40% YoY to INR3.5b, vs. our estimate of INR4.2b; the aluminum business dragged NACL’s profitability during the quarter. Revenue for the chemicals business stood at INR11.7b (down 3% YoY) and revenue for the aluminum vertical came in at INR24.7b (down 17% YoY), which was in line with our estimate of INR24.0b.

Outlook

NACL trades at 4x FY25E EV/EBITDA and 1.1x FY24E P/B. We reiterate our Neutral rating on the stock with a revised TP of INR85.

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Nalco - 23 -08 - 2023 - moti