Sell National Aluminium Company; target of Rs 145: ICICI Securities

ICICI Securities research report on National Aluminium Company

National Aluminium Company’s (NALCO) EBITDA was significantly lower than our/consensus estimates. Key points: 1) We estimate Alumina sales to be down 56% YoY while Aluminium sales to be down 11% YoY. 2) Subdued premium of Alumina sales over benchmark suggests that exports volume was impacted. 3) Power and fuel cost continues to stay benign as in-house captive coal from Utkal D coal block continues to contribute to profitability. In our view, owing to lower volumes, NALCO was unable to gain from the high LME prices, unlike its peers. Taking cognizance of NALCO's Q1FY25’s performance, current LME Al prices and the company's volume targets, we lower our FY25E/FY26E EBITDA by 11% each, resulting in a revised TP of INR 145 (earlier INR 160) based on 5.5x FY26E EBITDA. Maintain SELL.

Outlook

In our view, the earnings are significantly determined by underlying commodity prices. Taking cognizance of the company’s Q1FY25 performance, we lower our FY25E/FY26E EBITDA by 11% each, resulting in a revised TP of INR 145 (earlier INR 160) on an unchanged 5.5x FY26E EBITDA. On CMP, the stock is trading at 6.3x FY26E EBITDA, significantly higher than peers. We maintain our SELL rating on the stock.

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