Neutral Nalco; target of Rs 90: Motilal Oswal

Motilal Oswal's research report on Nalco

Nalco (NACL)’s revenue declined 13% YoY to INR30.4b, in line with our estimate of INR31.6b in 2QFY24. EBITDA increased 19% YoY to INR4b, which was below our estimate of INR5.4b. The miss was due to lower aluminum production volumes, higher input cost, higher power expense, and higher employee cost, which was partially offset by lower ‘other expenses’. APAT increased 49% YoY to INR1.9b, which was a 39% miss to our estimate of INR3.1b. APAT was adversely impacted by weak operating performance and higher depreciation, which was partially offset by lower tax and higher ‘other income’. NACL declared an interim dividend of INR1 (Record date 22 Nov’23). Net cash as on 1HFY24 increased INR519m to INR24.8b (v/s INR24.3b in Mar’23).

Outlook

NACL trades at 4.7x FY25E EV/EBITDA and 1.1x FY25E P/B and appears to be fully priced in. We reiterate our Neutral rating on the stock with an unchanged TP of INR90.